yesterday to ask Jeff. Davis, President, to --- the treaty of --- to ---- the neutral flag covering neutral goods to be respected. This is the first step of direct treating with our Government. So prepare for active business by 1st of January.

You submitted this information to Her Majesty's Government with a request on the part of the President of the United States that if it should be found to be correct Mr. Bunch might be at once removed from his office. And you further added by my direction that the President would cheerfully accored an exequatur to any person who might be appointed to succeed Mr. Bunch who would faithfully perform his functions without injury to the rights and interests of the United States.

There is appended to your dispatch now before me the written answer of the Earl Russell to your note thus recited. His lordship answers that he will without hesitation state to Mr. Adams that in pursuance of an agreement between the British and French Governments Mr. Bunch was instructed to communicate to the persons exercising authority in the so-called Confederate States the desire of those Governments that the second, third and fourth articles of the declaration of Paris should be observed by those States in the prosecution of the hostilities in which they were engaged. His lordship then asked you to observe that the commerce of Great Britain and France is deeply interested in the maintenance of the articles providing that the flag covers the goods and that the goods of a neutral taken on board a belligerent ship are not liable to confiscation.

Earl Russell thereupon proceeds to say that Mr. Bunch in what he has done in this matter has acted in obedience to the instructions of his Government, who accepts the responsibility of his proceedings so far as they are known to the foreign department and who cannot therefore remove him from his office for having obeyed their instructions. But his lordship adds that when it is tated in a letter from some person not named that the first step to the recognition of the Southern delcine all responsibliity for such statement, and he remakrs on this branch of the subject that Her Majesty's Government have already recognized the belligerent character of the Southern States and they will continue to consider them as belligerents, but that Her Majesty's Government have to recognized and are not prepared to recognize the so-called Confederate States as a separate and independent State.

You are instructed to reply to this note of Her Majesty's principal secretary of state for foreign affairs:

First. That Her Majesty's Government having avowed that Mr. Bunch acted under their instructions so far as his conduct is known to the foreign department, and that Government having avowed that so far as that portion of the subject is concerned the matter is to be settled directly with Her Majesty's Government.

Second. That a law of the United States forbids any person not specially appointed or duly authorized or recognized by the President, whether citizen or denizen, privileged or unprivileged, from counseling, advising, aiding or assiting in any political correspondence with the Government of any foreign Government or of any officer or agent thereof in relation to any disputes or controversies with the United States or to defeat the measures of the Government. The proceeding of Mr. Buch was clearly and distinctly in violation of this positive law.

Third. This Government findsd no sufficient justification or excuse for the proceeding of Mr. Buchn thus shown to be in violation of the