Many Englishmen's sympathy for the Confederacy, combined with the British government's lax neutrality enforcement, created a serious rift between the United States and Great Britain. The most serious charge leveled by the U.S. was that the British allowed the Confederate cruisers "Alabama," "Shenandoah," and "Florida" to be armed in British ports.

Early attempts to resolve this dispute were unsuccessful. At one point, a claim was made that Britain was responsible for half the cost of the war, and that the U.S. would consider Canada proper payment. This shocked the British, and they realized they needed to come to an agreement soon.

Thus, on May 8th, the United States and Great Britain agreed to submit all of their disputes, including boundary disputes, fishery issues, and the question of claims, to binding arbitration.

The arbitration committee decided that Great Britain owed the United States $15,500,000.