Papers Relating to the Foreign Relations of the United States, With the Annual Message of the President Transmitted to Congress December 2, 1902
The Secretary of State.
Sir: The following report, in the form of a draft instruction and accompanying memorandum, in the case of the Salvador Commercial Company v. Salvador is respectfully submitted.
Draft of instruction to United States minister to Salvador.
Sir: I gladly avail myself of this opportunity to express the gratification with which the Government of the United States has observed the kindly feeling and unfailing courtesy shown by the Government of Salvador throughout its elaborate discussion of the claim of the Salvador Commercial Company.
It also affords me unfeigned pleasure to express the sincere desire of the Government of the United States to cultivate and strengthen the cordial relations which have long and happily existed between the two Republics. Constantly animated by a high sense of justice, the Government of the United States is incapable of consciously lending itself to the commission of an act of injustice either toward its own nationals or those of other States; far less could it do so toward another friendly State. It entirely shares the views of the Salvadoranean Government that the question at issue between the two Governments is simply a question of right, and one which should be determined by the principles of equity, sanctioned by the conscience of all good men. This has been the sole criterion of its judgment; and such being its constant motive, it has no opinion to offer on the language quoted in the first counter-memorandum from the writings of the distinguished publicist, Mr. Charles Calvo, containing charges by the distinguished author of wrongful interventions of European States with those of South and Central America for the collection of indemnities.
If it were necessary to defend the high sense of honor which uniformly governs its own conduct in analogous cases, the Government of the United States is not wanting in ample precedents to vindicate its title to a foremost place among the nations in its respect for justice between nation and nation as between man and man. It might refer to the restitution to Japan of an indemnity which it collected in the sum of $785,000; to China, of an indemnity collected in the sum of $453,400.90; to Brazil, of an indemnity collected in the sum of $96,406.73, which had been wrongfully obtained on misinformation of the facts; and to the restitution recently made to the Republic of Mexico of $690,863.85 American gold. Other instances might be cited. Some of these moneys were refunded in the light of a better information and understanding of the facts, even after their payment to this Government on award made in pursuance of international arbitration, after a full hearing of all the evidence and arguments on both sides.
In the light of these high precedents and of the frequent displays of its magnanimity and of its justice, and of the numerous and striking proofs it h s given of its strong and sincere friendship to the States of Central and South America, the reference to the cited text of Calvo would seem to be inapposite to this discussion. That the Government of the United States should consciously do an unjust act toward any individual or any State is an impossible conception. Its vast resources and great power have, in its conception, no measure of value in comparison with the principles of justice, by the vindication of which and by the constant display of kind and fraternal feeling would it seek to win its true position among nations. There is never on its part danger of the conscious abuse of power; yet I am aware that there is always danger of the abuse of conscious power; and ever watchful against such subtile influence and in the effort to maintain the equal poise of the balance, the conclusion reached, from a most careful and laborious study of all the correspondence and evidence submitted on either side in this case, and especially of the oral arguments and counter-memoranda submitted on behalf of the Salvadoranean Government, is that Mr. Sol, vice-president of El Triunfo Company, was guilty of an act of usurped authority in assuming the permanent presidency of El Triunio Company; that Sol, [Page 839] Lopez, and Cochella were likewise guilty in their pretended removal of Burrell from the presidency thereof, and in their petition to have the court decree the company in a state of voluntary and judicial bankruptcy; that the court did not acquire lawful jurisdiction to decree the state of bankruptcy of said company; that these facts were apparent of record, and that the judge practiced an undue delay and discrimination of justice in passing on the question of his jurisdiction; and that the act of the President of Salvador in annulling the concession by arbitrary executive decree, on February 14, 1899, the next day after a call and notice had been issued and published by the majority stockholders for a general meeting of the stockholders, to enable them to take lawful steps to oust the usurping minority directors and to secure the release of the property by the court, was wrongful in itself and constituted in its effects a veritable intervention in the legal controversy between the parties, unduly influencing and affecting the regular and ordinary processes of justice and rendering nugatory the lawful measures contemplated and initiated by the majority stockholders; that this act of the President, whatever its motive, was indefensible from the standpoint of justice and private right, as well as of international law, and justifies and would require, if the controversy is not otherwise amicably, promptly, and satisfactorily adjusted between the parties, the intervention of this Government and the payment of an adequate indemnity to the American stockholders.
The grounds on which the foregoing conclusions are based are set forth at large in the accompanying memorandum.
Though the conclusion reached may not be satisfactory to either of the contending parties, the Department is not without hope of convincing them that the case has been considered with the sole aim of reaching a decision which will vindicate the supremacy of justice over might, whether the latter should be invoked against the Government of Salvador or should be exercised by it in the destruction of vested rights of private property. If, as urged by Salvador, it were wrongful for the Government of the United States to decide a controversy and fix the amount of an indemnity by the sheer exercise of power, not less wrongful was the act of the Executive of Salvador in arbitrarily destroying rights of private property. The arbitrary use of power is not less wrongful on the part of Salvador than of the United States; and the latter, sharing the feeling of abhorrence expressed in the counter memorandum for gross interventions of any kind “in which brute force always prevails over right,” has reached its conclusion.
The President of the United States can not take from any man the slightest right, or even a doubtful right, even as against a confessed wrongdoer, without submission to the courts, whose rule of decision is: Is it lawful; is it just? The Government of Salvador can therefore appreciate the inability of the Government, of the United States to conceive any other procedure as compatible with the existence of the State, which exists only to safeguard rights of property, of contract, of life and liberty, which can not be taken away except upon a fair and impartial hearing and upon solemn judicial decision.
It is conceivable that the President of Salvador, animated by patriotic motives, felt that El Triunfo Company was not fully discharging the obligations of the concession, and that in a feeling of repugnance at its supposed incompetency he thought to put an end, once for all, to alleged inconveniences suffered by the public service; but the fact remains that the property of El Triunfo Company was taken away without due process of law. Such arbitrary executive action, even supposing it righteous in its results, is essentially unjust, since it proceeds by ignoring the substance of the forms of justice, without the observance of which there can be no security in the possession of any private right.
From an attentive study of the documents submitted in the case the following facts are either admitted by both of the parties, or are, on the documentary evidence, established beyond dispute:
On October 6, 1894, the Government of Salvador granted for the period of twenty-five years, together with certain other incidental privileges, the exclusive privilege of steam navigation of the port of El Triunfo; that said concession was, on October 25,1894, assigned to the Salvadoranean corporation “El Triunfo Company, Limited,” having a capital stock of $100,000 American gold, consisting of shares of $100 each; that 501 of these shares were, before the commission of the grievances hereinafter mentioned, and still are, owned by the Salvador Commercial Company, a corporation [Page 840] organized under the laws of the State of California; that the grant of said concession was lawful and valid, and that said El Triunfo Company acquired a vested right of property therein; that over 70 per cent of said capital stock has been paid; that said port was opened in 1895, and said company entered upon the use of its concession and expended large sums of money in the development of the same; that the profits of said concession during the year 1898 are stated by said company to have been $30,000 and are admitted by the Government of Salvador to have been $7,851.85 net for the first six months of said year.
That by the statutes of El Triunfo Company its directors were to be five in number, with three substitute directors or alternates; that the officers of said company were to be a president, vice-president, treasurer, and secretary; that articles 12 and 18 of the statutes or by-laws of the company provide that a special or extraordinary meeting of the directors (ran only be called by the president; that at the general assembly of stockholders, held June 10, 1898, there were elected as directors H. H. Burrell, Simon Sol, J. H. Ellis, Francisco las Plazas, and G. Lozano; and as substitutes, C Cochella, A. Canessa, and E. B. Ruano; that the minutes of the twentieth session of the board of directors, held June 10, 1898, show “present the Messrs. H. H. Burrell, E. B. Buano, J. H. Ellis, S. Sol, and G. Lozano, appointed by the general assembly of stockholders in session to-day to form the board of directors, which should exercise its functions during the current year;” that the board of directors on said day elected as president H. H. Burrell, as vice-president Simon Sol, as treasurer J. H. Ellis, as secretary F. las Plazas; that article 9 of the by-laws provides for five directors and three substitutes, who, according to the order of their nomination, shall supply the places of absent directors; that no power is given by the corporation statutes or by-laws to the board of directors, or to a majority thereof, to appoint one of the substitutes as a permanent director; that such substitutes can act as directors, according to article 9 of the by-laws, only in the order of their nomination and only when the principal fails; and that the record does not show that any notice or opportunity was given to the regular directors to attend the meetings of the board hereinafter specified, except Directors Sol and Lopez, and fails to show that the substitutes were called in the order of their nomination, or that there was any such failure of the principals as would authorize substitute directors to act in their stead.
That from the minutes of the continuation, September 1, 1898, of the twenty-third session of the board, signed by Lopez, Sol, and the substitute Cochella, failing to show the authority of Cochella to act as a regular director, it appears that they requested Burrell to resign the presidency—that is to say, they show that they “supplicated Burrell, the president, that for a prudent time he rest from the administration”—but it does not appear that he resigned or vacated his office; that after the session was ended and the said minutes were completed, dated, and signed, as aforesaid, the following addendum, undated, was made underthe word “corrections,” signed only by Sol and Lopez:
“Inasmuch as the director of the Company of El Triunfo, Mr. H. H. Burrell, without giving notice and contrary to the express resolution of the board of direction, has absented himself, and this company not being able to continue without a head, as it finds itself, as vice-director, appointed conformably to article 11 of the statutes of the company, the undersigned assumes the office of president of the same.
That article 11 gave no authority whatever to said Vice-President Sol to constitute himself permanent president of said company; that, as shown by the records of said company, the said Burrell attended said twenty-third session and every session of the board from the first to the twenty-third, both inclusive; that, in keeping with the above proceedings, the said Sol usurped the presidency of the board on the unfounded pretension that Burrell had vacated or been removed from his office as president; that this addendum to the minutes by Sol that he was president of the company on account of the absence of Burrell is a manifest subterfuge—styled in the minutes “corrections”—to give an air of legality to his usurpation; that the pseudo-president, Sol, made a pretended call of a meeting of the board for September 22, 1898; that said call was a mere nullity, and the action taken by Sol, Cochella, and Lopez, under that call at said pretended session and without call from the lawful president, assuming to depose Burrell from the presidency, is in fact an admission of the prior usurpation of Sol, sought to be legalized by another act of usurped authority; that another, the twenty-sixth and extraordinary, session of the pretended board was held October 14, 1898, without notice or call by the lawful president, and a resolution was adopted to throw the company into judicial bankruptcy; that a petition signed by said Cochella, Sol, and Lopez, dated October 17, 1898, was presented to the [Page 841] judge of the primary court of claims and of commerce, requesting said judge to declare the voluntary and formal bankruptcy of said company, and on October 19 following the judge declared the state of bankruptcy thereof and appointed M. Meardi receiver, who accordingly took possession of the books and property of said company, that said petition in bankruptcy was made and filed in court by the pseudo-director Cochella and by Sol and Lopez in the professed capacity of directors of the company; that it is contended by the Salvadoranean Government that the formalities of law were not complied with in the organization of the corporation, and that therefore it was simply an unincorporated association of persons, and that the proceedings in bankruptcy were not against the corporation, but against its associated members; that no informality in the organization of the corporation has been pointed out and no substantial informality affecting the validity of the incorporation existed in fact; that this fact is corroborated by the further fact, as appears from the records of the proceedings before the court, that the bankruptcy proceeding was against the corporation as such, and not against its members as collective associates; that the petition in bankruptcy was filed by Cochella, Sol, and Lopez in the professed capacity of directors of the company; that they failed to comply with the last paragraph of article 1254 of the commercial code in relation to the bankruptcy of corporations, which provides: “If the debtor shall be a society, the petitions shall be subscribed by all the collective associates who hold this position according to the society compact and who were present at the domicile of the society;” that the records fail to show the absence of any of the regular and principal directors or stockholders of the company from the domicile of the society; that, in fact, said bankruptcy proceeding was prosecuted solely against said corporation, without the authority of its lawful president, and without the authority of any of its stockholders except Sol, Lopez, and Cochella; that said proceeding was carried on against said corporation only is further shown by the order of the judge, entered the same day, which declares “as parties in this judgment and in representation of the company of El Triunfo, Limited, the Messrs. Sol, Cochella, and Lopez, let be declared in a state of bankruptcy the designated company.” And the court appointed Meardi receiver of all the property of the company, and the fact is, as shown by the entire proceeding taken by the petitioners, by all the decrees and orders of the court, that the proceeding and adjudication were against the corporation and not against its members as collective associates, against whom in that capacity no steps whatever were taken; that articles 1241 and 1242 of the code declare that bankruptcy is an indivisible status, and consequently covers all the goods and debts of the bankrupt, and that the bankruptcy of a collective society implies the personal bankruptcy of all its members; that article 370 of the Salvadoranean code of commerce regarding insolvency of corporations provides that “the directors shall state this fact in a declaration signed by all,” which was not done; that the records fail to show that the petition was signed by all the directors, as required by the laws of Salvador, and fail to show the absence or inability of all or any of the directors to sign the petition; that the records fail to show facts necessary to give the bankruptcy court jurisdiction of the petition; that the Salvador Commercial Company and their stockholders raised this question before the court and sought in vain to have it decided, as shown by its own records; that on February 17, 1899, appeared before the court Mr. Lozano, Mr. Meta, Mr. Rossi, the firm of Dreyfuss, Mr. Ellis, and the Salvador Commercial Company, representing 580 shares of the stock, and represented to the court that on September 22, 1898, said Sol and Lopez in the most arbitrary manner, having summoned Cochella, decided to deprive Burrell and Ellis of their respective offices of president and treasurer, and proceeded without any authority to present the company in bankruptcy;” that this conduct was “notoriously illegal from their not having powers to dissolve the society in this form without the previous letter of convocation or general assembly, and that this letter had not granted its dissolution in any form, much less in the very grave one which they pretend to verify, it is undeniable that this decree does not have any legal value, except as an illegal act punishable by law;” that the board of directors “under no supposition have the right to proceed as they have done, and neither could they be considered in the judgment as persons who legitimately represent the company treating it for an anonymous society; that the parties appearing before the judge constituting by the value of their shares the veritable chief part of all the interests of the company, and not being disposed to approve this nullity, by the present instrument they protest against the illegality of all done in their name; that, moreover, for such an act, the legislature has provided that all members of the board must concur in this act, which did not take place, as by said legislative provision presupposes always the necessary resolution of the general assembly,” and appointed Dr. Leopoldo Alejandro Rodriguez their attorney “for the purpose of presenting the present protest and to put a final end to the judgment,”[Page 842]
The majority in value of the creditors likewise protested, the claim of the Bank of Salvador not then being due. That said Rodriguez, as such attorney, on February 23, 1899, likewise reiterated before the judge the protest of his constituents, and moved the court to declare the nullity of the judgment.
That not until July 5, 1899, did the court ever enter an order allowing said Rodriguez to appear and” represent his constituents “in order to resolve upon the adverse exceptions, and granted three days’ time for answer thereto,” and the fact thereby appears from the action of the court that the exceptions raised were sufficient in substance and in form to test the question of the jurisdiction of the court; that in the writ dictated by the judge July 5, 1899, the court, instead of allowing the Salvador Commercial Company to be represented by Mr. Rodriguez, the lawyer who had been deputed by and appeared for this company and others in presenting the question to the court, restricted the representation of Mr. Rodriguez to the presentation of the question raised by other aggrieved parties, and named, to represent the Salvador Commercial Company, Mr. Ellis, who is not a lawyer, and who at the time was not in the Republic of Salvador, as is shown by the deposition of J. Jirkowsky and by that of Ellis, in which he deposes that he had no knowledge or information of this writ, or of the action of the court which it purports to show, until he saw the reference to it in the counter memorandum of the Republic of Salvador in December, 1900. Copies of said affidavits are hereto attached.
That not until two weeks thereafter, to wit, on July 18, 1899, did Dr. Pedro Chavarria enter his appearance as “attorney of the secretary of the board of direction, Luis Lopez.”
That not until October 7, 1899, did Cochella and Dr. Chavarria, the latter as attorney for Lopez, file any answer alleging “that the nullities alleged by Dr. Rodriguez are neither just nor legal,” and made reference to the judicial proceedings; and that said Sol and Lopez have never answered.
That the nullity of these proceedings is apparent on the face of the record, and showed the lack of jurisdiction of the court to take cognizance of the petition and to decree the state of bankruptcy of the company.
That the record of the proceedings corroborates the affidavit of Dr. Rodriguez. (Copy attached.)
That the court has never yet taken any action or made any ruling on the motion of Dr. Rodriguez to declare the nullity of the judicial proceedings, thereby preventing an appeal and constituting a denial of justice.
That no creditor of said company asked or sought to have said company declared bankrupt, showing the high probability that said company was not in a state of bankruptcy.
That as appears from the diplomatic correspondence and the counter memoranda of the Salvadoranean Government, these illegal proceedings are upheld and justified by said Government, which has thus made itself a party to the original proceeding.
That the Salvador Commercial Company and others, representing a majority of the stockholders of El Triunfo Company, issued due notice and call, February 13, 1899, for a meeting of the stockholders of said company to be held at San Salvador February 28, 1899, for the purpose of taking steps to annul the proceedings of the court and to recover control and possession of the property, and the President of Salvador the next day, February 14, 1899, intervened in the struggle by an executive decree, closing the port of El Triunfo to importations, and thereby destroying the concession in which said company, as trustee for its stockholders, had acquired and held a valuable and vested right of property.
That this act of sovereignty, even on the supposition that the proceedings of the court were legal, effectually paralyzed the arm of the court, by destroying the chief and most valuable asset of the company for the liquidation of its debts and for the distribution of any surplus among the shareholders who would be equitably entitled thereto after the payment of its debts on the extinction of the anonymous society; and hence that this act of Government rendered futile and nugatory any further action by the Salvador Commercial Company to set aside the proceedings of the court; that the Government of Salvador granted on May 13, 1899, an exclusive concession for said port to Messrs. Aranjo, Arviola, and Gonzales, and at the same time the President, by executive decree, reopened the port.
That the new concessionaries accepted their concession; that this is shown by the official report of the minister of the army and navy to the National Assembly, published in the Official Gazette, March 7, 1900, which recites:
“The new navigation company of the port of El Triunfo, organized by virtue of the contract entered into with Drs. Manuel E. Aranjo, Ramon Garcia Gonzales, and J. Francisco Arviola, brought for loading and unloading a small steamer, the Maule, which it bought of an English company. Unfortunately, when it had hardly begun [Page 843] to serve its purpose, it was lost on the high seas, without its having been replaced up to date. Aside from this only one sailing vessel has entered the port, taking away a cargo of wood.”
It is also shown by the affidavit of the customs officer of San Francisco (copy attached). These acts of sovereignty inflicted irreparable injury and damage on the vested legal rights of property of said El Triunfo Company and on the equitable rights and interests of stockholders therein.
That on August 31, 1900, the President of Salvador by an executive decree, after the United States had intervened, revoked the decrees of February 14 and May 13, and declared that the decree of February 14, 1899, as well as the concession of May 13, was each dictated “until a definite arrangement could be made with the bankrupt company and the Government,” thus imposing conditions and interfering with the lawful freedom and independence of action of El Triunfo Company and of its stockholders, in accordance with the original concession, and thereby in effect expressly sanctioning the judicial decree of the state of bankruptcy which the Government had made effective by destroying said franchise.
That the executive decree of August 31, 1900, still further sanctioned these wrongs by declaring suspended the services of the port until the Government (in agreement with the company) decided otherwise, thus constituting a fresh intimidation of the company and a further denial and impairment of its rights under the concession; thereby casting a further cloud on the commercial standing of said company.
In the above statement the fact is not found whether the company was insolvent or not—that is, whether it had lost 50 per cent of its capital. The evidence submitted by the parties is conflicting. But it is a significant fact that the Government of Salvador nowhere takes into account the value of the franchise, which is the chief asset of the company. The solvency of a corporation or individual is presumed as a matter of law. It is shown in this case by the evidence submitted by the Salvador Commercial Company. The presumption is not satisfactorily disproven by the conflicting accounts and statements of Salvador.
But it is unnecessary to make an absolute finding of the fact whether the company was solvent or not; for, even if it was insolvent, its concession would be held with the other of the company’s property and be exploited by the receiver for the benefit of the company, its creditors, and stockholders, until the debts were paid and the company rehabilitated in its property, or until sold by the court in course of liquidation, in which event the stockholders would be entitled to any surplus remaining after the payment of debts. If, therefore, the decree of February 14 was wrongful, it was not the less wrongful in law whether the company was solvent or insolvent, which could only affect the damages.
The ultimate and controlling fact on which the decision turns is the Presidential decree of February 14, 1899, annulling the concession and closing the port to importations, the destructive force of which extends to this day in its injurious effects on the company, first, by annulling the concession and then by an imperfect rehabilitation on terms inconsistent with the concession. The act of the President destroyed the very end for which the corporation El Triunfo Company was created; and this in effect wrought the dissolution of the corporation by rendering impossible of performance the principal consideration for which the concession was granted. It had the inevitable effect to render impossible the exercise of its powers, thereby rendering the corporation ultimately and inevitably insolvent by destroying its earning capacity. The question then is whether the Government of the United States may justly and lawfully intervene in behalf of the Salvador Commercial Company, an American corporation, which owned a majority of the stock of El Triunfo Company, a Salvadoranean corporation, on account of the decree of February 14, which was so timed as to be in effect an intervention in the pending litigation, thereby perverting the due and regular course of justice, rendering nugatory the lawful efforts of the majority of the stockholders to regain control of the company and terminate the legal proceedings by the destruction of the very object of its existence.
It is impracticable to consider in detail all the numerous contentions made on behalf of the Government of Salvador during the prolonged discussions of this case. If any of them appear to be overlooked, it is not because they have not each received due consideration, but only because the decision turns on a few principal questions which will be considered. It is contended by Salvador:
First. That “the decree of February 14 was issued in the exercise of national sovereignty;” that the franchise granted by the concession “formed a part of the sovereignty and its enjoyment could not be delegated to any private corporation”[Page 844]
The concession was granted by the executive and ratified by an act of the national congress pursuant to the constitution of Salvador. “Allegans contraria non est audiendus.”
Second. That by the stipulations of the concession the stockholders agreed in advance to renounce diplomatic intervention and bound themselves in any case of controversy between the parties to submit their differences to private arbitration for determination. The contract does indeed contain stipulations which read, according to the translation furnished by the Salvadoranean Government, as follows:
- “Art. 8. The company shall have its domicile in this Republic, which may be agreed upon by the partners who may compose it, and shall be subject to the laws and courts of the country.
- “Art. 9. In the event that some difficulty shall arise between the Government and the company, the latter shall abandon any diplomatic intervention with reference to anything that may refer or relate to this contract, and both parties hereto bind themselves that any difference shall be decided by friendly arbitrators, each party to appoint one, and” in case of difference of opinion the two to appoint a third to decide it, both parties binding themselves beforehand, and without appeal, to accept the decision rendered by the arbitrators.”
A consideration for the agreement to renounce diplomatic intervention was the agreement to arbitrate. But this agreement was violated by the President of Salvador by annulling the concession arbitrarily, instead of resorting to the prescribed arbitration. The Government of Salvador, having violated the agreement, can not appeal to that agreement in support of its own wrong. It can not plead the contract in bar of intervention after having itself repudiated the contract by which arbitration was provided as a remedy. Nor can it destroy the concession and escape the consequences of its unlawful act by attempting to reinstate, in an equally arbitrary and imperfect manner, the right it had annulled. No small part of the damage results from the injury done to the commercial credit and reputation of the company whose property is subject to such caprice. This injury and the loss suffered by the closing of the port are not compensated by the decree of August 31.
In the counter memorandum it is stated that the company was not injured by the appointment of Meardi as receiver, because Meardi was discharging the obligations of the concession. If this statement is true, then the statement in the decree of February 14 of the pretext for its issuance is untrue—that the obligations of the service of the port were not being performed.
In any event, the Government was precluded by the terms of its grant from making the decrees of February 14 and May 13. If the President of Salvador claimed the company was not performing its obligations under the contract on account of the state of bankruptcy, he was denied the power to decide that question arbitrarily. But in truth this controversy is not upon the construction and performance of the contract, but it originates in the destruction of the concession itself, and there is no agreement to waive diplomatic intervention for that cause. It is more than doubtful whether the Government of the United States would admit the competency of its citizen to barter away his right to its protection against tortious, arbitrary acts of lawlessness on the part of any state.
On this question precedents are not wanting.
The Imperial Government of Germany has decided in a case arising in Venezuela that it will no longer consider itself bound by the clause in most contracts between foreigners and the Venezuelan Government which states that all disputes growing out of the contract must be settled in the courts of the latter; that the German Government is not a party to these contracts and is not bound by them; and that it reserves the right to intervene diplomatically for the protection of its subjects whenever it shall be deemed best to do so, no matter what the terms of the contract in this particular respect are.
The British Government, in a case arising in the United States, has taken the position that in a matter of international obligation its right of intervention is not affected even by the failure or omission of the individual to avail himself of a remedy before the courts for the grievance complained of.
Third. That under the constitution of Salvador, which was binding upon El Triunfo Company and its stockholders, diplomatic intervention is inadmissible.
While the Government of the United States has not taken so extreme a position as Germany and Great Britain, it has declared that “laws of a foreign state attempting to deprive citizens of the United States from having recourse to their own Government to press their claims diplomatically will not be regarded as internationally operative by the Government of the United States.” (Wharton’s Digest, vol. 2, sec. 242, p. 695.)[Page 845]
The constitution of Salvador declares:
“Title IV, Art. 45. Foreigners, from the moment they arrive in the territory of the Republic, shall be strictly bound to respect the authorities and to observe the laws, and shall acquire the right to be protected by them.
“Art. 46. Neither Salvadoraneans nor foreigners can in any case claim of the Government any indemnity for damages or detriment which may be caused by factions to their persons or property, having their speedy remedies to prosecute their claims against guilty officials or individuals.
“Art. 49. No international agreement can modify in any particular the provisions contained in this title.
“Art. 50. Foreigners shall remain subject to a special law of alienism.”
The law enacted by the Salvadoranean Congress in relation to foreigners provides:
“Art. 38. Every foreigner is obliged to obey and respect the institutions, laws, and authorities of the Republic, as provided by article 45 of the constitution, and to obey the decisions and sentences of the tribunals, without power to seek other recourses than those which these same laws give to Salvadoraneans.
“Art. 39. Only in case of a denial of justice or of a voluntary delay of its administration can foreigners appeal to the diplomatic forum; but only after having exhausted in vain the ordinary remedies provided by the laws of the Republic.
“Art. 40. It is provided, however, that there is a denial of justice only when the judicial authority shall refuse to make a formal decision on the principal matter in dispute or on any incidents of the case of which it has taken cognizance or which is submitted to its jurisdiction. Consequently, by the sole fact that the judge has pronounced a decree or sentence, in whatever sense, it can not be claimed that there is a denial of justice, even though it may be said that the decision is iniquitous or given against express law.
“Art. 41. The delay of the administration of justice ceases to be voluntary whenever the judge founds it in any reason of law or in any physical impediment which is not in his power to remove.”
Without entering into an elaborate analysis of these singular provisions of the constitution and laws of Salvador, it is obvious that even if not ingeniously contrived for the purpose, they would have the effect, if carried out in practice to a logical conclusion, to defeat the ends of justice in respect of foreigners. Under the claim of obedience to the local laws, the constitution prohibits the making of a treaty which would guarantee the rights of aliens, recognized among all civilized states, to appeal to their governments for protection; next commands obedience to the local laws; next follows the enactment of laws requiring obedience to the decisions and sentences of the tribunals, “without power to seek other recourses than those which these same laws give to Salvadoraneans;” and finally, a legislative definition of a denial of justice, which is in itself the consecration of injustice, by declaring that a decision is just even though it is grossly and confessedly iniquitous.
The will of the sovereign may be expressed either through constitutional and legislative enactments or through the unrestrained action of the executive. That will, whether expressed in the one form or the other, can not control the international relations of states; can not bind any foreign state. When there is a clash of opinion between two sovereign states on the right of intervention when invoked by the citizen of either against the other, the right is to be determined by principles of international law affecting states in the sovereign capacity and applicable to the given case. An attempt to prohibit by municipal law the right of intervention given by the common law of nations is inconsistent with sovereignty; and in all such cases the right of intervention is decided upon the merits of the particular case. A sovereign state can not yield this right without abandonment of one of its own most imperative duties.
Fourth. In the third counter memorandum prepared for the Salvadoranean Government by Messrs. Cotton & White, the case of the Antioquia is cited in support of the contention that intervention does not lie in behalf of American stockholders in a foreign corporation.
In that case the vessel Antioquia was owned by a Colombian corporation, whose capital stock was held by nationals of the United States, Great Britain, and other states. The vessel was seized by Colombian authorities as an act of military necessity. The president of the State of Magdalena, the authorities of which had seized the vessel, “offered to return the vessel and make prompt indemnification without the necessity of a reclamation or of judgment by the courts.”
This was an acknowledgment of the liability and an offer to make prompt compensation. The case itself, together with the admission and offer of the Colombian Government, is an authoritative precedent establishing the illegality of the action of [Page 846] the Executive of Salvador in this case and its liability to make indemnification to El Triunfo Company. This has not been done in this case. On the contrary, it has steadfastly upheld its action, and this attitude of the Colombian Government distinguishes the case from the one in hand.
The acknowledgment and offer of the Colombian Government disposed of the question of intervention, for Secretary Seward declared that “the Federal Government of Colombia declares that it has instructed its procurador to collect the necessary documents and submit them to the legal tribunals with a view to the liquidation of damages. It therefore invites the agent of the company to furnish his bill of charges and his proofs. With this I think the claimants must rest satisfied.”
The question was not presented for actual decision, as in this case, of the right of intervention where the act of the Government has practically destroyed the corporation by the destruction of the object of its incorporation and the means of its operation. This precise question arose and was decided by Secretary Blaine, and by the British Government, in the case of the Delagoa Bay Railway Company against Portugal, hereinafter mentioned.
The cited decision of Secretary Frelinghuysen (Wharton’s Digest, vol. 2, p. 547) directly supports the claimant in the case in hand. Secretary Frelinghuysen held that “redress must be sought through the board of directors of the company or by vote of the stockholders, or by other remedies provided by the charter or by the by-laws of the company.”
That is precisely what the stockholders of El Triunfo Company were proceeding to do when the decree of February 14 rendered their proceedings nugatory by annulling the concession and rendering impossible the plenary exercise of the powers of the corporation.
While the Department does not dispute the contention that intervention by the Government of the United States would not be in entire accord with certain dicta expressed in the case of the Antioquia in respect of intervention in behalf of American stockholders in a foreign corporation, it is consistent with the actual grounds of that decision. But if all the reasons stated in that case against the right of intervention were to be accepted, even if intervention had been refused solely on the academic reasons given, the decision of this case would be controlled by the later decision of the Department in the case of the Delagoa Bay Railway.
In that case a concession had been granted in 1883 by the Portuguese Government to Colonel McMurdo, an American citizen, to construct a railroad from Loureneo Marquez to the frontier of the Transvaal. The concession was transferred to a Portuguese corporation, in which Colonel McMurdo owned 498,940 out of 500,000 shares and £425,000 of the debenture bonds of the company. An English corporation—the Delagoa Bay and East African Railway Company—was formed and McMurdo assigned to it his shares and bonds of the Portuguese company, and the railroad was constructed with the funds thus raised.
The Portuguese Government canceled the concession, and Colonel McMurdo and the British shareholders in the English corporation applied to their respective Governments for protection. The American minister, under instructions from Secretary Blaine, protested against the act as unjust and demanded the restoration of the property or indemnity. Secretary Blaine held that the seizure of the railway by the Portuguese Government was an act of confiscation; that the Portuguese company being without remedy and having ceased practically to exist, the only recourse was intervention.
The Portuguese Government contended that it had no concern with the English company and could only recognize the Portuguese company, which had the power of appealing for protection to the laws of Portugal. But the British Government held that this contention was inadmissible for that the Portuguese company had for all practical purposes ceased to exist.
The Portuguese Government, however, annulled the contract and seized the railroad property. The concession provided that differences between the Government and the company in respect of the performance of the contract should be decided by arbitration; and the British Government held that “there was no meaning in the acceptance of arbitration after the party accepting it had settled the disputed question in its own favor by force;” that “the question at issue is not the motive, but the justice of the seizure;” that “the action of the Portuguese Government was wrongful and violated the clear rights and injured the interests of the British company, which was powerless to prevent it, and which, as the Portuguese company is practically defunct, has no remedy except through the intervention of its own Government;” that “the British investors have suffered a grievous wrong,” and “that for that wrong Her Majesty’s Government are bound to ask for compensation from the Government of Portugal.”[Page 847]
Secretary Blaine, in reply to the attitude of the Portuguese Government, held that the Portuguese Government in its correspondence “virtually admitted the facts upon which this Government’s opinion in respect to the confiscation is based;” that having annulled the concession, the Portuguese Government now appeals to its provisions for arbitration; that “it is not within the power of one of the parties to an agreement first to annul it and then to hold the other party to the observance of its conditions as if it were a subsisting engagement,” and declared that the United States “will not allow the Portuguese company to be interposed so as to obstruct the ends of justice.”
See Appendix for a fuller statement of this important case.
As the latest precedent, as well as for the solid grounds on which the decision was based, the Department feels constrained to follow it and to hold that the right of intervention exists in this case. Without intervention, confessedly, no adequate remedy is given by the laws of Salvador to assure full and due compensation for the arbitrary and lawless act of the Executive in annulling the concession, then granting it to others, and then rehabilitating it on terms inconsistent with the original grant, thereby casting a cloud on the original title, rendering its enjoyment insecure and doubtful, causing loss of profits of exploitation, and inflicting grave injury on the commercial credit and reputation of the lawful owner of the concession and seriously impairing its commercial value.
Intervention is therefore legitimate. This conclusion is moreover justified because compelled by the great law of necessity—by the demands of justice, which is the supreme necessity.
The distinguished European publicist, Pradier-Fodéré, states:
“It is the duty of every State to protect its citizens abroad. It owes them this protection when the foreign State has proceeded against them in violation of principles of international law—if, for example, the foreign state has despoiled them of their property.”
“Whoever uses a citizen ill indirectly offends the state, which is bound to protect the citizen, and the sovereign of the latter should avenge his wrongs, punish the aggressor, and, if possible, oblige him to make full reparation; since otherwise the citizen would not obtain the great end of the civil association, which is safety. But if a nation or its chief approves and ratifies the act of the individual (or if he does it himself), it then becomes a public concern, and the injured party is to consider the nation as the real author of the injury.”
“There can be no doubt that a state is responsible for the acts of its rulers, whether they belong to the executive, legislative, or judicial department of the government, so far as the acts are done in their official capacity.” (International Law, Vol. I, Chap. XIII, p. 393.)
denial of justice.
Calvo, Dictionary of International Law, defines justice as, “rendering to each one his due, respecting the rights of another, while also conforming our own actions to the law.”
The same author defines a denial of justice as “every refusal to give anyone his due.”
“The denial of justice by one government to the citizen or subject of another—that is to say, reparation for an evident injury or wrong—justifies recourse to reprisals by the government of the foreigner who claims this reparation.
“Those who resort to foreign countries are bound to submit to their laws. The exception to this rule, however, is that when palpable injustice—that is to say, such as would be obvious to all the world—is committed toward a foreigner for alleged infractions of municipal law, of treaties, or of the law of nations, the government of such foreigner has a clear right to hold the country whose authorities have been guilty of the wrong accountable therefor.” (Wharton’s Digest, vol. 2, p. 612, sec. 230.)
“When citizens of the United States go to a foreign country, they go with the implied understanding that they are to obey its laws and submit themselves in good faith to its established tribunals. But the case is widely different when the foreign government becomes itself a party to important contracts, and then not only fails to fill them, but capriciously annuls them, to the great loss of those who have invested their time and labor and capital from a reliance upon its own good faith and justice.” (Wharton’s Digest, vol. 2, p. 615, sec. 230.)
“It is the right and duty of a government to judge whether its citizens have received the protection due to them pursuant to public law and treaties.
“In cases of a denial of justice, the right of intervention through the diplomatic [Page 848] channel is allowed, and justice may as much be denied when, as in this case, it would be absurd to seek it by judicial process as if it were denied after having been so sought.” (Wharton’s Digest, vol. 2, pp. 617–618, sec. 230.)
“International justice may be denied by studied delays and impediments for which no good reason can be given, and which are in effect equivalent to a refusal, or by an evidently unjust and partial decision.” (Wharton’s Digest, vol. 2, p. 649, sec. 230.)
In its second counter memorandum, the Government of Salvador proposed “to raise the judgment of bankruptcy and to rehabilitate the bankrupt company in the administration of its property,” “if the claimants will submit to an equitable and reasonable settlement of the whole question.”
In the counter memorandum dated October 27, 1900, the Government of Salvador “repeats the offer of assistance by all the means in its power to rehabilitate El Triunfo Company in the management of its property and the exploitation of its privileges and franchises.”
In the spirit of these propositions, which, if carried out by Salvador, will greatly minimize the damages, the Government of Salvador should promptly take the proper steps to reinstate El Triunfo Company unconditionally in the possession and enjoyment of its property, including the concession, and to restore to the Salvador Commercial Company its legitimate control of said El Triunfo Company, discharged from the court. There would then remain the question of compensation for the damages caused to the American stockholders by the wrong initiated by the order in bankruptcy and the appointment of the receiver. In solving this question, the rights of the Salvadoranean stockholders and the legitimate rights of creditors of El Triunfo Company should be respected. This is in entire harmony with the sentiment of Salvador, “that in any settlement which is evolved, it shall be made without injury to the interests and rights of the other shareholders, not plaintiffs.”
This equitable solution may be reached:
By ascertaining the entire sum of the damages sustained by “El Triunfo Company” by the wrongs committed. Out of this sum should be first paid the legitimate debts of said company, if sufficient for that object, and out of the residue, if any, should be paid to the Salvador Commercial Company a sum which shall bear to said residue the proportion of 501 to 1,000; the remaining fraction of four hundred and ninety-nine one-thousandths being retained by Salvador, or being paid by it, at its own option, to the Salvadoranean stockholders. The proportion actually paid to American stockholders should, of course, exceed the fraction of five hundred and one one-thousandths, if American stockholders own more than 501 shares. The American stockholders would be entitled to receive such proportion of the damages sustained as the number of shares owned by them bears to 1,000. The entire amount of the damages sustained by El Triunfo Company should be ascertained, in order to assess the amount of the indemnity, if any, which would belong to the American stockholders after the payment of the legitimate debts created by the lawful managers of the company. This would render the indemnity complete and effective to recompense the American shareholders.
In the interest of the mutual friendship and good will which have always distinguished and blessed the two Republics, it is hoped that the above solution, or some other which is equitable and satisfactory to the parties, may be promptly reached by amicable negotiation. If not, the only alternative would seem to be to assess in a lump sum the indemnity to be paid to the American stockholders, to be ascertained in the manner above indicated.
In addition to the above indemnity, the Salvador Commercial Company should also be paid its costs of prosecution and its attorney’s fees, reasonably incurred.
The right of diplomatic intervention by the Government of the stockholders of a corporation whose charter has been granted by a foreign state.
the delagoa bay railway arbitration.
In the matter of the Delagoa Bay Railway arbitration, the Government of the United States and the Government of Great Britain jointly, as well as severally, [Page 849] intervened in the interests of American and British stockholders and bondholders, although the concession to build the railroad was legally vested in a corporation organized under the laws of Portugal. The facts are these:
In 1883 Edward McMurdo obtained a concession from the Portuguese Government to construct and operate a railroad from Lourenco Marquez to the frontier of the Transvaal. It was stipulated in the concession that he should form a company for this purpose under the laws of Portugal, and such company, called the Lourenco Marquez and Transvaal Railway Company, was organized in accordance therewith. In May, 1884, Colonel McMurdo assigned his concession to the Lourenco Marquez and Transvaal Railway Company, and received as consideration therefor 498,940 out of 500,000 shares of the stock of the said Portuguese company. By the same instrument Colonel McMurdo agreed to construct the railroad in consideration of the transfer to him of the whole of the debenture bonds of the company, amounting to £425,000.
For several years McMurdo was unsuccessful in his efforts to float these bonds. Finally, in 1887, he obtained the assistance of English capitalists, who, however, stipulated that their interests should be represented by the bonds and shares of a company to be incorporated under English laws. In this way the Delagoa Bay and East African Railway was formed, with a capital of £500,000 in shares. McMurdo then assigned to this English company the shares and bonds of the Portuguese company and the benefit of his contract with said Portuguese company of May, 1884, the English company undertaking to indemnify him in respect to the obligations of his contract, to pay him £115,500, and to give him their entire issue of stock. The company then issued debenture bonds to pay McMurdo and raise money to build the road.
In July, 1887, the Portuguese Government intimated that it would require an extension of the line of the railway. Meantime the railway was completed in accordance with the original plans and accepted by the Portuguese Government, with a reservation of the question as to the further extension of the line. Controversies over this extension led to the confiscation of the road in June, 1889, by Portugal.
The first step of the United States toward intervention was taken May 9, 1889, when Mr. Blaine instructed Minister Lewis, at Lisbon, to send the Department all the documents relating to the McMurdo concession. On June 19 Mr. Blaine further instructed Mr. Lewis that it was reported that the Portuguese Government intended to take possession of the railway on the 24th of June, and he expressed the hope that no decisive action might be taken until the Government of the United States could investigate the case and make known any objections it might desire to express. At the same time he reserved all the rights of the United States in the matter. When it was reported that the concession had been canceled, Mr. Lewis was instructed to make a formal protest, reserving all rights the heirs of McMurdo, who had died meanwhile, or other American citizens might have in the concession; and on October 12, 1889, Mr. Loring, who had succeeded Mr. Lewis as our minister at Lisbon, was directed to “inform Portuguese minister for foreign affairs that this Government, after careful investigation, views the forfeiture of Delagoa Railway concession and confiscation of the property of American citizens as unwarrantable and unjust, and that it will demand and expect the restoration of property or indemnity for losing, inflicted by Portuguese Government at the time of threatened forfeiture.”
On November 8, 1889, in the course of a long instruction to Mr. Loring, reviewing the facts in the case, Secretary Blaine says:
“Upon full consideration of the circumstances of the case, this Government is forced to the conclusion that the violent seizure of the railway by the Portuguese Government was an act of confiscation which renders it the duty of the Government of the United States to ask that compensation should be made to such citizens of this country as may be involved. * * * The Portuguese company being without remedy and having now practically ceased to exist, the only recourse of those whose property has been confiscated is the intervention of their respective governments.”
The British Government had already taken action for the protection of its shareholders independently of the United States. On June 24, 1889, Mr. Petre, the British minister at Lisbon, was advised by Lord Salisbury that should the Portuguese Government take steps to cancel the concession and forfeit the line the British Government would be justified in intervening diplomatically in order to prevent such action. The instruction continues:
“You should accordingly inform Senhor Barros Gomes that if the Government refuse to grant the extension of time for completion of the line * * *and decline to submit the questions at issue to arbitration, this would, in the opinion of Her Majesty’s Government, be, on their part, a very serious step.” (No. 178, from London, February 13, 1890, p. 16 of inclosure.)[Page 850]
On September 10, 1889, Lord Salisbury instructed Mr. Petre as follows (confidential inclosure with Mr. Lincoln’s No. 109, October 24, 1889, from London):
“Senhor Barros Gomes, in his notes of the 26th of June and 1st of July, while admitting the right of Her Majesty’s Government to advocate, on just grounds, the claims of British subjects, contended that in this case such advocacy was not needed, as the Portuguese Government had no concern with the English company, and he asserted that they could only recognize the Portuguese company, which had the power of appealing for protection to the laws of Portugal.
“If this contention were admitted, the interests of the British company would be at present absolutely unprotected, for the Portuguese company, after submitting, under protest, to a decision which it felt itself incapable of resisting, has, for all practical purposes, cease to exist. But Her Majesty’s Government consider this view to be altogether untenable. Senhor Barros Gomes must, indeed, in advancing it have forgotten the circumstances which attended the establishment of the British company.
“It is unnecessary to recapitulate the history of the concession given to Colonel McMurdo in 1883, of the subsequent formation of the Portuguese company (the Lourenco Marquez and Transvaal Railway Company), and of the successive prorogations of the term fixed for the completion by that company of the contract. It is sufficient to remark that the company, notwithstanding the extensions of time granted to it, was unable to find the capital to enable it to fulfill its obligations. It was in consequence of this failure that an attempt was made to obtain funds in England. The attempt was successful, and in March, 1887, the British company— the Delagoa Bay and East African Railway Company—was formed in London with the object of working the concession; and the necessary capital was subscribed.
* * * * * * *
“The Portuguese Government, basing their action on article 42 of the concession, annulled the contract, seized by force the rails, bridge work, and other material of the railway, and thus confiscated the whole property of the English company. This step was taken, notwithstanding that provision had been expressly made in the concession for the amicable settlement of a dispute of this character, it having been stipulated in the fifty-third article that all questions which might arise between the Government and the company touching the execution of the contract should be decided by arbitration. This declaration made by Senhor Barros Gomes in his note to you of the 26th of June last, that arbitration would be accepted, but that in the meanwhile the annulment of the concession could not be suspended, can only be regarded as illusory. There was no meaning in the acceptance of arbitration after the party accepting it had settled the disputed question in its own favor by an act of force.
* * * * * * *
“Into the merits of the question I do not propose to enter. The question at issue is not the motive, but the justice of the seizure.
“Her Majesty’s Government are of opinion that the Portuguese Government had no right to cancel the concession nor to forfeit the line already constructed.
“They hold the action of the Portuguese Government to have been wrongful and to have violated the clear rights and injured the interests of the British company, which was powerless to prevent it, and which, as the Portuguese company is practically defunct, has no remedy except through the intervention of its own Government.
“In their judgment the British investors have suffered a grievous wrong in consequence of the forcible confiscation by the Portuguese Government of the line and the materials belonging to the British company and of the security on which the debentures of the British company had been advanced, and that for that wrong Her Majesty’s Government are bound to ask for compensation from the Government of Portugal.”
* * * * * * *
The answer of the Portuguese Government to the British Government (confidential inclosure with Mr. Lincoln’s No. 141, December 27, 1889) is in part as follows:
“It is incorrect to suppose that the Portuguese Lourenco Marquez Railway Company has ceased to exist. * * *It is evident, therefore, that the company, on the one hand, did not make use of the power conferred upon it by law of dissolving on its own accord, and, on the other hand, it can not be held to be legally extinct by the sole fact of the decree of the 25th of June having rescinded the contract of the 14th of December, 1883.
* * * * * * *
“It is true that Lord Salisbury’s dispatch only declares the company extinct for all practical purposes; but not even from this strict point of view is the noble lord’s assertion justifiable. As regards the decree of the 25th of June up to the present, [Page 851] the company has done no more than protest against what it supposed to be the unjust provisions of the decree. This is true. But that very protest is an evident sign that it did not look upon itself as extinct, and there is nothing to prevent it from still appealing, as I said, to the court of arbitration, the constitution of which in accordance with article 53 of the contract insures the greatest impartiality to the parties to the suit. The Delagoa Bay Company, which owns at present almost the whole of the shares of the Portuguese company, is in a position to contribute in a most decisive manner toward the carrying into effect of this perfectly legal appeal. The supposition, therefore, that the interests of the company are unprotected is absolutely groundless, on which supposition it thought, as may be presumed, that it was placed under the unavoidable necessity of having recourse to diplomatic intervention. The defense of those interests was, and still is, placed in the hands of those who can better and are, moreover, obliged to protect them—that is to say, the company itself. In the contract, from which His Majesty’s Government have never swerved, except for the purpose of generously favoring the company—as will hereinafter be amply proved—in the laws of Portugal, and in the good will of His Majesty’s Government—of which they have invariably given it the most decisive proofs— the company would have found, and will still find, more than sufficient means for the effectual defense of the interests which it represents.
“The supposition that the Delagoa Bay Company was formed with the full assent of the Portuguese Government must not be considered as hardly less void of foundation. His Majesty’s Government were not called upon either to give or to refuse their assent to the formation of that company. The telegrams of the financial agent of the Portuguese Government do not prove at all any such assent. They merely prove that His Majesty’s Government were aware, as they could not fail to be, that the new company was being formed and for what precise purpose, and they also prove the care taken by His Majesty’s Government to notify, in order that the good faith of no one should be deceived, the laws and legal provisions by which the action of the company, when once formed in Portugal, would have to be bound and regulated. The declarations made by the Baron da Costa Ricci are both clear and positive. According to those declarations the Portuguese Government had, in the first place, nothing whatever to do with the formation of the Delagoa Bay and East Africa Railway Company and, consequently, were not in any way responsible for the statements and promises contained in its prospectus.
* * * * * * *
“In truth, no document whatever can be produced in which a single word can be found amounting to an official recognition of the English company, or to an official assent having been given to its formation. On the contrary, the Portuguese Government have always and invariably only recognized the Portuguese company as legally existent. The concession was only made to it, and they have always and directly treated with it alone. It appears to me unnecessary to add anything further on this point.
* * * * * * *
“Although the Government rescinded the contract on these strong grounds, nevertheless they did not, as alleged, confiscate the line and the materials belonging to the company; they only took possession, in accordance with the precise terms of the contract, of the whole of the property of the company, in order to act toward it, as they did invariably, in accordance with the clauses of the contract. For this purpose, it is clear, they based their action on article 42, but at the same time without infringing, as it is alleged they did, article 53. I have more than once officially recognized, in the name of the Government of which I am a member, the right of the company to appeal to the court of arbitration upon the question of the rescission of the contract of 1883, it being the intention of His Majesty’s Government, as it could not fail to be, to respect the award, whatever it might be, and to cause it to be entirely carried into effect. The means to compel the Portuguese company to appeal, as it had the right to do, are, as I have already poin ed out to your excellency, in the hands of the company, which will thus be easily able to refrain from having recourse to diplomatic intervention.
* * * * * * *
“Nevertheless, it must not be in any way inferred from the above statement that His Majesty’s Government are not willing to accept, as regards this pending question, a settlement which may conciliate the paramount interests which it is their duty to protect carefully and in equity the interests of the company on whose behalf Her Brittanic Majesty’s Government have, in the exercise of a right which is worthy of respect, thought proper to interfere.
“With a view to this equitable and conciliatory settlement, it is the opinion of His Majesty’s Government that the starting point can not but be from the firm conviction [Page 852] that the Portuguese company still exists both de facto and de jure, which I have asserted more than once, and which I think I have proved in the course of this note, and also from the clauses of the decree which the Portuguese Government published on the 25th day of June last, under the full conviction of their right to act in that manner.”
The Department further instructed Mr. Loring on November 30, in reply to his dispatch inclosing the answer of the Portuguese Government to the demand of the United States:
“The views of the Department, as expressed in its instruction of the 8th instant, are not modified by the note of Senhor Barros Gomes, of the 5th instant, which virtually admits the facts upon which this Government’s opinion in respect to the confiscation of the railway is based. The offer of arbitration now held out to the Portuguese company, which has practically ceased to exist, is not the offer of arbitration contemplated by the concession to Colonel McMurdo. That concession provided for the arbitration of any difficulties which might arise between Colonel McMurdo and the company which he was to form on the one hand and the Portuguese Government on the other. Such a difficulty having arisen on account of the action of the Portuguese Government, that Government, instead of offering to submit it to arbitration, makes it a ground for the annulment of the concession and the seizure of the property acquired thereunder. But having thus annulled the concession, the Portuguese Government now appeals to its provisions as governing the rights of the contractors and investors. If the terms of the concession still bind those persons to the arbitration therein provided, they must also be held likewise to bind the Portuguese Government, and hence to require the rescinding of the order of annulment and the restoration of the property to its owners, in order that such arbitration may take place. It is scarcely necessary to say that it is not within the power of one of the parties to an agreement first to annul it and then to hold the other party to the observance of its conditions as if it were a subsisting engagement.”
On April 24, 1890, Minister Loring was instructed by telegram to “say to minister of foreign affairs that the Government of the United States will not permit the property of American citizens to be seized and appropriated by any other government. The rights of American citizens in the Delagoa Bay Railway can not be solely determined by a Portuguese tribunal. The United States will accept nothing less than an international arbitration of the real merits of the case, and will not allow the Portuguese company to be interposed so as to obstruct the ends of justice. Express the hope to the minister of foreign affairs that Portugal will take no steps which will produce unfriendliness between the two Governments.”
United States of America, State of California, County of Alameda, ss:
Julie Jirkowsky, being sworn, deposes that she resides in the city of Oakland, county of Alameda, State of California, is of the age of 32 years, and is by occupation a clerk; that she is personally acquainted with Julius H. Ellis, who formerly represented Salvador company in the Republic of Salvador with respect to its interests as a stockholder of the Triunfo Company; that during all the month of July, 1899, she was employed in a business office in the city of San Francisco with which said Julius H. Ellis had business relations, and that during all that month she saw said Ellis nearly, if not quite, every day except Sundays, and that she knows positively that said Ellis was not in the Republic of Salvador or absent from the State of California in said month of July, 1899.
And further deponent saith not.
Subscribed and sworn to before me this 14th day of March, A. D. 1901.
Notary Public of the State of California in and for the County of Alameda.
United States of America, State of California, County of Alameda, ss;
Julius H. Ellis, being sworn, deposes upon his oath that he is a citizen of the United States and resident of the State of California; that he is of the age of 27 years; that by occupation he is a merchant; that he is the same Julius Heyman Ellis who in the year 1898 was a director of the corporation named Compania de El Triunfo, Limitada, of the Republic of Salvador, in Central America, and at that time was sojourning in the said Republic, and his residence was at the town of Usulutan, which town is about 24 miles from the city of Santiago de Maria; that during all the month of September, 1898, deponent was at said town of Usulutan, and at his office [Page 853] and business there, and that he was the treasurer of said corporation, and until the 26th day of said month had possession of the treasurer’s books of said corporation and acted as treasurer thereof; that between the said town of Usulutan and said city of Santiago de Maria there was during all that time a daily mail each way; that the mode of travel between said places was by riding on horseback, and the time necessary for the journey was about four hours; that he did not at any time receive any notice of a meeting of the directors of said corporation to be held or which was held on the 22d day of September, 1898, and did not know of said meeting until the said 26th day of September, at which time Simon Sol, Luis Lopez, and C. Cochella came together to his place and demanded the treasurer’s books of said corporation, informing him that said Cochella had been made treasurer in place of deponent, and thereupon he delivered the books to said Cochella.
Deponent further says that there is no truth whatever in the statement set forth in the contra-memorandum of the Republic of Salvador that Henry H. Burrell, president of said corporation, abandoned his office or abandoned the business of said corporation in the month of September, 1898, or at any time, but the truth is in respect thereto that in the month of September, 1898, said Henry H. Burrell, who was the general manager of said corporation as well as its president, and who lived at the said town of Usulutan, went to the city of San Salvador, the capital of said Republic, which is only about 100 miles distant from the said city of Santiago de Maria, upon business of said corporation requiring his attention there; that deponent knows the nature of business and the purpose of said Burrell’s going to San Salvador at that time, because said Burrell conferred with him about it before starting, and telegraphic communication was had between him and said Burrell at different times during the stay of the latter at San Salvador concerning said business; that among the objects of the journey of said Burrell to said San Salvador was the executing of security to the bank called Banco Salvadoreno for the debt which said corporation owed said bank, and said Burrell did make the necessary arrangement with said bank and executed a mortgage for such security, which mortgage is the same that is referred to in document 4, Package D, accompanying said contra-memorandum. Deponent recalls distinctly that upon this same journey said Henry H. Burrell went in company with Eugene Hoffman, who also resided at Usulutan.
Deponent further says upon his oath that he was not notified of the meeting of the board of directors held on the 14th day of October, 1898, but that, it coming to his knowledge by rumor at the port El Triunfo, where he was at the time that a meeting was about to be held, he went to the meeting at Santiago de Maria; that the meeting was held at the dwelling house of said Simon Sol, and there were present Messrs. Sol, Lopez, Cochella, Burrell, and deponent, and a partof the time Mr. Morales, an attorney, who appeared to be acting as the legal adviser of said Sol at the meeting; that in that meeting there was much discussion of the question whether said corporation should continue in business or should be put into liquidation, the said Sol, Lopez, and Cochella speaking in favor of liquidation and against continuing in business, and this deponent and said H. H. Burrell opposing liquidation, calling attention to the fact that the corporation was now in a condition to make money, that it had abundant resources to meet its present obligations, and especially calling attention to the fact that $80,000 gold par value of the stock of said corporation was still subject to call or assessment to the amount of 10 per cent, which would produce $20,000 silver at the then current premium. That all the current obligations of said corporation then existing and the expenses to accrue during the remainder of the year 1898 would not exceed $6,000 silver in the aggregate; and that there had been made large profits during the last previous shipping season, which begins annually about the 1st of January, or a little earlier, and extends to the month of June, and there was prospect of still larger profits the coming season, and that therefore it was entirely unnecessary to think of liquidation; and thereupon the said Burrell and this deponent urged that an assessment be levied sufficient to meet the immediate demands of the corporation and the current expenses for the remainder of the year; the said Burrell made a motion to that effect which this deponent seconded, but said Sol, who was acting as president of the meeting, refused to put the motion, saying simply it was unnecessary, that the corporation must go into liquidation. Thereupon said Burrell offered himself to advance money necessary to meet the current demands and carry the expenses until the shipping season, which was but a little over two months distant, but this was refused. Then Sol put to vote a resolution that said corporation should cease business and go into liquidation, with the result that Sol, Lopez, and Cochella voted for the resolution, and Burrell and this deponent voted against it. Lopez was the secretary of the corporation and seemed to be keeping the minutes of the meeting. If the minutes state that this deponent voted for liquidation they are absolutely false. The deponent and said Burrell opposed liquidation, both in discussing and in voting. This deponent and said Burrell remained at Santiago de [Page 854] Maria until the next morning, when they made preparation to return to El Triunfo. The journey was to be made on horseback, and when they were ready to start and had the animals saddled, rode to the dwelling house of said Sol for the purpose of hearing the reading of the minutes of said meeting; that said Lopez pretended to read the minutes of said meeting, and read them as stating that this deponent and said Burrell voted against liquidation; and thereupon this deponent, without himself looking over the minutes, signed them and immediately left the room; but said Burrell refused to sign, saying as they were written in the Spanish language he feared there might be something in them which were not true, and he would decline to sign. This deponent and said Burrell then rode away.
This deponent further says upon his own personal knowledge that up to the time when he ceased to act as the treasurer of said corporation, as hereinbefore stated, that there had never been one moment’s cessation or suspension of payment of the current expenses of or demands against said corporation; that the crew of the steamer Celia received their wages monthly, the month’s wages always running from the 7th of one month to the 7th of the succeeding month; that the crew were always paid promptly at the end of the month, and that all had been paid at the end of the month which ended September 7, 1898; that the laborers working at the port El Triunfo received their wages weekly, and all were paid up to the end of the last week before this deponent ceased to act as treasurer aforesaid; that Albert Hylton was check clerk of said corporation, and his wages were $125 silver per month, payable at the end of the month; that he had drawn his wages for all the time to the end of the last monthly period therefor preceding the time when this deponent ceased to act as treasurer, and at that time there was nothing due him, the month not being up.
This deponent further says that in the month of February, 1899, while Mauricio Meardi was in possession of the property of said corporation as receiver, in the course of a conversation with Meardi concerning the proceedings in bankruptcy against said corporation, Meardi said to this deponent that the port of FA Triunfo having now been opened up by American money the Americans must be put out.
Deponent further says that in the month of September, 1899, while he was in the city of San Salvador, he had occasion to see and examine a bill of sale of the steamer Maule, and that said bill of sale bore the name as the maker thereof not of an English company, but of the company called Compania Sud Americana, which company was represented at San Salvador by an English gentleman named W. E. Caldwell, and that said bill of sale named as the grantee of said steamship M. Meardi & Co., which the bill of sale stated was represented in the transaction by Ramon Garcia Gonzales, an attorney of the city of San Salvador, who was one of the persons named as grantees in the concession made by the Government of Salvador on May 13, 1899, purporting to grant the same property and franchises which had been previously held by said Compania de El Triunfo Limitada. In said bill of sale it was also specified that said steamer Maule was purchased for use in the transshipment of cargo from the port of Triunfo to the high sea. This deponent recalls with great distinctness the said facts concerning said bill of sale, because he considered it very remarkable that the steamer should have been purchased by M. Meardi & Co. in their own right, and for use at said port, and that in the negotiations therefor M. Meardi & Co. should have been represented by said Gonzales, one of the grantees of the hostile concession. This deponent for that reason examined and reexamined said bill of sale, and immediately afterwards reported the facts concerning it as above stated to his principal, the Salvador Commercial Company, at Oakland, Cal.
This deponent further says that he was not at any time in the month of July, 1899, in the Republic of Salvador, but during all that time was at his home in the State of California; and that he never saw nor had any intimation of the existence of the order or writ alleged in the said contra-memorandum to have been made by the judge of the court of the first instance of Alegria, in said Republic, on July 5, 1899, until he saw the statement thereof in the said contra-memorandum in the month of January, 1901.
This deponent further says that he was present when Leopoldo Alejandro Rodriguez, at the city of San Salvador, made and signed the statement which is certified by Hon. John Jenkins, the American consul at said city, under date of January 1,1900, and which is referred to in the reply of Salvador Commercial Company as the deposition of said Rodriguez; that said Rodriguez himself dictated said statement, and this deponent heard and saw the said consul administer to him an oath that the said statement was true, and said Rodriguez did then and there, in the presence of this deponent and said consul, swear to the truth of said statement. This deponent makes this statement, not supposing it will be denied that said statement was made under oath, but because the certificate of the said consul omits to state that the said deposition was sworn to.
And further deponent saith not.
The foregoing deposition was subscribed by the deponent therein named in my presence, and was sworn to by him before me on the 16th day of March, A. D. 1901, at the city of Oakland, in the State of California, and I certify that he is a person of good standing and repute.
Notary Public of the State of California in and for the County of Alameda.
Republic of Salvador, Central America,
January 1, 1900—2 p.m.
Leopoldo Alejandro Rodriguez, resident and born in the city of San Vincente, in the Republic of Salvador, 30 years of age, by occupation attorney and archivist, being sworn to tell the truth in all that he expresses, deposes—that for five years last past he has practiced his profession of attorney and archivist in the tribunals of this Republic; that in the month of February, 1899, he was employed by Julius H. Ellis, acting as agent and representative of a corporation of the State of California, United States of America, called the Salvador Commercial Company, to represent said company in the court of first instance of the district of Alegria in this Republic, in a proceeding then pending in that tribunal, in which had been pronounced an adjudication of insolvency and bankruptcy of a corporation of this Republic, namely, “LaCompania de El Triunfo, Ltd.,” and in which company the “Salvador Commercial Company “figured as the owner of the majority of the shares; that the purpose of the employment of this deponent and which he was instructed to carry into effect, if possible, was to procure the vacation of said adjudication of bankruptcy, on account of the proceeding not being founded on the laws of this Republic and on account of there not being any fundamental reason for the referred to adjudication, and to restore the company to its former state, thereby obtaining the removal of the receiver who had been appointed in said proceeding to the end that the property, assets, and franchises of said corporation so adjudged bankrupt be restored to it; that in the public document of power of attorney made by Mr. Ellis in conjunction with other shareholders of the “Compania de El Triunfo, Ltd.,” before the attorney, Daniel Quiroz, the proceeding of the court of Alegria was energetically protested against, and said document demonstrated and proved the illegality of the adjudication of bankruptcy, all of which was founded upon the substantive laws and according to the proceedings established by such cases in this Republic, which public document the deponent presented to the judge of first instance of Alegria, accompanying same with a writing by which the deponent strengthened the statements in said document, with reference to declaring the vacation of the suit, on account of its treating upon absolute nullities; that upon the receipt of the writing and public document by the court of the district of Alegria said tribunal ordered that said documents be attached to the records or acts, not deciding anything with reference to the alleged nullities and to the incorrectness of the proceedings; that it was impossible to obtain any fundamental decision in said tribunal for the definite arrangement of the referred to bankruptcy from the 19th of October, 1898, the day it was declared bankrupt, until date, the deponent being unable to find out the reason why they did not hear his petition nor why they did not continue the bankruptcy suit with the object to finish same and to come out in that manner from the state of indecision in which the things are found at present, so that his representatives might know to what they should abide by; that all which he has said is the truth, and he knows it to be the truth on account of the knowledge which he has of the case which he knows from sight and from the knowledge which he has of the laws of this country, signing for proof.
San Salvador, January 1, 1900.
I, John Jenkins, consul of the United States at San Salvador, do hereby certify that the signature of Leopoldo A. Rodriguez, at the foot of the paper annexed, is his true signature, made and acknowledged in my presence, and that said Leopoldo A. Rodriguez is personally known to me, and of good repute as a man of truth.
In witness whereof I have hereunto set my hand and affixed the seal of the consulate at San Salvador this day and year next above written and of the Independence of the United States the one hundred and twenty-third.
Consul of the United States.
John P. Irish, being duly sworn, deposes and says: That he is a citizen of the State of California, and is and has been since February 17, 1894, the naval officer of customs in the revenue district of San Francisco, Cal., and that he was the naval officer of customs at San Francisco on the 11th day of September and the 30th day of September, 1899; and he further deposes and says: That as such naval officer of customs it is by law made a part of his duty to enter and clear all ships and vessels that enter said port of San Francisco and depart therefrom, and that of his own knowledge he deposes that the Salvadoranean steamer Maule from Triunfo, Salvador, was entered at said port of San Francisco, on the 11th day of September, and was cleared therefrom on the 30th day of September, 1899, with cargo for Triunfo and other ports in the Republic of Salvador; and further deponent saith not.
Subscribed and sworn to before me this 2d day of April, 1901.
Notary Public in and for the City of Washington, D. C.