No. 557.
Mr. Bayard to Mr. Buck.

No. 97.]

Sir: I have received your No. 138, of the 12th of August last, in which you report certain proceedings of the Peruvian Congress which seemed to cast a doubt upon the obligation of the present Government of Peru to keep engagements entered into by the Pierola and Iglesias Governments. Your apprehension that the present Government may contemplate a general denial of such obligations seems to have been aroused mainly by two bills introduced in the House of Deputies, one of which proposed to annul all appointments made in the judiciary departments under the Governments of Pierola and Iglesias, and the other to annul all interior or domestic acts of those Governments. The former bill, you state, has been passed by the House without discussion, The latter measure has not been acted on; but, inasmuch as if it should receive the approval of the Congress it might seriously affect extensive interests of citizens of the United States which have grownup under contracts with the Pierola and Iglesias Governments, especially in connection with the construction and operation of railways, you ask to be instructed as to the course you should pursue in the contingency you suggest.

Upon the general question of the binding effect upon Peru of contracts made by the Pierola and Iglesias Government in accordance with the constitution and laws of that country, the opinion of this Department is that the performance of such engagements is obligatory upon the present Peruvian Government; and that the attempt on the part of that Government to avoid such contracts, thus denying the capacity of the Pierola and Iglesias Government to contract, in violation or disregard of the vested rights of citizens of the United States, would afford just ground for complaint. For the greater part of six years, from 1879 until 1885, either the Pierola or the Iglesias Government was recognized by foreign powers as the Government of Peru. The United States, in common with other nations maintaining diplomatic and commercial [Page 922] relations with that country, took no part in the civil conflict which raged from time to time during that period, but acted upon the principle of recognizing as the lawful Government of Peru that political organization which was able to maintain the diplomatic and commercial relations of the country with foreign nations. The acts of such a government are Universally admitted as binding upon the country which it represents. This principle holds even where a change in the form of a government occurs; and it applies still more strongly where the change is merely in the personnel of the government. Contracts made by a government are to be regarded as the obligations of the nation it represents, and not as the personal engagements of the rulers. Hence, although the government may change the people remain bound.

It is hardly to be supposed that the Government of Peru would entertain a disposition to declare void all contracts made by the Pierola and Iglesias Governments; and what is herein said on that subject is intended to inform you of the views of this Government upon the questions of international law which are involved, and not to direct you to take any anticipatory action.

Any case arising in which American interests are found to be affected will require to be examined on its merits, to determine how far the general principle applies. But, as to the general principle, the present Government of Peru should know our position.

I am, etc.,

T. F. Bayard.