Mr. Olney to Mr. Tillman.

No. 69.]

Sir: I have received your No. 73, of the 20th ultimo, relative to the Santos arbitration.

The Department is disposed to accept your suggested arrangement that (1) the Government of Ecuador should formally accept Mr. St. John as arbitrator, and (2) the facts and amount of indemnity agreed upon by the parties should be submitted to the arbitrator as the basis of his award.

The Department does not anticipate objection on the part of the arbitrator to adopt the facts and amount of indemnity which are satisfactory to the contesting parties, but is of opinion that our Government is not entitled to join with Ecuador in dictating to the arbitrator what his award should be. Should he demand evidence, in conformity with the provisions of the treaty, he would have the right to withhold the award until the evidence was produced.

The Department does not, however, apprehend that the proposition agreed upon by the parties will be inequitable or otherwise objectionable to the arbitrator.

I am, etc.,

Richard Olney.