The peace treaty signed at the end of the American War of Independence in 1783 provided for a recommendation by the Congress of the United States for the restoration of the property of 'real British subjects.'
This recommendation was intended to cover the claims of those Americans who had suffered losses during the war as a result of their loyalty to the Crown but it soon became apparent that they could expect little redress from the legislatures of individual states. In fact, British commissioners had already been appointed under the American Loyalists' Act 1783 to inquire into the losses of such persons and many of them were awarded pensions and compensations by the British government.
Claims in respect of debts were, however, excluded as the 1783 peace treaty provided that creditors on either side should meet no lawful impediment in seeking to recover debts due to them. In practice, there were many difficulties particularly as, in the case of loyalist claimants, their attainder was invariably held by the American courts to bar their suit.
In 1794 a new treaty, commonly known as Jay's Treaty, was signed between Great Britain and the United States. The sixth article of this treaty provided for the settlement of all debts contracted with and due to British subjects prior to the peace of 1783. A seventh article provided for the payment of claims for compensation for losses and damages suffered by American merchants and citizens during the war by reason of irregular or illegal captures of vessels and property. Two boards of commissioners were established to carry these articles into effect. Each consisted of two British and two American commissioners with a fifth appointed by the other four. In 1799, deadlock having arisen in the settlement of claims under the sixth article, the British government, as a counter-measure, suspended its proceedings under the seventh article.
In 1802 a new convention was signed by the two countries for the mutual payment of claims. The board constituted under the seventh article of the treaty of 1794 resumed its work and the American government undertook to pay the sum of £600,000 in satisfaction of the money they might otherwise have been liable to pay under the terms of the sixth article.
To deal with claims under this article in respect of outstanding debts from British merchants and from Americans who had remained loyal to the Crown, three commissioners were appointed in Britain under the Distribution of Certain Monies Act 1803. Two of these commissioners had previously represented Great Britain on the former board established for this purpose under the 1794 treaty, while the third had sat on that board as its fifth member, having been chosen by lot in 1797.
Claims amounting to nearly £5 million were considered by these commissioners of which £1,420,000 were allowed to be good. Successful claimants received dividends pro rata from the money made available by the American government which, with interest, amounted to £659,493. The commission made its final adjudication on claims in 1811 and presented its last report to the Treasury in June 1812 when it wound up its proceedings.