WAR DAMAGE COMPENSATION THROUGH

REHABILITATION: THE PHILIPPINE WAR

DAMAGE COMMISSION
ERNEST SCHEIN*

I
WAR CLAIMS-A GENERAL SURVEY

The palm which fashions war claims has a long life-line. Complications arising
out of each destructive struggle appear almost to merge with the heated problems of
the next. At this moment when the victims of World War II might be finding some
encouragement from the progress of international negotiations and domestic legis-
lation, vast areas of the still smoldering world are being devastated anew, creating
grievances of greater and greater weight and complexity.
The dual question: (a) What constitutes a war claim and (b) What are the
standards upon which it will be adjusted, cannot be answered categorically; but in
developing the subject of this study, some of the attempts at its solution should be
reviewed and discussed.
A. What Are War Damages?
When reference is made to war claims or war damages in treaties and domestic
legislation, what is contemplated is the kind of loss for which compensation must
be considered. Under the harsh rules of war, injuries derived from sanctioned
military activity are not ordinarily accompanied by rights to relief. Compensable war
losses result chiefly from requisition, seizure, detention, sequestration, confiscation,
use, and destruction outside what is recognized as excusable incidents of hostility. Pro-
vision has been made for claims based upon torts, broken contracts, even loss of
profits, interest, expenses and costs. The property involved may be real or personal,
merchandise, commodities, household furniture, and clothing. In recent efforts
to define the substance of loss for which reimbursement should be made, the, Ameri-
can, British, French and Dutch governments have not undertaken to include cur-
rency or intangible property, and either have excluded completely or provided for in
only limited amounts, articles of jewelry, works of art, .and other luxuries.
In general, daims arising out of World War II will be defined'by (a) interna-
tional agreements, treaties, conventions, and exchanges of notes; (b) domestic law;
(c) implicit principles, sometimes called the common international law, which
govern the behavior of civilized nations
0 A.B. 1gxg, LL.B. 1922, Harvard University. Member of the Illinois and District of Columbia bars.
Formerly Chief of the Philippine Division of United States Commercial Company (F.E.A. and RXF.C.)
and 'Chief of Public and Private -Claims of the Philippine War Damage Commission:
'In this connection an applicable interpretation of the meaning of iiternational law is found in
Borchard, The Place of Law and Courts in International Relations, 37 Am. J. INT'L L. 46, 54-55 (1943):
"International law is a system of normative rules, developed most actively from the seventeenth century
 LAW AND CONTEMPORARY PROBLEMS

In the legislation of the United States, as well as allied countries, war damage has
been defined very broadly. The recent report of the War Claims Commission points
out that Congress deliberately omitted defining the term war claims under Section
8 of the War Claims Act rather than assume the risk of adopting a narrow definition.
It was left to the Commission to make a study and at its end to recommend what
claims should or should not be considered. 2
B. What Are the Standards Upon Which War Claims Are Settled?
The creation and ultimate settlement of war claims during their long history
have given rise to acknowledged principles which form a pattern or set of ground
rules which are reliable in making the simplest adjustments. Thus, since during
a war a belligerent government admittedly cannot take the time and trouble to buy
all the property which it needs in emergencies, indiscriminate requisitioning becomes
an accepted procedure, and requisition is always accompanied by the duty to make
proper compensation to the owner
to the early twentieth, which obtain their sanction not by force but by practice and cultivation among
governmental authorities--state executives, ministers of foreign affairs, other public officials, and
notably international tribunals of various kinds. Narrow as may be its scope in the total complex of
international relations, and in constant danger of submersion or violation of politics, it nevertheless
controls a vast field of human activity and is universally invoked both by governments and by individuals
affected. Few violations escape public notice, and while the sanctions necessarily differ from those of
private law, they nevertheless operate with considerable efficacy. States may differ as to what is the rule
of international law, but no State would ever assert exemption from its control."
'War Claims Act of 1948, 62 STAT. 1240, 50 U. S. C. App. §§2001-2013 (Supp. 195o). The term
"war claims" in pursuance of the authority given by Congress was defined by the administrative regu-
lations of the War Claims Commission as follows:
"War Claims.-Shall include any loss, injury, or damage suffered or sustained by a person or business entity
or organization, who, at the time of such loss, injury, or damage, was:
(a) a national of the United States, as hereinafter defined, who did not give aid or comfort to, or
collaborate with any enemy or ally of enemy of the United States; or a branch or agency of the United
States Government; or a regularly appointed, enrolled, enlisted, or inducted member of the military or
naval forces of the United States; or an alien to whom the United States owes protection, such as an
alien seaman signed on a United States vessel. Such loss, injury, or damage must be the result of action,
not normally incident to the conduct of hostilities, by a branch or agency, civil or military, of any sovereign
power who, by declaration of war or by military activity of its regular forces, was at war during World
War II, such loss, injury, or damage being one which would not have occurred, but for the existence
of a state of war; or
(b) not a national of the United States and not an enemy, or ally of enemy, as defined in section
2 of the Trading With the Enemy Act of r917 (50 U. S. C. App. Si): Provided, That such definition
shall not apply to a person who, after September 1, 1939, being resident within enemy or ally of enemy
territory, or being a citizen or subject of such enemy or ally of enemy nation, was deprived of liberty,
or did not enjoy full rights of citizenship under the laws of such enemy or ally of enemy nation, as a
consequence of any law, decree or regulation, of the nation within which he resided, or of which he was
a citizen or subject, discriminating against political racial or religious groups. Such loss, injury, or
damage must be the result of an action, not normally incident to the conduct of hostilities, by the
Government of the United States or one of its civil or military agencies. Such action must arise out of
World War II and the loss, injury, or damage must be one which would not have occurred but for the
existence of a state of war." (pp. 5, 6.)
a2 MARyORIE M. WsnEmAx, DAMAGES IN INTERNATIONAL LAW 902 (1937). UNITED STATES ARMY

RULES oF LAND WARFARE, §33s: "Private property susceptible of direct military m.e.-All appliances,
whether on land, at sea, adapted for the transmission of news, or for the transport of persons or things,
exclusive of cases governed by naval law, depots of arms, and generally all kinds of ammunition of war,
may be seized, even if they belong to private individuals, but must be restored and compensation fixed
when peace is declared (H. R. 53, par. 2)."
 THE PHILIPPINE WAR DAMAGE COMMISSION

On the other hand, reimbursement for the loss of prospective profits, interest,
intangibles, money, luxuries, presents controversial elements to those endeavoring to
meet demands for international understanding and domestic or unilateral legisla-
tion.
When liability is acknowledged, the measure of damages in claims of various
categories has been considered but not always adequately dealt with in the making of
awards. After World War I, the United States-Germany Mixed Claims Commission
applied the following rule in the evaluation of plants and going concerns:
In computing the reasonable value of plants and other properties at the time of their
destruction, the nature and value of the business done, their earning capacity based on
previous operations, urgency of demand and readiness to produce to meet such demand
which may conceivably force the then market value above reproduction costs, even the
goodwill of the business, and many other factors, have been taken into account. But
this is quite a different thing from assessing damage for loss of prospective earnings or
profits for a period of years computed arbitrarily or according to the earnings of com-
petitors whose properties were not destroyed, and the awards made by this Commission
4
do not embrace the items claimed of prospective earnings or prospective profits.
The Special Mexican Claims Commission in its first decision describes the
measure of damages which it employed in claims for loss or damage of property, as
follows:
The quantity and value of property of various kinds owned by the claimant as shown by
inventories filed prior to the origin of the claim; the market value, original cost, and
depreciation of the property; and deterioration through lack of attention directly attributable
to acts of force. In this connection the Commission has applied the principle that, where
the evidence does not satisfactorily establish a high or unusual value for property, an
award should be made on the basis of the value of common or ordinary property of that
class.5

Miss Whiteman in her work, after a review of the subject of damages in inter-
national reclamation proceedings, wisely concludes:
It will be evident from the context of the decisions in the various cases that the amount
allowed in any case should be that to which the claimant is reasonably entitled under all
the circumstances.6
An additional standard to be followed in the making of awards determines
whether the claimant is qualified to receive settlement. Specifically, should war
damages be paid by a country only to its own nationals or to the nationals of allies,
or even of neutrals, who suffered losses in their territories?'
Assuming that the appropriate claimant is identified, the basis of loss recognized,
'DECISIONS AND OPINIONS OF THE UNITED STATEs-GERMANY MIXED CLAIMS COMMISSION 273, 308, 331,
704 (1925-x926).
5 SPEcIAL MEXICAN CLAIMS COMIIISSION, REPORT TO THE SECRETARY OF STATE 21 (1940).
2 WITEMAN, op. cit. supra, note 3, at 1549.
' A valuable study of this subject appears in' Fraleigh, Compensation for War Damage to American
Property in Allied Countries, 41 AM. J. INT'L L. 748 (1947)-
 LAW AND CONTEMPORARY PROBLEMS

and the measure of damages established, the question still remains: what effect has
the compensation upon the rehabilitation of the country in which the war loss has
been sustained? It is submitted that underlying the philosophy of equitable adjust-
ment of losses incurred by victims of war is the ethical requirement that society should
be restored after damage inflicted by belligerents. In provisions for indemnity or
reparations, restitution in kind has always been an objective pursued where practically
feasible. A systematic search for looted property follows the repulse of the enemy.
There is universally prevalent a feeling for putting together the pieces which have
been shattered by the forces of war.
Whatever method of claims settlement is finally adopted, the awards will be
made principally by judicial boards or commissions.' Even if lump sum settlements
in cash are negotiated between countries, the claims themselves will have to be
adjudicated and the monies distributed by a commission or arbitral body. The
settlement of claims of the United States Government and nationals against the gov-
ernment of Yugoslavia arising from the nationalization of properties for an amount
of approximately seventeen million dollars was accompanied by the adoption of the
International Claims'Settlement Act of 1949 which established a Commission to make
aWard.
Save in claims for breach of contract or the seizure of property through requisition,
confiscation, nationalization, expropriation or other seizure-in short, except in those
cases which are analogous to suits for the recovery of money-the trend in thinking
about war damage compensation is towards rehabilitation. Even when claim for
claim in connection with the loss of property in a war-devastated area is considered, it
is total rehabilitation which is set as a goal. As in the physical rehabilitation of indi-
vidual soldiers, the responsibility of the group dominates, so in the award of war
damages, the aggregate restoration of what has been physically devastated, economi-
cally destroyed or damaged, must be dealt with on a country-wide or even area-wide
basis.
Legislation of the United States dealing with the rehabilitation of the Philip-
pines represents an historical accomplishment, as well as a guide for future under-
takings of other interested states. Since this study will further concern itself only
with the relation of war' claims and war damage compensation to rehabilitation, the
Philippine Rehabilitation Act of 1946" and the work of the Philippine War Damage
Commission will be examined in some detail as valuable contributions to the de-
velopment of the subject.
"Aside from the numerous Mixed Arbitral Tribunals created under the Treaties of Peace of 1919-1920,
some sixty such tribunals have functioned during the past hundred years. MANLEY 0. HUDsoN, INTR-
NATIONAL TRIBUNALS, PAST AND FUTURE x96 (1944).
' International Claims Settlement Act, Pub. L. No. 455, 8sst Cong., 2d Sess. (1949).
" Philippine Rehabilitation Act of 1946, 60 STAT. 128, 50 U. S. C. App. §175p-8o6 (1946).
 TiE PHILIPPINE WAR DAMAGE COMMISSION

II
PmLIPPINE REHABILITATION-A SPECIFIC CASE HISTORY

A. Background
President Roosevelt only voiced the sentiments of many other Americans when
he told the people of the Philippines that they would get back everything they lost
in the war to the last nipa hut and the last carabao. War damage compensation,
strictly construed, became absorbed in the concept of rehabilitation, and traditional
legal grounds for the collection of claims under international law yielded to the
pressure of what was a whole nation's humane viewpoint.
The American who suffers war damage to property on territory of the United
States during a war knows that compensation somehow will be provided by his
own government. Specifically in providing for losses in World War II, an Act of
Congress of March 27, 1942,11 authorized and directed the War Damage Corporation
to provide premium insurance effective not later than July 1, 1942, against war
losses, with such general exceptions as the War Damage Corporation, subject to
approval of the Secretary of Commerce, might deem advisable. Coverage was not
extended to property in the Philippine Islands, however, because lack of control by
the United States made protection impracticable during the period of occupation
by the Japanese.
The Act further expressly provided that subject to the same limitations pre-
scribed with respect to premium insurance, the War Damage Corporation might
compensate for losses after December 6, 1941 and prior to the effective date of the
premium insurance program, July 1, 1942, without requiring a contract of insurance
or the payment of premiums. The free insurance, of course, terminated automatically
on July 1, 1942.
By September 30, 1944, claims and notices of contingent or prospective claims,
totalling 393 in number and property values of more than one hundred thirty-five
million dollars, alleged to have risen in the Philippine Islands prior to July 1, 1942,
had been presented to the War Damage Corporation. No payments were made,
both because of the inaccessibility of the area for purposes of investigation and
adjustment, and the general sentiment that Congress wished to deal with the sub-
ject on a special basis when the occasion arose.
Early in 1945, it was proposed to amend Section 5(g) of the Reconstruction
Finance Corporation Act relating to the War Damage Corporation respecting losses
in the Philippine Islands 12 in two major respects: (I) to broaden the definition of
war damage; (2) to extend automatic free insurance on property in the Philippine
Islands (with designated exceptions) beyond the date of July i, 1942.
During the Senate hearings on the proposal, a letter from Mr. Jesse Jones, then
Chairman of the Reconstruction Finance Corporation, to Senator Millard Tydings,
Chairman of the Committee on Territories and Insular Affairs of the United States
"1 Pub. L. No. 5o6, 77th Cong., 2nd Sess. (X942).
'2S. 1o4, 79th Cong., Ist SsI. (1945).
 LAW AND CONTEMPORARY PROBLEMS

Senate, dated December 4, 1944, was read.' 3 Among other things, Mr. Jones stated:
To summarize, it seems to me that Congress should enact legislation with respect to the
overall Philippine situation and should provide for the payment of appropriate compensa-
tion for property damage due to combat operations in the Islands throughout the period
of enemy attack, enemy occupation and our reoccupation. Since such compensation will
have dose connection with general relief and rehabilitation in the Philippines, it may be
that Congress would want the whole Philippine problem handled by a Filipino Rehabili-
tation Commission, the members to be appointed by the President and approved by the
Senate. 14
It appeared further in the course of the proceedings before the Committee on
Territories and Insular Affairs that the United States Army in the Philippines took
for its own use during the emergency considerable private property without being
able to follow formal procurement procedures. Claims for such property, even if
informally appropriated, could be paid out of customary War Department appropria-
tions. However, claims for property destroyed to prevent capture by the enemy,
which was a common practice, were not payable from available funds or under
established regulations.
The Commanding General of the United States Armed Forces in the Far East
had already organized a Claims Service in the Philippine Islands for the settlement
of contract or procurement claims as well as torts."5 That such claims should be
settled as promptly as possible was considered not only a military necessity, but
politically expedient in promoting friendly relations with the inhabitants.
The adjustment of losses as a military measure fell short of what we proposed to
do for the Philippines. Moreover, the payment of claims for damages on the basis
of insurance adjustments appeared woefully inadequate. The terms of the pro-
posed bill to change the War Damage Corporation's powers, it was admitted, did
not approach our goal, even on a limited basis. For instance, losses of office build-
ings, factories, and mechanical installations, were covered, but compensation was
"Report of Proceedings, Hearings before Senate Committee on Territories and Insular Afair.( on
S. 104, 79th Cong., ist Sess. (1945).
"The Act of March 7, 1942 (Pub. L. No. 506, 77th Cong., 2d Sess. (1942)) provides in part as
follows: "Such protection shall be applicable only (i) to such property situated in the United States
(including the several states and the District of Columbia), the Philippine Islands, the Canal Zone, the
territories and possessions of the United States, and in such other places as may be detcrmined by the
President to be under the dominion and control of the United States. . . . The War Damage Corpora-
tion, with the approval of the Secretary of Commerce, may suspend, restrict, or otherwise limit such pro-
tection in any area to the extent that it may determine to be necessary or advisable, in consideration of
the loss of control over such area by the United States, making it impossible or impracticable to provide
such protection in such area."
' As to service-connected tort claims resulting from noncombat activities of the Army: Under the
provisions of the Act of July 3, 1943 (57 SeAT. 372, 31 U. S. C. §222b (1946)), the War Department
is authorized to settle claims on account of damage to or loss or destruction of property, and reasonable
hospital, medical and burial expenses actually incurred on account of personal injury or death caused by
Army personnel acting within the scope of duty or otherwise incident to noncombat activities of the
Army. Under the provisions of AR 25-25, the Army regulations implementing the provisions of the
act of July 3, 1943, the War Department does not pay claims for damage to or loss or destruction of
property or for personal injury or death resulting from action by the enemy or resulting directly or in-
directly from any act by the Armed Forces engaged in combat.
 THE PHILIPPINE WAR DAMAGE COMMISSION 525

specifically excluded for growing crops, orchards, personal apparel, and household
furniture, which obviously formed the aggregate of the wealth of a simple Filipino
family.
More than anything else, the reluctance of the Senate Committee to act along
traditional lines was prompted by the conviction that ordinary war damage com-
pensation went only a short distance towards actual rehabilitation-the rebuilding
of the physical equipment and economy of a country despoiled by war. It was
decided to refer S. 104 to the Philippine Rehabilitation Commission,' 6 with a request
that they examine the requirements and report back a program which would be a
constructive solution of the Philippine problem.
No measure was ever projected by the Congress which was intended primarily
to reimburse individuals or organizations for specific damages incurred in the war.
The aim was to assist and encourage rehabilitation, the rebuilding of the physical,
economic and social structure of the Philippines. The bill, S. i6io, introduced in
the Senate for the purpose of attaining these high purposes, suffered the usual legis-
lative vicissitudes, in the course of which the original objectives of the proposed law
became confused and distorted.
The first conception, as has been indicated, was not a private class measure for
the payment of war losses. In attempting to provide for practical implementation,
however, this type of measure dominated the thinking of the law-makers. There
was no denying the influence of the procedures of the past. Claims commissions,
international, national or other arbitral bodies, had always awarded compensation
determined according to certain standards. Therefore, a commission had to be set
up, the duties and responsibilities of which comprised a mixture in which direct
rehabilitation was only one ingredient. Economy-minded and high-principled public
servants laid the greatest emphasis upon the setting up of standards to minimize
fraudulent practices which might be costly to our Treasury and a menace to our
moral code.
The Philippine Rehabilitation Act 7 emerged with the word "rehabilitation" in its
title and with very substantial provisions for the assistance of the Philippine rehabili-
tation program. However, its language from the very beginning refers generously
to "compensation for war damage." The agency which it established is known as
the Philippine War Damage Commission, the discharge of its duties embracing a
combination of welfare payments to the lowly, adjustment of losses-analogous to
the payment of insurance benefits-to more substantial property owners, and the
granting of funds which contributed in part to the overall program of physical
rehabilitation adopted by the Republic of the Philippines.
" Created by Act of Congress approved June 29, 1944. For a summary of pertinent legislation, see
HARRY BARTo HAWES, REHABILITATION OF THE PHILIPPINES (1944).
"Philippine Rehabilitation Act of 1946, 6o STAT. 128, 50 U. S. C. App. §§1751-i8o6 (1946).
 LAW AND CONTEMPORARY PROBLEMS

B. The Philippine Rehabilitation Act of 1946

i. Title I-War Damage Compensation
The Philippine War Damage Commission consisted of three members."8 The
time limit of its functions was set at two years after the expiration of the time for
filing claims, and in no event later than five years from the enactment of the Act,
which was April 30, I946.?°
The Commission was charged with the functions of receiving, investigating, ap-
proving, and disapproving war damage claims covering properties lost, destroyed
or damaged during and as a consequence of World War II in the Philippines, and
of making payment, replacement or restitution for such loss in accordance with the
law. In exercising these functions, the authority of the Commission is in lieu of
and supersedes that which was previously conferred on the War Damage Corpora-
tion.2 o
Losses to be considered by the Commission must have been the result of one or
more of the following: (i) enemy attack; (2) action taken by or at the request of
the forces of the United States to prevent property from coming into the possession
of the enemy; (3) action taken by civilian or military representatives of enemy or
governments cooperating with it; (4) action of the Armed Forces of the United
States in opposing, resisting or expelling the enemy; (5) looting, pillage or other
lawlessness or disorder accompanying the collapse of civilian authority determined
by the Commission to have resulted from any of the other perils or from control
by enemy forces."
Qualified claimants are (i) those who have an insurable interest in the property
alleged to be lost, as owner, mortgagee, pledgee or lien holder; (2) any heir, devisee,
legatee or distributee of a deceased person's interest; (3) executor or administrator
of the estate of a deceased person for the benefit of such heir, devisee, legatee or
distributee. The claimants must come under one of the following categories: (a)
a citizen of the Philippines or the United States on December 7, 1941 and con-
tinuously to the date of filing claims; or (b) a citizen of a nation not an enemy
of the United States in World War II, if he had been a resident of the Philippines
at least five years prior to December 7, 1941, provided that the country of which he
is a citizen grants reciprocal war damage payments to American citizens resident
therein; or (c) a person who served honorably in the Armed Forces of the United
States or Commonwealth of the Philippines or the Merchant Marine; or (d) a church
or religious organization; or (e) an unincorporated association, trust or corporation
(or their successors if already dissolved), organized pursuant to the laws of the
several states of the United States or territory or possession, including those
" 8Filipino member is Francisco A. Delgado; American member John Young was succeeded by John
A. O'Donnell; Frank A. Waring was the chairman.
" 6o STAT. 128, 50 U. S. C. App. §1751(d) (r946).
" 60 STAr. 129, r32, 50 U. S. C. App. §§1752, 1759 (1946).
2' 6o STAT. 129, 5o U. S. C. App. §1752(a) (1946).
 THE PHILIPPINE WAR DAMAGE COMMISSION

organized pursuant to the laws in effect in the Philippines, but excluding corpora-
tions wholly owned by the Philippines 22
Specifically disqualified from receiving war damage compensation are: (x)
enemy aliens; (2) collaborators and disloyal persons; (3) any unincorporated associ-
ation, trust, corporation or sociedad anomima owned by any such persons. Pay-
ment is barred (I) if loss or damage to the property was insured, except for the
excess of the value over the face value of the insurance; or (2) if the loss or damage
is one for which the War Department or Navy Department is authorized to make
payment; or (3)if the loss or damage is payable or has been paid or is authorized
to be paid by the Government of the United States or the Government of the
Philippines, unless such payment was declined; or (4)if the claimant does not file
a claim in reasonable conformity with the law within twelve months after the
opening date set by the Commission for filing.
All property is subject to compensation, except the following (in general): (I)
Accounts, bills, records, films, plans, drawings, formulas, currency, deeds, evidences
of debts, securities, money, bullion, furs, jewelry, stamps, precious and semi-precious
stones, works of art, antiques, stamp and coin collections, manuscripts, books and
publications more than fifty years old, models, curiosities, objects of historical or
scientific interest, and pleasure- aircraft, unless such are included in inventory, sup-
plies or equipment for carrying on a trade or business within the Philippines;
(2) vessels and watercraft, their cargoes and equipment, with certain exceptions;
(3)intangible property; (4) property diverted to the Philippines by authority of the
United States Government, or otherwise as the result of war conditions; (5)prop-
erty in transit which was insured against war perils or with respect to which in-
surance was availableP
Claims are provable either for (a) actual cash value at the time of loss or de-
struction or damage; or (b) the actual cost of repairing or rebuilding or replacing
with other property of like quality, whichever is less.2 4 In lieu of cash payments,
the Commission may, at its option, make payments in whole or in part of the
amount payable by replacing lost, damaged or destroyed property with any other
property of like or similar kind; and the Commission is authorized to acquire such
property, to have such work done, to make contracts, and to take such other action
as may be necessary for the purpose; and surplus property of the United States
may be transferred to the Commission at a fair valuation, to be used in settling
claims.2 5
Before payments are actually made to claimants, the Commission is directed to
require that lost, destroyed or damaged property be rebuilt, replaced or repaired,
provided that in the event that the Commission determines that it is impracticable
to do this, payments may be made subject to the further requirement that they be
" 60 STAT. 129, 50 U. S. C. App. Sx752 (1946).
"6 o STAT. r33, 50 U. S. C. App. §-76o (1946).
" 66o STAT. 129, 5o U. S. C. App. §1752 (1946).
" o STAT. 130, as amended, 6o STAT. 8o5, 5o U. S. C. App. 1754 (b) (1946).
 . LAw AND CONTEMPORARY PROBLEMS

reinvested in such manner as will further the rehabilitation or economic develop-

ment of the Philippines.26
Claims up to $5oo, those of the little man, were to be paid in full and as quickly
as allowed.2 Of larger claims, the excess above $500 is arbitrarily reduced by 25
per cent.28 A pro rata, not exceeding 8o per cent, applicable to all claims, was
authorized to be paid immediately upon allowance. Remaining funds are to be
distributed pro rata among allowable claims. 29
The War Damage Commission notifies the claimants of the approval or dis-
approval of their claims, and dissatisfied claimants are entitled to a hearing on
appeal before the Commission, or its representatives, under such rules and regula-
tions as may be prescribed, the decision of the Commission to be final and not re-
viewable by any courtY0
Penalties are provided for fraud 3' and a 5 per cent limit is placed on fees.8 2
The total authorization of Congress for the payment of private claims was four
hundred million dollars. Of this amount twelve million dollars ear-marked for
administrative expense will probably not be exhausted by the Commission.' a
Money or bullion received by the United States from Japan is to be used (i) to
reimburse the Treasury for sums appropriated; (2) to satisfy unpaid balances of
approved claims; (3)to make up the 25 per cent by which claims were first reduced;
(4)to pay any approved claim of the Philippine Government or its subsidiaries not
compensated under the Act. The balance will also be covered into the Treasury
of the United States.4
2. Title l-Disposalof Surplus Property
To expedite the disposition of surplus property of the United States in the Philip-
pines as well as to aid in physical rehabilitation, there was transferred to the Gov-
ernment of the Philippines, provinces, chartered cities, and municipalities, property
of a fair value, estimated by the Foreign Liquidation Commissioner, not to exceed
one hundred million dollars0 5
3. Title Ill-Restoration and Improvement of Public Property and Essential Public
Services
As a manifestation of good will to the Filipino people, appropriations of one
hundred twenty million dollars were approved for the following purposes: (i) to
plan, design, restore, and build roads, streets, and bridges, and to train ten Filipino
engineers in the construction, maintenance, and engineering necessary for efficient
and safe operation of highway transport facilities; (2) to rehabilitate and improve
port and harbor facilities and to train ten Filipino engineers for this work; (3)to
compensate the national Philippine Government, provincial governments, chartered
"'1d.§x754(c). 2"Id.- §x754(a)- " Id. §1752(a).
0
"Id. §1754(a). a Id. § 763. " ld. § 1757.
'2Id. §1758.
"Id. §1756(a). The original allowance for administrative expenseof $4 million was indreased.
5
" Id. §1756(b). " 1d. §§i8oi-s8o6.
 THE PHILIPINE WAR DAMAGE COMMISSION 529

cities, municipalities and corporations wholly owned by the Government, for

physical loss or damage to public property during and as a result of the war; (4)
to help in the rehabilitation and development of public health services?'
Appropriate agencies of the United States are designated to assist in directions
within their respective jurisdictions towards the goal of complete rehabilitation. The
restoration and improvement of inter-island commerce is assigned to the Maritime
Commission; air navigation to the Civil Aeronautics Administration; meteorologi-
cal equipment to the Weather Bureau; the fish industry to the Department of the
Interior; coast and geodetic survey to the Commerce Department. In all instances
the training of Filipino specialists is emphasized T
4. Titles IV, V, and VI
The Act contains general provisions incidental to its execution. Rehabilitation is
involved directly only in the authorization of the expenditure of five million dollars
for the restoration, repair, and improvement of public buildings of the United
States and the acquisition of housing for civilian agencies in the Philippines?" It
was under the last general power that the War Damage Commission procured
efficient space in specially constructed buildings which at the end of its program will
become the possessions of the Republic of the Philippines.
C. Experience of the Philippine War Damage Commission
Time and space have been given liberally to a summary of the organic act of
Philippine rehabilitation since from this more than anything else can the essential
inconsistencies of the undertakings of the War Damage Commission be evaluated.
Moreover, it brings into focus a rehabilitation program, based on the principle of
war damage compensation, ideally conceived, but implemented by legislation the
detailed provisions of which are fraught with weaknesses inherent in considerations
of politics, nationalism, and narrow legal traditions. For further enlightenment and
possible practical assistance in future undertakings with like objectives, we may direct
our attention profitably to some of the experiences of the Commission which even
as this paper is being written hastens towards the completion of its difficult and
significant assignment.
The challenge and danger of the task of the War Damage Commission were
first posed in the assembling of staff personnel in the United States. Although the
law specifically excluded any regard to the civil service laws or the Classification Act
of 1923, as amended, 9 it was to be expected that Commissioners, fabricating what they
perceived as another government agency, should call upon civil service experts for
advice in employment procedures, and follow, as far as practicable, the routine
established in other departments. The advantages in regularity are obvious, but so
are shortcomings in the direction of elasticity of employment, transfers, and separa-
tions which the legislators in fact sought to avoid.
a'Id. §§1781-1785. ' Id. §§1786-1791.
'Id.§§1796-1797, 1x8ori. "Id. 5I7 5 I(b).
530 LAW AND CONTEMPORARY PROBLEMS

Despite the language of Congress and the patent intent to encourage and support
a rehabilitation program, limitations are further implicit in the wording of the Act,
recognizable as conventional devices for the payment of claims against the govern-
ment. The Commission from its inception was faced with the necessity of setting
up the machinery and equipment of a claims agency. Forms were prepared by men
in the United States accustomed to the mechanics of administrative bodies, but
unfamiliar with the customs, experience, and language of the people of the Philip-
"pines. They were 'obviously ignorant of the fact, as evidenced by the forms which
were prepared, printed, and circulated, that most of the eighteen million or more
Filipinos residing in the Islands at the time did not use English as a language at all,
and that most of the remainder would not be familiar with the idiom employed by
: lawyers. or.government claim= agents in the United States. °
An American crew of skeleton proportions arrived.in Manila in the autumn of
*1946, occupying housing.facilities principally in special quarters at the Manila Hotel,
and. using office space in a building, which had survived the general demolition.
.This equipment was procured largely.through the zealous efforts of the Chairman
,and the, Filipino member of the Commission.. Local help was recruited and per-
formed most satisfactorily..
Since a distinction could be drawn between Titles I and III of the Act, relating
respectively to private and public claims, separate divisions could be and were set
up under the same administrative head for the implementation and execution of
these programs: The differences between what on the one hand were essentially
claims payments, relief, and welfare doles (although, to be sure, the actual payment
of money in large amounts would be expected to have an effect on the economy of
the country), and what on the other hand were contributions towards the physical
rehabilitation of devastated areas, indicated throughout the history of the Com-
mission the diverse patterns and philosophies implicit in the two approaches to
war damage compensation.
i. Private claims
The language of the Act, despite its ostensible objectives in the field of rehabilita-
tion, required the early adoption of rules and regulations which set up conditions,
requirements, procedures, rules, and limitations sounding very much like those of
claims agencies in the most orthodox tradition."
The period for filing claims as required by the statute extended from March i,
1947 to February 29, 1948. The Bureau of Public Schools of the Philippines was
employed to distribute forms to teachers who, in turn, were delegated the responsi-
bility of issuing them to interested parties. The Commission maintained a publicity
department, amply staffed, which gave widespread information in English and in
"oSee P.W.D.C. form xoo (basic claim forms); iooA (supplement for watercraft and automobiles);
300 (return receipt card); i-i (circular of general information). Filipinos employ 8 languages, 87
dialects.
Rules and Regulations of the United-States-PhilippineWar Damage Commission, ix Fri. REG. 13337
(1946); 12 id. 813 (1947); 44 CODE FED. REGS. S8OI-803 (1949).
 THE PHILIPPINE WAR DAMAGE COMMISSION

the local dialects through all available media, including newsprint, radio, and sound
trucks. Branch offices in several localities in the Islands were installed and main-
tained not only to decentralize activities, but also (a) to offer facilities for filing in
areas distant from Manila; (b) to assist the Commission in making investigations in
larger claims and in special instances where circumstances demanded; and (c) to
observe and record the reactions to the work of the Commission in local communi-
ties, which, in the scattered archipelago of the Philippine Islands with their diversity
of races and tongues, naturally would be far from uniform.42
By the end of the filing period, approximately i,25o,ooo private property claims
had been filed. Of these, more than one million had a claimed value of not more
than $500 each. Claims having a claimed value of more than $50,000 each numbered
less than 1700.
The vast volume of individual cases made impossible the careful and conventional
claims procedures originally contemplated by the American personnel which in large
proportion had been recruited from Washington agencies dealing with claims against
the government. The respect of the Commission for the cautious approach which
was obviously favored by many legislators in dealing with the Philippines notwith-
standing, no investigation worthy of the name could be made of all of the smaller
individual claims. The obstacles became very tangible in dealing with remote
territories, broken down transportation facilities, and ignorant, often illiterate, claim-
ants.
Every element considered, the incidence of fraud was probably no greater than is
assumed as a calculated risk in the adjustment of claims by insurance companies and
other claims agencies in the United States during peace times. It is almost accepted
practice for claimants to ask for more than they hope to recover. A reasonable degree
of exaggeration must be overlooked in very much the same way as civil courts regard
the inflation of damages claimed in an accident case beyond what the plaintiff hopes
to recover. The excessive ad damnum is taken with a grain of salt, but is not
ordinarily held to be prejudicial.
In the early record of the Commission an indication can be found of what any
effort to make individual personal checks and investigations of claims might have
"'There are 7083 islands in the Philippines; three main racial groups-Negrito, Indonesian, Malay.
Branch offices were maintained in: Baguio City; Cagayan; Cebu City; Cotabato (Davao City); Iloilo
(Bacolod City); Legaspi; Manila (Cabanatuan, San Pablo City); Tacloban; Tuguegarao; Zamboanga.
" Hunt, the American Agent reporting the American and Panamanian Claims Arbitration under the
Conventions of 1926 and 1932, says (Report, p. ii): "Experience has shown . . . that in practically
every general arbitration some of the most persistent and most vehement claimants are those whose claims
are shown by examination to be unfounded, either in fact or in law." Also see HUDsoN, op. cit. supra
note 8: "The amounts claimed against States are easily exaggerated. A public purse always looms large
in the eyes of a claimant. Hence the total of the awards made by a tribunal is frequently out of all
proportion to the total amount of the claims presented to it. Following the Civil War in the United
States, British claims were presented to the amount of $6,ooo,ooo, but less than $2,000,000 was awarded,
by a claims commission; French claims totaled $3,500,000, but less than $65oooo was awarded. The
z868 American-Mexican Commission awarded less than one percent of the amount claimed by each
Government from the other; the i9io American-British tribunal awarded less than two percent of the
amount of the American claims, and only four percent of the British claims."
 LAW AND CON tMPORARY' PROBLEMS

entailed. The development of standard procedures for the settlement of the

stupendous volume of claims of small size, without individual investigation, resulted
in the gradual increase of the volume adjudicated from about 3,000 in July to 16,414
in November, 1947, with every prospect of a proportionate increase each month.
Due to the disclosure in November, 1947 of evidence indicating the possible existence
of fraud in several hundred small claims in a minor locality, the Commission decided
to discontinue disposing of cases, however small, without individual check-up in the
field. The volume of adjudicated claims dropped from about 6,20o in December,
r947 to less than 3,000 in January, 1948, and to smaller numbers thereafter until the
realistic policy of standardized examination of small claims without individual in-
vestigation, except in particular instances, was resumed. When the full impact of
this policy was realized, claims settlement zoomed so that by December 3, 1949 the
Commission had processed 927,ooo small claims.
More fundamental and more immediate than the adoption of measures to
counteract attempts at fraudulent enrichment was the development of standards of
value which would, in a practical sense, contemplate the restoration of property
destroyed or damaged during the war. If there was any substance in the rehabili,
tation aspect of the work of the Philippine War Damage Commission, such an ob-
jective had to enter into its deliberations.
The Act imposed the restriction of paying to successful claimants the actual cash
value of property at the time of loss or injury; or in the alternative, the cost of re-
pairing, rebuilding or replacing the same with other property of like quality; which-
ever was less. The technicians of the Commission undertook, through exhaustive
research, to determine valuations of types of articles which were recurrent in claims
and to prepare tables of depreciation. Thus, if a printing press had been acquired
new in 1935 at a certain price, its valuation at the time of loss could, according to
the tables prepared by the Commission, be determined. The more complicated
problems arising in connection with growing crops, like sugar, rice, tobacco, hemp,
cocoanuts, and corn, indigenous to the Philippines, or with animals in being, but
not born before December 7,ir4 i, presented categories of head-splitters which were

weighed by the Commission after hearings of interested parties, as expediency

dictated and the limitations of the Act required. The question remained open al-
ways of whether the true aims of rehabilitation are being observed when the value
of property at the time of loss, or the cost of repairing, reconstruction, or replacement,
whichever is less, is the basis of compensation. Doubts become accentuated when
there is adopted as a basis of compensation a formula for settlement establishing not
even the cash value at the time of loss or damage (which, in all instances in the
Philippines, was less than the replacement value), but reduced values determined
according to preconceived tables of depreciation."
It must be 'said in fairness that the Philippine War Damage Commission was
4 For a discussion of values in reparations, see Gide, The Indemnity for Reparations, 104 ANNSALS
140, 142 (November, 1922).
 THE PHILIPPINE WAR DAMAGE COMMISSION

restricted in the first instance by law from awarding replacement values 'if they
were more than the cash value at the time of loss. But, it is submitted, the Corm-
mission, in adopting rigid standards which embraced, where applicable,, the urse bf
depreciation tables or predetermined standard values for frequently recurring items
of the lowest figure consistent with any degree of fairness, went farther than wis
required. It is safe to say that in connection with the compensation for loss or
damage in privately owned property, no practical consideration was given to, re-
construction or replacement values. Add to this the obstacles in the way of making
restitution in kind of lost property and you find a situation where true rehabilitation
is a remote concept.
The most common claims before the Commission' were" based upon total or
partial destruction of small homes; simple tools; work animals, mostly carabao,
pigs, chickens; and stocks of wood. These were usually inadequately identified. Not
all of the claimants had the patience or artistry of one from Dipolog, Zamboanga,
who not only enumerated his personal belongings and described them in detail, but
portrayed them with rare skill in drawings, some of them colored. He elaborated
upon each item with such detail as "muslin (cocoa) blanket bedspread combinationu,
beautifully embroidered by my wife; when we arrived in Cebu the work was dtne;
she was a school teacher, but when I took her to Cebu she stayed at home to comfort
her life companion."
Obviously, restoration in kind in these instances was a virtual impossibility, and
in the case of antiquated equipment, was not even desirable. The only acceptable
method of coping with the problem of compensation for such losses was to develop
a set of values for the smallest and most frequently mentioned items, a rule of the
thumb, as it were; and for the valuation of more considerable property, a system of
appraisal worked out specifically for real estate, machinery, equipment, and mer-
chandise; and to pay the claimants in cash.
Congress, in considering and adopting the war damage legislation under which
the Commission functioned, placed much emphasis upon the rehabilitation program
and the devotion of the funds provided to the rebuilding of a devastated area, but,
nevertheless, recognized that the the implementation of such a program would
defy the best efforts of an administrative agency. In committee the original pro-
posals were amended as follows:
PROVIDED, That if the Commission determines it is impossible for any reason beyond
the control of the claimant, or is impractical to rebuild, replace, or repair the lost or
damaged property, the Commission may make payment to the claimant without making
said requirement: PROVIDED, however, That, as a condition to the making of such
payment, the Commission shall require that the whole of such payment shall be reinvested
in such manner as will further the rehabilitation or economic development of the Philip-
pines; AND PROVIDED further, That nothing in this subsection shall preclude the
partial payment of claims as the rebuilding, replacing, or repairing of the property
45
progresses.
" 6o STAT. i31, as amended, 6o STAT. 805, 50 U. S. C. App. §5755 (Supp. 1950).
.534 LAw AND CONTEMPORARY PROBLEMS

The Commission has reported that a survey which it conducted demonstrates

that the little claimant who received an award is rehabilitating himself and his
family with war damage payments; that he is buying tools and work animals and
repairing his home and his store, endeavoring to reconstruct himself as the mainstay
of an agrarian land.
In the period July i to December 1, 1949, the Commission made an analysis of the use
which large claimants-industry, business and agriculture and all of those who contribute
most to employment and general rehabilitation-are making of their payments. Without
question, they, like Juan de la Cruz, 46 have utilized the money they have received to
benefit materially the processes of economic recovery, although the funds have
47
been far
from sufficient to provide complete restoration of lost or damaged property.
Further, it is reported that in small claims processed by December 31, x949, the
claimants had been paid approximately $127,085,000 of the total $4ooooo,ooo author-
ized in the Act. Of approximately i,ooo claims having a face value of more than
$o,ooo each completed by December 31, 228 were disallowed because of ineligibility
of claimants under the law, and the remainder by allowance and initial payments
aggregated $35,000,000. The Commission announces that actual reinvestment of this
group in the economy in the Philippines was estimated to be $ii6,ooo,ooo during
the same period. The survey also disclosed that 274 claimants who were paid a
total of something less than $27,500,000 had actually reinvested $io8,ooo,ooo prior to
award by the Commission. It would not be wide of the mark to conclude that
much more than this amount was invested in postwar Philippine construction and
business before the Commission got around to making payments.
Despite the best efforts of the Philippine War Damage Commission resulting in
some sort of record attached to the completion of its task in settling almost 1,250,000
private claims before the expiration of the time limit set by Congress, and with less
administrative expense than authorized, there was an essential lack of realism in the
whole operation measured by the requirements of a true rehabilitation program.
Among many elements in the account, which we need go no farther to find than
the experience of the Commission in handling private claims, are the following:
:,, ,(i) The law itself, although sounding in language of rehabilitation, actually im-
posed the restrictions of a claims agency.
(2) There were obstacles even to the adoption of ordinary claims procedures be-
cause of the volume and small size of the claims which actually called for relief or
welfare donations.
(3) The specific requirement that compensation should
be made for property
lost or damaged on the basis of the cash value at the time of loss or damage or
replacement or reconstruction value, whichever was less, disregarded fundamental
principles of rehabilitation which have to do primarily with replacement, restoration,
reconstruction, and improvement. To this was added the additional limitation of
,The "John Smith" or little man of the Philippines.
UM
UJrTED STATES-PHILIPPINE WAR DAMAGE COMMISSION, SEVENTH SEMIANNUAL RpowRT volt Pg~lo
ENDING DECEMBER 3x, 1949 3 (1950).
 THE PHILIPPINE WAR DAMAGE CoMMIssIoN 535
the procedures of the Commission which, in the case of very small items, used
low standard values, and in the case of more considerable property, applied tables
of depreciation which reduced the awards materially from original costs to un-
realistic values at the time of loss or damage.
(4) The language of the law authorizing replacement or restitution in kind
was not implemented in practice, due to the impossibility of realization under post-
war conditions. The qualification in the law permitting payment in cash, without
even requiring the replacement of property with the funds awarded, simply recog-
nizes the obvious. The additional condition imposed upon the Commission, that
it shall require -the whole of the payments to be invested in such manner as will
further the rehabilitation or economic development of the Philippines, to be effective
obviously would require such policing as the Commission had neither the time, the
funds, nor the facilities to control. . %
(5) Payments under the word and spirit of the Act had -to be made to innocent
victims or to their heirs who -might leave the Philippines, or -conceivably never
lived there.
. (6) Despite the time record of the Commission, it still remains a fact that two
to five years or more elapsed from the time-of -the loss .or damage to the date .of the
award. Moreover, the payments above $5o0 made on larger claims were diminished
in three ways: (a) the award, due to valuation procedures -of the Commilssion,
ordinarily reflected a great reduction from the claimed amount; (b) under the
law an automatic reduction of 25 per cent of the excess over $5oo was made; (c)
initial proportionate payments on awards above $5oo amounted to 30 per cent and
it has been predicted by the Commission that about 50 per cent in all might be
expected in final computation.
(7) Since the total physical damage to property in the Philippines has been
estimated at from $8oo,ooo,ooo to $1,250,000,000 (and by some at two billion dollars).
the amount of money made available in the first place was inadequate to attack the
job which the United States protested it would undertake.
(8) The functions and performance of the War Damage Commission were not
integrated closely enough with other Philippine rehabilitation efforts. A number
of assistance programs were going on at the same time. Years after the end of the
war the Philippines are still in bad shape economically, and by standards of the
United States, far from satisfactorily advanced physically.
:z. Public Claims
Of the amount of 12o million dollars allowed by the Congress in Title III of the
Act for the restoration and improvement of public property and essential public
services in the Philippines, sixty-three million dollars was allocated to rehabilitation
of public roads, public health, inter-island commerce, air navigation, and coast and
geodetic surveys, each, as has been indicated earlier, under the administration of an
agency of the United States within the jurisdiction of which such efforts would
 -LAW AND CONTEMPORARY PROBLEMS

ordinarily fall. Representatives of these arms of the United States Government have
been located in the Philippines to complete work which is authentically rehabilita-
tion.
The Philippine War Damage Commission was allowed 57 million dollars "to
compensate the Republic of the Philippines, the provincial governments, chartered
cities, municipalities and corporations wholly owned by the Commonwealth of the
Philippines ...for physical loss of or damage to public property in the Philippines"
occuring within the same time limits, and as a result of the same perils of war, as
designated for private property losses.48
The physical improvement of public property resulting from the
direct efforts of
agencies of the United States is obviously easier to detect than the recovery of the
economy and even tangible incidents of private life. Roads were repaired, trans-
portation services restored, under the very eyes of observers. Debris was swept from
the harbor by the strong arms of men paid by the United States. Health services
were revived to serve daily needs of the Filipino people. The War Damage Com-
mission has appropriately placed upon principal Philippine schools and government
buildings reconstructed with the aid of the United States plaques inscribed las
follows: "Rebuilt with the aid of the people of the United States of America under
the Philippine Rehabilitation Act of 1946."
Procedures in the rehabilitation of publicly owned property adopted and em-
ployed by the War Damage Commission from the beginning reflected three dis-
tinct basic policies. First: the Commission would not do the work itself; second:
the Commission would not pay the entire sum of money awarded for the repair or
reconstruction of a damaged or destroyed building directly to the Philippine Gov-
ernment to be spent by it; third: the Commission would pay to authorized agencies
or subdivisions of the Philippine Government the money awarded to specific proj-
ects suggested by the Philippine Government, only as their progress and completion
were verified by representatives of the Commission. Pursuant to these principles
and practices, the Philippine Government presented to the War Damage Commission
claims totalling approximately i9o million dollars. Priorities were adopted in
making awards according to the following sequence: (i) hospitals and municipal
water works; (2) schools; (3) government buildings. Again, despite the considerable
txpense to which the United States Government consented to go in its program
of assistance, the amount of i2o million dollars (of which 57 million dollars was
allocated to the War Damage Commission), was appreciably deficient. This is
true even giving effect to the additional grant of surplus materials "to aid in repair-
ing and replacing buildings. . . works, utilities, equipment or other property."40
- The Philippine Government undertook and is completing restoration projects on
a much larger scale, but it must be recognized that the contributions of the United
States Government and the stimulation they furnished, particularly through the
,"60 STAT. 136, 50 U. S. C. App. §1784 (Supp. 1950).
4
Id. §§1771-1776.
 THE PHILIPPINE WAR DAMAGE COMMISSION

orderly processes, planning, and supervision afforded by representatives of the War

Damage Commission, were of inestimable help, and probably account for some very
substantial accomplishment not traceable to any other source.50
As early as destruction in the principal cities of the Philippines was viewed, it
became apparent that the amount of money which the United States could or would
donate towards physical rehabilitation would not be enough to accomplish the
full job. Moreover, the pattern of distribution followed there may have been
suited to the Philippines, but may never be applicable to another instance of the re-
pair of war damage. The Philippine Government had become independent; it re-
served the right to develop its own program of reconstruction, embracing improve-
ments, changes of sites, and re-emphasis of projects according to overall plans of its
own. Lastly, there is a question whether funds for rehabilitation should not have
been turned over to the government suffering the damage to be expended by it
without supervision or verification, a course which, for the Philippines, is not now
open to review, but which may be considered in connection with future undertakings.
The writer has entertained little reservation in questioning the efficacy of the
award of small welfare payments or even larger amounts in partial reimbursement
for losses of private property, as a constructive factor in overall rehabilitation. He is
ready to admit, however, that the dual program forced upon the War Damage
Commission by the Act had the healthy effect of placing in comparable perspectives
war damage money grants and public property rehabilitation. The implementation
of the latter service, regardless of methods and amounts, appeared tangible, con-
structive, and durable. Improved planning and more advanced techniques of
operation would serve to bring.about an even better result.
III
CoRRELATION OF WAR DAMAGE COMPENSATION AND REHABILITATION:
CONCLUSIONS AND PRosPEcTs

For the future which is now foreseeable there will be a measure of expedient
application of the historical pattern in the settlement of war claims following lines
"°Of the total amount of 57 million dollars allocated to the War Damage Commission for the
program of restoration and repair of public property, $1,7oo,ooo was set aside for estimated administrative
expense. The balance determined by the Commission in conjunction with the Philippine Government
was apportioned as follows:
Item Per cent o1 Allocation Allocated Amount Per cent of Estimated Loss
Schools ........................ 6z.4 $34,546,698.87 35.8
Hospitals and dispensaries ........ 8.3 4,571,010.10 91.9
National government buildings .... 12.3 6,810,747.89 34.0
Provincial and Municipal,
government buildings ......... 7.4 4,081,701.r5 13.3
Waterworks and
irrigation systems ............ 5.6 3,089,841.99 59-5
Government corporations ......... 4.0 2,200,000.00 17.9
100.0 $55,300,000.00

See SEVENTH SEMIANNUAL REPORT OF THE UNITED S7IATES-PHILIPPINE WAR DAMAGE COMMISSION, DE-
CEM13ER 31, 1949 22 (1950).
 - LAW AND CONTEMPORARY PROBLEMS

of (a) reparations from losing belligerents; (b) payment for property commandeered,
confiscated or requisitioned under pressure of necessity; (c) indemnities and the
adjustment of losses under treaties or other international agreements, whether on a
national or territorial basis.
The concern with which the government of the United States has addressed
itself to the ethical elements in war damages-justice and humanity-has not been
diluted by considerations of material reward or reimbursement from other govern-
ments.5 The big fact is there--that not much is to be hoped for in the way of in-
demnities or reparations for the very practical reason that none of the enemies of
the Allies is solvent or likely to be for a long time. Still further, with the kind of
war which is waged in the modern era, the enemy at the time of victory becomes
reduced to a position where it is actually the charge of a victorious opponent, and
in the name of humanity and sound business, if you please, demands its own re-
habilitation at the expense of the rest of the world. It goes also without saying that
despite encouraging signs of recovery among the Allies of the United, States, it is
too early to expect scientifically balanced international adjustments of war, losses
among them; the burden will ever fall on the most affluent.
A decline in international principles affecting requirements for the declaration of
war, the rules governing the-treatment of prisoners, and the adjustment of losses after-
wards, has been brought about, by each successive struggle through the process of
violation by one side and retaliation by the other. Superficially, there have been
accretions to the body of understanding and information in the subject.of. interna,
tional law, and new techniques have been adopted governing.restitution, reconstrug-
tion, and rehabilitation due, -as an anomaly, to the, corrodingprocesses. of var., In
the Philippines, as has been pointed out, the United States, under no legal com-
pulsion, and largely without precedent, made a contribution of sizable proportions
to correct the dislocations brofight abotit by warfare.
It is true that as far as the Philippihik eipeirien goes there have been demon-
strated deficiencies in legislation anrd perhaps iradministration'in the earlier stages
of the program. These resulted from (a) inexperience -implicit in the novelty of
the plan; "(b) concerns of public relations- which led to confusion between what
,were essential welfare yi,ents to the litie man and financial reimbursement to
sufferers of more considerable property losses; (c) local peculiarities of language,
custom, and geography. . - .
The following considerdtions" which the writer-rlakes bold to express would
not have iounded as trite.a few years ago as they do now.
Only cooperative international action appears to be an effective instrument of
progress 'towards peace. 'If 'is hot just ethically correct, but economically sotind,
1
Convdsely, in the case of the Inteinbational Claims Settlement Act, the United States Government
proposes to obtain settlement froid d6untries which have nationalized private property, or otherwise 'caused
losses to nationals of our country before, awards will be made to~claimants for these losses. So far a
settlement of $17,Ooo,ooo has been made with Yugoslavia; others are expected, although not immediate
in time, "vith Poland'ihd Czeclioslovakia. '"' ... . '
 THE PHILIPPINE WAR DAMAGE COMMISSION

that those most fortunately situated in worldly goods should make their resources
partly available to the backward and those denied equal gifts and opportunities.
It is assumed that this principle will be supported only to the extent that it is con-
sistent with a sane regard for conserving those resources upon which the prosperity
of the favored nation is based.
The adjustment of losses after a war will have to take into account direct re-
habilitation, irrespective of responsibility and beyond the limits of any plan which,
like insurance, contemplates only monetary awards to individual sufferers. The
kind of war damage compensation thus envisioned would be free from the detailed
concerns incident to a program of war damage compensation which, in the case of
the fraudulent, is unjustified, and in the case of real victims, often has been hopelessly
inadequate. It does not provide, in the category of business and private property
losses, for examination, investigations, appraisals, standard values, and other tech-
niques, which are suitable to adjustment in avenues of commerce, but not in the
field of international post-war recovery and reconstruction.
I The future of war damage compensation might follow paths which at the
moment may seem to be laid along very ambitious lines and in at least some di-
rections may meet with obstacles of unpopularity and skepticism and fear. These
paths in any event would have distinguishable and desirable characteristics, some
of which may be suggested, even at the risk of approaching controversial territory.
First: The area of war losses having been identified, the nations participating in
the hostilities resulting in such :damage must immediately set up an agency to de-
termine (a) the extent of the damage; (b) a formula for immediate relief and
recovery on the basis of expediency;" -(c) an overall plan for rehabilitation and im-
provement. A
Second: The obligation to, finance the rehabilitation program shall be inde-
pendent of blame. Industry and government long ago discovered that in such
socially significant areas as workmen's compensation (including occupational illness
as well as accident), unemployment and. old age security, specific causation or fault
should be disregarded and benefits awarded as a part of the expense of doing
business or conducting an organized society. Commercial and political entities
underwrite restitution, relief, and rehabilitation, on a minimal basis, to be sure, as an
incident to the vagaries of human existence. In international affairs, so long as war-
fare persists as an institution, and the kind of war is promised which is no respecter
of noncombatant person or property, -recovery and rehabilitation are also common,
group responsibilities.
Third: The budget necessary to insure the completion of overall rehabilitation
" The writer was engaged in the efforts of the United States Government directly following the
reoccupation of the Philippine Islands to bring immediate relief to war sufferers and to reestablish the
channels of ordinary living and trade. These efforts, delegated officially first to the Foreign Economic
Administration and then carried on in detail by the U. S. Commercial Company, a subdivision of this
Administration later taken over by the Reconstruction Finance Corporation, were supplemented in the
early post-war era by very effective private relief bodies. All of this was quite apart from the rehabilita-
tion program covered by the Act of 1946.
 ...- LAWe AND CONTEMPORARY PROBLEMS

will not depend upon the precise nature of the items lost, their cost, deprecialiii,
replacement value, and other traditions in the school of claims adjustment. No
isolated instance of fraud or exaggeration will be entertained as a distraction. The
fractures of war will be reduced through rebuilding. Rehabilitation to be constructive
must be along modern designs with a view to improvement rather than restoration
of the status quo ante bellum. The nipa hut ought to have been replaced by livable
dwelling quarters; the outhouse or tree-stump eventually has to give way to plumbing
and a septic tank.
Fourth: Commencing on a physical level total reconstruction will entail as a
normal consequence sound economic improvement extending into the life of each
member of the community. Therefore, a loser of a hut or a carabao, although
he, may feel injured when denied restitution in kind or a cash equivalent, is actually a
joint beneficiary with his fellow-men of the boons of modern planning-adequate
h6using facilities, up-to-date equipment, a generally enhanced economy with ex-
panded opportunities for every individual.
. I Fifth: In the case of Korea, for instance, it is a remote hope that those whom we
would adjudge malefactors will pay for the damage done during the';Avasion f
the South and the battle for the North. Nonetheless, it is universally conceded thAt
there must be (a) immediate relief measures, and (b) a total rehabilitation progrAtri
to be adopted, implemented, and initiated as soon as possible. No one at this stage
of world development is cynical enough to suggest that all we need'doin this
unhappy country is to pay, after meticulous investigation, the sums.of Money rep?6
senting the depreciated value of property destroyed or damaged, or -to undertake to
restore it to its former condition which, -except in the cases of a few buildings and
installations, would mean a long step backwards. , - I!
-Sixth: The United States is the repository of a considerable portion of the usable
wealth of the world as -well as of most of the remaining hopes of mankind. In
connection with postwar' restoration it already has assumed the heAviest burden,
irrespective of fault or'responsibility.. The idea of doing most of the financing of
wholesale rehabilitation in not only Koreabut:posiibly Indonesia, Indo-Chihl, Tibt;
Persia,, and other remote corners of the tarth where the allied forces of freedomn'ma
be engaged by their challengersi may startle not only the conservative among 6it
citizens but sound statesmen and international-lawyers whose approaches have beeth
conditioned to orthodox concepts of reparations, indemnities, and the payment o
mixed- claims in orderly procedures.: If there were in existence an international fund;
built up over the years, analogous to insurance deposits, against the casualty of war;
resistance might not be great. The lack of such a fund, however, does not diminish
the necessity or responsibility for the same kind of assistance as would be extended
throigh insurance benefits, We"have already adjusted ourselves to an agreeable
r. 5 p.tion of a law which permitted outright grants to the Philippines of more than
half a billion dollars. Under the Marshall Plan and international defense agreementd
 THE PHILIPPINE WAR DAMAGE CommissIoN 54t
we are committed to the expenditures of billions more without any hope of direct re-
turn, but with boundless confidence that we shall be rewarded by the betterment of
the world of which we are a part. It is no great step in advance of what we are doing
to subscribe unreservedly to the principle that rehabilitation of war damaged countries
is a world responsibility which we shall share within the limits of our resources.
It is not implied that the rehabilitation of any one country will be at the expense
of the debilitation of another.
Seventh: The logical agency to plan, implement, and carry out a program of re-
habilitation anywhere in the world is the United Nations. 3 If in the distant future
there is to be an adjustment on the basis of blame or proportionate responsibility, it
should be effected under the auspices of this convenient international mechanism.
Any reserves which might be set up in peace times to cover the casualties of war
should be assembled and safeguarded by a common instrumentality the strengthening
of which by any means is a gesture towards peace. This is not the place to make
specific recommendations, but the generalities propounded should be sufficiently ;im-
perative to set machinery in motion for fabricating workable plans. 4
In the course of this discussion an effort has been made to correlate concepts of
war damage compensation and total rehabilitation. Since the need for some form of
adjustment of individual war claims along traditional lines will probably persist in-
definitely, and since, moreover, a backdrop of historical activities may help a picture
of the future, a general survey was first attempted.
The Philippine Rehabilitation Act of 1946 and the experience of the War Damage
Commission were then presented for the object lessons they contain. It is true that
in the case of the Philippines there were special pressures due to a long and unusual
relationship. Many valid generalities, nevertheless, may be drawn from that experi-
ment.
Hereafter, isolated domestic legislation donating money, property, and services
should be avoided. Haphazard grants, gifts, and easy loans, made on the basis of
politics, public relations, and even humanity, are essentially ineffectual in a genuine
rehabilitation program. The combination of welfare payments or doles, relief
' UNESCO already has taken jurisdiction in relief and rehabilitation of war stricken areas.
' After this text had been prepared the naming of a civilian to rebuild Korea under United Nations
auspices was recommended at Lake Success by a representative of the United States. The subject received
widespread press notices among them the following which appeared in issues of October 17, 1950:
Washington Evening Star: "The United States proposed today that the United Nations appoint a
supreme civilian boss to direct Korea's multi-million dollar economic rebuilding."
N. Y. Times: "No decisions have yet been taken on how the financial burden shall be borne. But the
U. S.-because it is the only power that can spare substantial resources to do the job-will play a dominant
part in the program. Last week President Truman said, 'The United States will carry its full share of
this load.' "
The Christain Science Monitor: "President Truman, before leaving for his Wake Island meeting
with Gen. Douglas MacArthur, approved a relief and rehabilitation program for Korea of nearly Si
billion, it was learned.
The program, as envisaged by the President, would call for establishment of a war damage and
reonstrucuon corporation under United Nations auspices, to which the United States would contribute
between $2oo,ooo,ooo and $3oo,ooo,ooo annually during the next three years."
542 LAW AND CONTEMPORARY PROBLEMS

measures, war damage settlements, and rehabilitation projects in one great hopper, is
bound to lead to confusion and disappointing results.
What is indicated in the dangerous cases of war damage and destruction is a
remedy, consistent with advances in world thinking, in the form of a systematic
provision for total adjustment of total losses occasioned by total wars, governed
wholly by the techniques of rehabilitation.
Collective compensation packaged in repair, reconstruction, and improvement of
war devastated regions is an immediate objective which does not concern itself with
individual indemnities for the loss of private possessions. The aggregate benefits
of rehabilitation inure to the world and may be derived only from broad, progressive,
and concerted action by all interested groups. Such action requires a common in-
strumentality which is now available in the United Nations Organization. This
body, in the face of doubts and cynical assaults which have questioned its rights to
survive, has successfully answered the call of war; given half a chance, it can do as
well in response to the summons to compensate war damage through rehabilitation.