The Alabama Claims — The Fishery Question — The Washington Treaty concluded, May 8th—1871. Lord Dufferin, Governor-General-Canadian Pacific Railway Companies organized—1872. Prince Edward Island enters the Dominion, July 1st—"Pacific Railway Scandal" controversy—The Macdonald Ministry resigns, November 5th—1873.

The question of the liability of Great Britain for the immense damage done to American commerce by the depredation of the Alabama, Florida, and other Confederate cruisers sailing from British ports, was the occasion of intense and prolonged discussion in the United States. The political irritation found vehement expression in the public press, on the platform, and even in the pulpit.

Another cause of international difficulty also existed. During the continuance of the Reciprocity Treaty, the deep sea and inshore fisheries of the British North American coast were freely thrown open to American fishermen by the conditions of the treaty. On the suspension of reciprocity, of course that privilege ceased. Yet the Americans continued to claim the right of fishing in British waters. In order to remove as far as possible these causes of irritation, a joint high commission, composed of eminent statesmen of both nations, met at Washington in the month of February, 1871. The result of the negotiations was expressed by the Washington Treaty, concluded on the 8th of May. The Alabama claims were jointly referred to a board of arbitration appointed by friendly powers, which awarded $15,000,000 to the United States. The fisheries of both Canada and the United States were thrown open to either country. A money compensation (afterwards settled at $5,500,000) was, however, to be paid to Canada in consideration of the superior value of her fisheries.

In the month of December, 1871, the Hon. John Sandfield Macdonald, in consequence of a vote of the Ontario Legislature adverse to the policy of the Government, in appropriating $1,500,000 for railroad subsidies without taking a vote on the appropriations to the several roads, resigned the premiership into the hands of Mr. Edward Blake.1 Among the important measures of the session was one disallowing the practice of dual representation, that is, the occupancy of seats by the same person in both the Dominion and local parliaments. In consequence of this, Mr. Blake yielded the office of premier to the Hon. Oliver Mowat, who resigned his position on the bench in order to enter again into political life.

In the' month of June following, the- Earl of Dufferin 2079 succeeded Sir John Young (now Lord Lisgar) as Governor-General. He brought with him a distinguished reputation as a statesman and man of letters, and by the urbanity of his manners won a very remarkable degree of popular favour. He promptly identified himself with every interest of the country which was calculated to promote its happiness and welfare.

The construction of a Canadian Pacific Railway across the continent was one of the conditions of the entrance of British Columbia into the Dominion. For the purpose of procuring the contract for this gigantic undertaking, two rival companies obtained incorporation—the " Canada Pacific," with Sir Hugh Allan, principal proprietor of the Canadian steamship line, at its head; and the " Inter-Oceanic," with the Hon. Senator Macpherson as its president. A subsidy of $30,000,000, and a grant of fifty million acres of land in alternate blocks along the line of railway, were also to be given to the company constructing the road.

A charter was at length granted (February 19th) to a 187o new "Canada Pacific Railway Company." The president was Sir Hugh Allan, and among the directors, seventeen in number, were members of both the former companies, and representative men from the different provinces of the Dominion, together with several leading American capitalists.

Parliament met on the 6th of March. The Government had a good working majority. Early in the session grave charges were preferred against the ministry by Mr. Huntington, the member for Shefford. They were accused of malfeasance of office in connection with the granting of the Pacific Railway charter. A committee of investigation was appointed, with authority to examine witnesses on oath.

In Quebec, Mr. Caron became Lieutenant-Governor, vice Sir N. Belleau; and in New Brunswick, Mr. Tilley succeeded Mr. Wilmot.

On the 1st of July, 1873 (Dominion Day), Prince'Edward Island was admitted into the Canadian confederacy. It received a representation in the House of Commons of six members, and in the Senate, of four members.

During the recess of Parliament certain correspondence between Sir Hugh Allan and some American capitalists, which was published in the newspapers, seemed to inculpate the Government in what was now known as the " Pacific Scandal." The burden of the charge was that the Government had received from Sir Hugh Allan and American capitalists, in consideration for granting them the Pacific Railway Charter, large sums of money to be used in carrying the elections in the interest of the Ministerial party.

When Parliament met on the 13th of August, the committee of investigation failed to report, as the Imperial Government had on legal-grounds disallowed the Oaths Bill, under which it was authorized to receive sworn testimony. A royal commission was appointed by the Governor-General, to receive the testimony of sworn witnesses on the charges against the Government.

Parliament met again on the 23rd of October to receive the report of the royal commission, presenting the unprecedented circumstance of being in session three times within five months. The report of the commissioners was confined to a statement of matters of evidence, without expressing any judicial opinion upon the subject. Mr. Mackenzie, the leader of the Opposition, moved a resolution of censure on the Government. The debate continued for seven days. At length, without waiting for the House to come to a vote, Sir John A. Macdonald announced the resignation of his cabinet, November 5th.