During the American Civil War, British shipbuilders were commissioned to build warships for the Confederacy. One of these ships—the CSS Alabama—was used to capture almost 60 Northern merchant vessels, and in total, the British-built Confederate ships sank around 150 Union ships. Outraged, the United States convinced Britain to confiscate any other ships intended for the South.
After the war was over, the United States argued that because Britain violated its declaration of neutrality by building the ships, the country should pay them reparations for the damage done by the Alabama and other British-built ships. The initial sum the United States suggested was 2 billion dollars—but they were willing to accept Canada as payment instead.
Not surprisingly, Britain didn’t agree to the United States’ demands, and years of diplomatic squabbling ensued. Finally, in 1871, as part of the Treaty of Washington, Britain apologized for their contribution to the damages done by the Confederate ships and set up an international commission to determine the validity of the United States’ monetary claims.
Over a year later, the commission decided that Britain was to pay 15.5 million dollars in damages. This outcome, as well as the other components of the Treaty of Washington, was notable for establishing a precedent of solving problems peacefully through international arbitration and for building an amicable relationship between Great Britain and the United States.