818.154/235
The American Minister in Costa Rica (Sack) to the Costa Rican Acting Secretary of State for Foreign Affairs (Picado)13
Excellency: I have the honor to refer to my note No. 95 of September 4, 1935, acknowledging the receipt of note No. 293–B of May 21, 1935, from His Excellency the Minister for Foreign Affairs, on the claim of the Simmons Construction Company, and to set forth below the opinions of my Government with respect thereto, reached after careful consideration of the note of May 21, 1935, already referred to.
After setting forth the factual and legal bases of the claim, as understood by my Government, this Legation’s note No. 99 of August 6, 1934, requested (1) that the Costa Rican Government make payment to the claimant corporation in conformity with the award rendered by the company arbitrator, which in its opinion was the only award legally rendered by the arbitral tribunal established under the terms of the contract, or (2) that the case be submitted to international arbitration in accordance with terms to be agreed upon by the two Governments, in order to determine the amount due the claimant.
In reply to the first alternative the note of the Foreign Office of May 21, 1935, states that the award of the company’s arbitrator can in no circumstances be considered the award of the tribunal; that even if the government arbitrator’s award was not rendered within the prescribed time limit, the only recourse would have been to claim the nullity of the arbitration; in which case the procedure would have been to submit the questions between the Government and the company again to the decision of the same or new arbitrators who would finally solve the matter. It will readily be seen that any such procedure [Page 472] would have resulted in entirely nullifying the arbitration agreement of July 7, 1932. The only purpose of that agreement was to compel the arbitrators to hand down a decision within a definite time, a thing which the government arbitrator had refused to do for more than eighteen months under the old agreement which contained no time limitation. To submit the question which the government arbitrator still refused to decide within the time set by the new agreement, again to the same arbitrator is not logical; but even if new arbitrators were chosen the arbitral agreement could again be nullified by the refusal of one of the arbitrators to submit his award within the time set by the agreement. Thus new time limits could be set and new arbitrators could be appointed indefinitely until the expense and the time consumed rendered the whole situation a farce. My Government cannot consent to any such solution as disposing of the rights of its nationals.
Despite the attempt of the public attorney to prove that the government arbitrator’s award was rendered in time, he has brought forth nothing which was not before my Government when its previous note was written. It therefore remains convinced that the government arbitrator’s award was rendered after the expiration of the time set in the arbitral agreement of July 7, 1932, that the award of the company’s arbitrator was the only award legally rendered, and therefore that the only alternative to payment of that award is to submit the claim to international arbitration.
With respect to the latter alternative the Minister for Foreign Affairs states that, while it is comprehended that a government may be internationally responsible for the decisions of its courts resulting in a denial of justice, it is inadmissible that the same responsibility can be alleged in the case of a decision rendered by a private tribunal constituted by the parties to the controversy, adding that in the present instance the decision of the private tribunal was confirmed by the highest court of the Republic of Costa Rica.
Without discussing the effect of the decision of a private tribunal when both of the parties litigant are private persons (a matter not under consideration here), it is not believed that Your Excellency’s Government will contend that when one of the parties litigant is the Government itself, it can divest itself of its governmental character and responsibility for any irregular or improper acts of its appointed representatives which result in injustice to the nationals of another country. To acquiesce in any such contention would be to admit that any injustice can be done to a foreigner provided only that it is done by a specially constituted tribunal rather than by the regularly constituted tribunals of the country. However, even were such an argument sound, it has no present application because, as pointed out [Page 473] above, the decision of the private tribunal in the instant case was appealed to the highest court of the country and was confirmed by that court. Thus, an award which, in my Government’s opinion, was rendered in an irregular and illegal manner, has been confirmed by the highest court of Costa Rica, for whose decisions the Foreign Minister admits the Government is responsible and the rule of international law to that effect is well established.
In the brief of the public attorney it is contended that the controversy cannot be submitted to international arbitration because the decision of the third arbitrator disposed of the question of the illegality of the award of the government arbitrator; that the only appeal from the private arbitral tribunal was to the Court of Cassation and that that appeal having been availed of, the matter is res adjudicata and cannot be inquired into further. Whatever may be the correctness of the public attorney’s opinion on this matter from the standpoint of Costa Rican law, it is certain that it has no standing in international law. My Government has frequently contested the doctrine that any government can set up the decision of its tribunals as a bar to an international claim where such decisions are unjust or in violation of international law and its contentions in this regard have been upheld by international tribunals in numerous cases. Not only is diplomatic interposition not prohibited when a controversy has been adjudicated by the highest court of a country but it is precisely only when the exhaustion of local remedies has taken place that a resort to diplomatic intervention is permissible under international law.
In an effort to support his position that the decision of the private arbitral tribunal cannot be questioned by this Government, the public attorney cites the following provisions of the Second Hague Conference:
“The contracting powers agree not to have recourse to force for the collection of contractual debts which the government of one nation claims from the government of another country as contracted with nationals of the claiming country.
“This agreement, nevertheless, will not be applicable when the debtor state refuses or fails to reply to an offer of arbitration, or after having accepted the offer, prevents any agreement from being reached, or after the arbitration, fails to submit to the award”.14
Far from supporting his position, these provisions are in direct contravention of that position. It is clear that the provisions cited have reference to international arbitration and not to private arbitration, and the seriousness with which the contracting parties consider the failure of a debtor government to pay its debt or to respond to an [Page 474] offer of international arbitration is shown by the fact that they inferentially sanction the use of force in such cases.
The public attorney complains, however, that no principle of international law has been violated and that the intervention of my Government in behalf of the claimants is therefore unjustified. Contrary to such assertions, my Government considers that the arbitrary annulment of the contract by the Costa Rican Government, the seizure by force of the offices and archives of the company, as well as the machinery and materials, thus preventing it from carrying on under the contract, the studied delays and impediments placed in the way of carrying out the arbitration by the Costa Rican Government’s representatives, the irregularities in connection with the submission and consideration of the Effinger report, as well as the injustice done to the company by the award of the government arbitrator and the concurring award of the third arbitrator, each and all constitute ample basis under well recognized principles of international law for the intervention of my Government.
In view of the considerations indicated above, my Government is unable to agree with the contention of Your Excellency’s Government that the claim of the Simmons Construction Company is unfounded and does not merit the espousal of my Government. While desirous of arriving at a satisfactory and amicable adjustment of the matter, my Government is compelled to adhere to the position set forth in its note of August 6, 1934, requesting that the Costa Rican Government either give effect to the only award legally rendered or that the matter be submitted to an international tribunal to determine what amount should be paid to the claimant.
I avail myself [etc.]
- Copy transmitted to the Department by the Minister in Costa Rica in his despatch No. 873, September 27; received October 7.↩
- Convention concerning the recovery of contract debts, signed at The Hague, October 18, 1907, Foreign Relations, 1907, pt. 2, p. 1199.↩