Señor Rengifo to Mr. Sherman.
Washington, July 13, 1897.
Honorable Mr. Secretary: My Government being desirous scrupulously to carry out the decision pronounced on the 2d of March last [Page 256] by the President of the United States of America, as arbitrator, according to the protocol of Castellamare of August 18, 1894, with the exception of article 5, the validity of which it has been under the painful necessity of denying, has endeavored, through its representative at Rome, to reach an agreement with the Royal Government of Italy with respect to the manner and form in which and the terms on which payment is to be made of the £50,000 which in article 4 of the aforesaid decision Colombia is sentenced to pay to the Royal Government of Italy for the use of Mr. Ernesto Cerruti for the losses and damages occasioned to his private property and to his interests as a member of the firm of E. Cerruti & Co., in the State of Cauca.
With the aforesaid object in view, the diplomatic representative of Colombia at Rome addressed his excellency the minister of foreign affairs of the Kingdom of Italy, under date of the 29th of May last, stating the wishes of his Government on this subject, setting forth the manner in which, in the opinion of the aforesaid Government, based upon its interpretation of article 4 of the decision, the payment of the £50,000 was to be made, and requesting him to be pleased to express his views concerning said interpretation that it might be carried out if the Royal Government accepted it, and, in case of a disagreement, that it might request the President of the United States of America, as arbitrator, to furnish a suitable explanation, which plan it formally proposed.
His excellency the minister of foreign affairs of the Kingdom of Italy replied to the representative of Colombia on the 3d ultimo, stating that the Royal Government did not consider correct the interpretation which that of Colombia gave to article 4 of the decision as regarded the manner, form, and terms of payment of the £50,000 sterling; he stated the views of the Italian Government on the subject, and expressly accepted the suggestion of the representative of Colombia in respect of making application to the President of the United States of America, as arbitrator, according to the aforesaid protocol, for the desired explanation.
The result of the aforesaid antecedents, which I have thought proper to state, is the present respectful request which, through you, as Secretary of State, I have the honor to address to the President of the United States of America, in the name of my Government, that, in performance of his functions as arbitrator, and in kind compliance with the request of the two Governments interested in the aforesaid decision, he will be pleased to explain that portion of article 4 of the decision of March 2 of the present year which I will hereafter state.
As my Government, in view of the high respect which it feels for the President of the United States of America, and the lofty idea which it has of his spirit of justice, can not doubt for a moment that he will continue to fulfill the friendly mission which was accepted by his honorable predecessor, and that he will prevent, as far as possible, any differences from remaining pending, or any new differences from arising with respect to the decision between the signatory Governments of the protocol of Castellamare in which his powers had their origin, I have received instructions to set forth in this same communication the reasons on which it bases the interpretation which it gives to the controverted portion of article 4 of the decision now under consideration, which instructions I am about to have the honor to obey, proceeding in so doing with the proper method.
I should, however, be wanting in my duty to the President of the United States of America and to my Government if I were to state the [Page 257] fundamental reasons for the explanation of article 4 of the decision, and were to omit any reference to another point to which I alluded in the first paragraph of this note—that is to say, to the attitude of my Government as regards article 5 of the same decision.
I therefore deem it my duty to inform the President of the United States of America that my Government, in paying to the Royal Government of Italy—as it has already done—the £10,000 sterling, which constitute the first installment of the indemnity which article 4 of the decision of March 2, 1897, required it to pay, simply desired to execute in good faith that portion of the said decision which it has expressly recognized as valid and obligatory, and to avoid subjecting the parties entitled to that sum to annoying delays; but that it made said payment to the Royal Government of Italy under the most positive reservations as regards the validity of article 5 of the decision, and without changing, abandoning, or in any way modifying the position which it assumed toward the President of the United States of America by means of my communications of March 3 and May 1 last, and toward the Government of the Kingdom of Italy in the notes addressed by its representative at Rome to his excellency the minister of foreign affairs, bearing date of May 1, 12, 29, and of June 5 and 12 of the present year, of which I have the honor herewith to inclose copies, since they are directly connected with the present request for an explanation of article 4 of the decision, and also of the replies made to them by his excellency the minister of foreign affairs of the Kingdom of Italy on the 10th and 15th of May and the 3d of June, highly important correspondence, an informal translation of which into English I likewise take the liberty herewith to inclose, respectfully requesting you, honorable Mr. Secretary, to call the attention of the President of the United States of America to its contents.
With a view to avoiding the misunderstanding which might arise from the circumstance that in informing the President of the United States of America, through you, of the views of my Government concerning article 4, I omit making any statement relative to the objections of my Government as regards the validity of article 5, I deem it my duty to the President of the United States and to my Government to call attention to the fact that this circumstance, like the payment of the £10,000 sterling to the Royal Government of Italy, does not arise from any change, abandonment, or modification of the attitude assumed by my Government in respect to article 5 in my communications of March 3 and May 1 last, to which I have already referred, and is solely due to the restrictions which were imposed upon me in the notes which you did me the honor to address to me under date, of May 5 and 19 last, in reply to those which I had the honor to write to you on the 1st and 15th of the aforesaid month, which notes, as I understand them, prevent me from laying stress, in addressing the President of the United States of America, upon the nature and reasons of the objections of my Government as regards the validity of article 5 of the decision.
Being compelled by the aforesaid circumstances to refer in this communication to article 5 of the decision only in the manner in which my duty gives me the right to refer thereto and imposes upon me the obligation to do so, I have the honor to proceed to state to you, for the information of the President of the United States of America, the opinions of my Government concerning the interpretation of article 4 of that decision.
As I stated at the beginning, the manner and form in which, and the [Page 258] terms on which the payment of the £50,000 sterling is to be made is the origin of the difference of opinion which has arisen between the two Governments in respect to article 4 of the decision, and as any explanation will necessarily be based upon the provisions of the decision on the subject, I think proper to transcribe in full article 4 of that document, which article reads as follows:
Article 4. I award for losses and damages to the individual property of Signor Ernesto Cerruti in the State of Cauca, and to his interests in the copartnership of E. Cerruti and Company, of which he was a member, including interest, the net sum of sixty thousand pounds sterling, of which sum ten thousand having been already paid, the Government of the Republic of Colombia will, in addition, pay to the Government of the Kingdom of Italy, for the use of Signor Ernesto Cerruti, ten thousand pounds sterling thereof within sixty days from the date hereof, and the remainder, being forty thousand pounds, within nine months from the date hereof, with interest from the date of this award at the rate of six per cent per annum, until paid, both payments to be made by draft payable in London, England, with exchange from Bogotá at the time of payment.
In view of this provision, the Government of Colombia maintains: (1) that the delivery of the drafts or bills on London, with exchange from Bogotá at the time of payment, in which it is provided that the indemnity granted must be paid, is to take place at Bogotá, and that such drafts or bills are to be those which are common and current in Colombia—that is, payable at ninety days’ sight; (2) that the day on which the proper draft or bill is paid to the representative of the Kingdom of Italy at Bogotá is to be considered as that of the date of the payments, and (3) that to the second installment of £40,000 sterling shall be added only the interest on that sum computed at 6 per cent per annum, reckoning from the 2d day of March of the present year until the time of payment—that is to say, the time when the corresponding draft on London is delivered to the representative of the Kingdom Of Italy at Bogotá.
Judging from the note received by the representative of Colombia at Rome from his excellency the minister of foreign affairs of the Kingdom of Italy, dated June 3, 1897, the Royal Government declares: (1) That the drafts on London which are to pay the indemnity that the decision requires Colombia to pay are to be delivered at Rome; (2) that those drafts are to be computed in accordance with the exchange fixed by the decision of the arbitrator, and (3) that they are to include, in addition to the interest due, the condition of payment at sight in London.
Keeping in view article 4 of the decision, which is transcribed above, calling to mind the very clear antecedents of that decision and stating certain special circumstances which will doubtless not escape the notice of the honorable arbitrator, I do not think that it will be difficult to carry to the mind of the President of the United States of America the conviction that the interpretation, which is in harmony with its letter and spirit, but which is also equitable and just.
I will call attention in the first place to two facts which are very well known to all who have commercial business with Colombia: (1) That gold coin is rarely obtained, unless in very insignificant sums; that it is an article of commerce and not a factor in monetary circulation; (2) that in Colombia sight drafts on foreign countries are not in use and can not be obtained at any price or on any terms and that all the bills of exchange which are sold are at ninety days’ sight. The cause of the absolute lack of gold coin is the obligatory circulation of the treasury note, which has been in use in the Republic since 1885, and the precise term for which bills of exchange are sold is perhaps due to the fact that [Page 259] exporters draw upon bills of lading of the produce which they send to foreign countries and are obliged to make a careful calculation of the lime allowed for the voyage and of that which is necessary for the sale of the article exported; but, whatever that cause may be, it is not necessary to examine it now, but it is necessary to state that invariable commercial practice. Under these circumstances it would be very difficult tor the Government of Colombia to give drafts at Rome payable at sight in London on the day when each installment became due, without accepting burdens additional to those which the decision imposes upon it, since it would be obliged to purchase such drafts more than three months beforehand, thus losing the interest on the amount.
But if the payments were to be made at Rome on the terms demanded by the Government of Italy, not only would this imply, as I have already remarked, an additional burden, which would greatly increase the indemnity which my Government is bound to pay, but what is still more important, it would render impossible the strict execution of a part of the decision of the arbitrator, and in documents of this kind it can not be supposed, even for the sake of argument, that anything is decided the execution of which is not possible under normal circumstances. Article 4 of the decision says: “The Government of Colombia will, in addition, pay to the Government of the Kingdom of Italy, for the use of Signor Ernesto Cerruti, ten thousand pounds sterling thereof within sixty days from the date hereof,” and it was not natural or supposable that a knowledge of the entire document should reach my Government otherwise than through the ordinary channel (the mail), which requires nearly thirty days, as is well known. Now, although I received notice of the decision on the day after it was pronounced, that is to say, March 3, that notice was not sufficient to enable my Government to purchase the draft necessary for the payment of the first £10,000 sterling, because in a matter so important in every point of view, it was necessary for the party directly interested to have full knowledge of the decision, and to have the time necessary to study and examine it before taking any step, which it was impossible to secure by means of a mere telegraphic dispatch, which is always unsatisfactory and likely to give rise to doubt and perplexity. On the basis of what has been stated, the correctness of which I consider incontrovertible, my Government could only acquire full and definite knowledge of the decision, together with the necessary illustrative report from its diplomatic representative at this capital, and from its special counsel here, at the close of the month of March (as was the case), and then it had to hear the advisers whom the constitution of the Republic requires it to hear, and fulfill all the legal formalities before proceeding to execute the obligations which were imposed upon it. That my Government could not, under such circumstances, and in view of the conditions to which reference has been made, of the exchange of the Republic with foreign countries, deliver to the Royal Government of Italy at Rome, on the 2d day of May, the last of the term of sixty days fixed for the first payment, bills of exchange payable at sight in London is, I am sure, obvious to the President of the United States of America. But as the honorable arbitrator could not desire to have that impossible thing done, it must be concluded that the intention of the eminent magistrate who pronounced the sentence was that the payment should be made at Bogotá, at the rate of exchange of the day in (on?) London, and that the delivery of the bill of exchange at ninety days’ sight—in accordance with the only commercial practice of the country—to the representative of the Kingdom of Italy, constituted [Page 260] a complete fulfillment of the obligation; to suppose the contrary in accordance with the claims of the Royal Government of Italy would imply the consequence above referred to, to which it can not, and is not to be supposed that the honorable arbitrator desired to give rise.
And let it not be thought that in describing the situation in which the Government of Colombia necessarily finds itself, when it received its copy of the decision by mail, together with the reports of its representatives, there is anything exaggerated or unjustifiable, because the same would have been the case in any country in which the chief magistrate—whatever may be the form of government—does not have free control of the public revenues. In the United States of America the formalities are well known which, according to the Constitution, the President would have to fulfill before making a payment of such origin and nature, and although in Colombia the President is authorized to decree certain appropriations in addition to the budget of expenditures, his sphere of action is limited by restrictive rules which he can not disregard. Nay, more; a real commercial draft is not at sight in any country in the world, and when the obligation is contracted or imposed to pay a sum of money by means of a draft or bill on a foreign country, it is understood—unless the contrary is expressly stipulated—that the payment is to be effected by the delivery of the bill of exchange at so many days’ sight, agreeably to the commercial custom which is observed between the two countries. In the United States of America, for instance, it is well known that any obligation to pay a sum of money in drafts on London is satisfied by the delivery of a bill for the amount of the same at sixty days’ sight; in Colombia drafts on the aforesaid place are at ninety days’ sight, as I have already stated, and the honorable arbitrator certainly did not forget the rules that govern international exchange when he ordered, in a general way, that the payment of the indemnity should be made in drafts on London; if his intention had been different he would have stated it unmistakably, since he was thereby about to constitute a case of decided exception.
Supposing now, for the sake of argument on the one hand, that the notice which was given to me of the decision on the 3d of March had been sufficient for my Government, and that the cablegram which! sent it on the same day, giving in general terms an account of the provisions of said decision, could be considered as information sufficient to induce it to proceed to its execution; and on the other, that my Government had been able, without difficulty of any kind, to order the immediate purchase of the drafts for £10,000, being the amount of the first installment of the indemnity, and that said drafts having been purchased, it had sent them to Italy by the earliest mail—as nearly forty days are necessary for a letter sent from Bogotá to reach Rome—the drafts in question would have been in the hands of the representative of Colombia in the capital aforesaid, say, on the 12th of April; but as they were to be paid at ninety days’ sight—the only kind which, I repeat, are obtainable in the Republic—the result would have been that even under those imaginary circumstances it would have been wholly impossible to execute the part under consideration of article 4 of the decision in the manner in which the Royal Government of Italy interprets it—that is to say, to pay at Rome sight drafts on London at the dates of the payment. And let it not be said that drafts by telegraph might have been procured, because that form of drafts on foreign countries has never existed in Colombia. Moreover, as sight drafts on foreign countries are not in use and not obtainable in Colombia, the necessary preliminary arrangements between Colombia and [Page 261] England could not have been effected within the sixty days following the notification concerning the decision in such a way as to render possible the drawing and delivery at Bogota of a bill of exchange payable at sight, and the delivery of such a bill of exchange at Rome would have been totally impossible.
It seems unnecessary to add that since the decision establishes no difference between the terms of payment of the first installment of £10,000 and the second of £40,000, what is applicable to the former is also applicable to the latter, and that consequently my Government will duly and properly fulfill its obligation if on the day when the nine months expire, which are reckoned from the 2d day of March, 1897, which is the date of the decision now under consideration, it delivers to the representative of the Kingdom of Italy at Bogotá the drafts on London, with the exchange of the day in that capital, to the value of the aforesaid £40,000, with interest thereon for nine months at 6 per cent per annum.
That the delivery of the drafts in question is to take place at Bogotá and not at Rome, as is claimed by the Royal Government of Italy, is easy of demonstration. In the first place, the decision, in fixing the manner in which the payment of the indemnity granted by it is to be made, says: “Both payments to be made by draft on London, England, with the exchange from Bogotá at the time of the payment,” which clearly shows the intention of the honorable arbitrator with respect to the place of payment—Bogotá; since, if his intention had been that it should be made at Rome, he would have fixed as the basis the exchange of the latter city, as would have been natural, and would not have referred to Bogotá.
But this is not all. I will call attention to the fact that what my Government really owes to the claimant are Colombian dollars of commercial value equal to that which such money had in 1885, when the occurrences took place out of which the claim has grown, since, in the natural order of events, the damaged property could only be estimated according to that monetary unit; and that if the honorable arbitrator ordered the indemnity to be paid by draft on London, making, certainly, the corresponding conversion of the amount in Colombian dollars into its equivalent in pounds sterling, his proceeding can have no other object than to subject my Government to the burden which is implied by the depreciation which its circulating medium, owing to various circumstances, has undergone during the past twelve years and to protect the claimant from the losses which the aforesaid fluctuation in the commercial values of the Colombian dollar might cause to him in the nine months intervening between the date of the decision and that of the payment of the second installment of £40,000. Only thus can be explained the obligation which has been imposed upon my Government to pay the indemnity in drafts on London, and this interpretation is still further strengthened by the fact that it is provided in the decision that such drafts are to be purchased at the rate of exchange in Bogotá on the day of their delivery. Surely if Colombian money had had during the past twelve years and now preserved an unalterable value, the honorable arbitrator would have ordered the payment of the indemnity to be made in it, as well justified practice establishes in similar cases, and there would then have been no ground for arguing as to the place where the payment was to be made. The fact, however, that the foregoing considerations led him to make the conversion of Colombian money into English money, to which 1 have already referred, can not reasonably be taken as ground to maintain that the obligation is to [Page 262] be fulfilled at Rome, which interpretation is opposed by the letter and spirit of the decision, its clear antecedents, and the important circumstances which I have examined in detail.
The payment is to be made within the period designated in the obligation, or in the decision whereby judgment is pronounced against it; but of course the obligation to pay can only be made effective in this latter case after the debtor has received information of the decision which imposes this obligation upon him.
The notice of the arbitrator’s decision which was given to the representative of each party, or to the attorney appointed ad hoc by each of them, can not be considered to produce at the same moment all the effects that would be produced by a notice given directly to the governments whom they represent. The diplomatic representative, or the attorney ad hoc of a government, is but an intermediary between the arbitrator and the government which he represents, and his mission, so far as the notice of an award is concerned, is confined to bringing such award to the knowledge of his mandator with as little delay as possible. So that an award can not begin to produce its effects until the government against whom decision is pronounced has had full and complete knowledge of it.
It is entirely reasonable to suppose that the President of the United States of America, when he fixed the time of the first payment, took this necessity into consideration; that is to say, that the Government of Colombia should receive from its representative here, by the ordinary means of communication, the full text of the award and the suggestions pertinent thereto of its agent at Washington; that the time granted for such communication should be sufficient for the purpose and should not be limited to the shortest possible period, and that the term that was fixed, viz, sixty days, should render possible the payment at Bogotá by means of a draft on London, according to the usual commercial custom of the country, but that it would be wholly insufficient, or rather impossible, to deliver at Rome a sight draft on London within the same period.
My argument acquires greater force when international arbitration is concerned, because the chief magistrates of every country do not dispose of incomes which are their own, and are obliged, in order to dispose of those of the nation, to be governed by the constitutional provisions on the subject; and unless an award conforms to that essential requisite, and consequently fixes a period sufficient to enable the Government which is bound to pay to place itself in condition to meet the obligations that are imposed upon it, the decision of the arbitrator will, in the majority of cases, be disregarded, because, according to its own terms, its fulfillment will be impossible.
The telegraphic communication that diplomatic officers may have with their respective governments in regard to the notice received by them of the decision of an arbitrator can in no case result in obliging such government to carry out the decision immediately. So that, as I have already remarked, it can not be maintained that a government is obliged to perform the duty imposed upon it by the decision of an arbitrator until after it has had full knowledge thereof in a formal manner and by the ordinary means of communication.
The debtor is bound to deliver to the creditor the very thing that he has obligated himself to deliver, or which he has been obliged to deliver by a competent sentence.
The decision, in its fourth article, which I have analyzed, condemns [Page 263] Colombia to pay a determinate sum of money, in drafts on London, with exchange from Bogotá at the time of payment.
The honorable arbitrator has specified the manner in which payment is to be made, viz, by draft; but he has failed to determine when it becomes due.
The codes of commerce of all countries specify the ways in which it is to be made known when such documents become due, and the commercial customs of every people establish, on the ground of the conditions of exchange, preferences for some one of these methods. This being the case, and as the honorable arbitrator has in nowise stated when the drafts become due which Colombia is to deliver in payment, it is reasonable to understand that the drafts to which article 4 refers can not be at sight, or payable at a certain time, or on a fixed day, or at any other time that is accepted by the commerce of the world, but at that which is normal and current in the commercial markets of Colombia. To maintain anything else would be to distort the intentions of the honorable arbitrator, which are clearly indicated by the fact that he fixed no time when the drafts were to become due, or would be, supposing that he left it to a third party to determine when they became due, which is inadmissible.
The honorable arbitrator, who can not have been ignorant of the fact that the fixing of a time when a bill of exchange becomes due is a requisite essential to its validity, omitted to do so because, not being perhaps acquainted with the time usually adopted for this purpose as regards bills of exchange by business men in Colombia, was unwilling to fall into error or to create difficulties in the performance of his task, and manifested by his silence that he referred to the bill of exchange current between Colombia and the London market.
If this had not been the purpose of the honorable arbitrator, he would have stated with precision that the bills were to be at sight, or that they were to be payable in some of the other ways which are customary, especially since sight drafts are exceptional papers of credit in the commercial transactions of nations.
If the foregoing interpretation of the fourth article of the award were not the true one, the Royal Government of Italy would have the same reason to maintain that the bills of exchange to which it refers should be at sight that Colombia has to think that they should be at a fixed day; but as the honorable arbitrator could not leave to the will or caprice of the parties the determination of an essential requisite of the manner of payment fixed by him, the natural thing is for the interpretation which I have stated to be accepted.
I therefore respectfully call attention to the fact that there is no just ground for doubt as to the place, time, and form of payment in view of the terms of article 4 and of the intention had when it was written; that is to say, that the payment is to be made at Bogotá at the expiration of the time fixed in the award, provided that the Government of Colombia has had within that time the opportunity to acquire full knowledge of the decision which imposed obligations upon it with respect to Mr. Cerruti, and that it has been able within the time aforesaid to perform its constitutional duties so as to be able to dispose of a portion of the public revenues, and that the bills of exchange which it must deliver in fulfillment of those obligations are the same that are used and purchased in market at Bogatá, and at the current rate of exchange of that market on the day of their purchase, which will be that of the payment.
I feel confident, honorable Mr. Secretary, that you will kindly be [Page 264] pleased to bring the contents of the present communication to the notice of the President of the United States of America for such purposes as may be necessary, and for this I take pleasure in expressing in advance the sincere gratitude of my Government.
With sentiments, etc.,
Chargé d’Affaires ad interim of Colombia.