Papers Relating to the Foreign Relations of the United States, With the Annual Message of the President Transmitted to Congress December 6, 1904

Mr. Loomis to Mr. Merry.

Department of State,
Washington, February 4, 1904.

No. 575.]

Sir: I inclose herewith the duplicate of a letter and of its inclosures from Messrs. John P. Irish and W. Lair Hill, attorneys of the Salvador Commercial Company and other American citizens, complaining of the nonfulfillment by the Salvadorean Government of the agreement of August 17, 1903, between that Government and said company, providing for the payment of the claim of the company against said Government.

You will bring the matter to the attention of the Salvadorean Government and say that unless there is a full compliance by that Government with the terms of the agreement of August 17, 1903, this Government will require the payment of the full amount of the award of May, 1902.

It is understood that the National Legislative Assembly of Salvador convenes during the present month, and that the matter should be taken care of at this session.

I am, etc.,

Francis B. Loomis,
Acting Secretary.

[Inclosure.]

Messrs. Irish and Hill to Mr. Hay.

Washington, D. C., February 3, 1904.

Sir: The undersigned, the attorneys of Salvador Commercial Company and other American citizens, beg leave to present the following facts:

1. On the 8th day of May, 1902, an award was made by an international tribunal of arbitration, sitting at Washington and composed of the Right Honorable Sir Henry Strong, chief justice of Canada; Plon. Don M. Dickinson, of the United States, and Hon José Rosa Pacas, of the Republic of El Salvador, in and by which award it was adjudged that the Government of El Salvador pay to the United States, for and on account of claims of Salvador Commercial Company and other American citizens, then and there represented by the undersigned, the sum of $523,178.64 American gold, together with interest thereon at the rate of 6 per centum per annum from and after the said 8th day of May.

2. On the 17th day of August, 1903, said award not having been paid by the Government of El Salvador according to the terms of the protocol between that Government and that of the United States, by which said tribunal of arbitration was created, the said claimants, with the approval of the Department of State of the United States, entered into an agreement with the minister of El Salvador at Washington, subject to the approval of the legislative power of El Salvador, whereby it was agreed that the legislative power of El Salvador should provide by law for the issuance of seven series of bonds, covering 67½ per centum of amount of said award, the first of said seven series to be paid on the 8th of May, 1904, and the other six series to be paid, respectively, on the 8th of January, 1905, and on the 8th day of January of each successive year to and including 1910; and that the said bonds should be deposited by the Government of El Salvador with the Union National Bank of Oakland, Cal., as trustee, and they should be paid at said bank at the respective dates of their maturity; and that the Government of El Salvador should at the same time with the deposit of said bonds also deposit with said bank certificates of the beneficial interests of the respective claimants in the amounts to be paid upon said bonds, such certificates to be negotiable and to be delivered by said bank to the claimants, respectively; and in and by said agreement it was further stipulated that said bonds should be secured by 10 per centum of the customs of the Republic of El Salvador until they were fully paid, and that upon the payment of said bonds at or before the respective dates of their maturity said award should be deemed satisfied as to the interests of the said claimants therein. One original of said agreement was filed in the office of the Secretary of State of the United States, and may be referred to for verification hereof.

3. On the 22d day of September, 1903, the legislative power of El Salvador passed an act declaring said agreement reducing the amount to 67½ per centum ratified, and specifically authorizing the Executive of that Republic to issue seven series of bonds covering the said 67½ per centum of said award, and directing and declaring that the Executive should “pay the claimants with said bonds, delivering them, with the certificates provided for in the agreement, to the Union National Bank of Oakland, Cal.” No power is vested in the Executive to deliver the bonds and certificates except in payment of the claims. (The official paper of El Salvador, containing said act, is herewith presented, and a translation of said act into the English language is hereto annexed.)

4. The bonds and certificates having been prepared, they were transmitted by the Executive of El Salvador to the Hon. Encarnacion Mejia, consul-general of El Salvador at the city of San Francisco, Cal., for delivery, reaching him on or about the 15th of January, 1904: and that official, on the 16th of January, 1904, notifying the said Union National Bank of his readiness to deliver them, accompanied the notification by a form of receipt to be given by said bank, as trustee, in which form of receipt it is declared that the amount of money covered by said bonds and certificates is received, and that the delivery of said bonds and certificates is fulfillment by the Government of El Salvador of its obligations under said agreement of August 17, 1903. (A copy of said form of receipt in the Spanish language and a translation thereof into the English language are hereto annexed.)

5. Said bank has declined to receive said bonds and certificates, upon the ground that the delivery to it, and the receipt by it, of said bonds and certificates, under the terms and conditions prescribed and declared by said act authorizing the issue thereof, would be, as to said trustee and as to the claimants beneficially interested in said bonds and certificates, satisfaction of said award, leaving the claimants at the mercy of the Government of El Salvador as to the payment of the money promised in and by the bonds; and the claimants have notified said bank that they object to its receiving said bonds and certificates upon the terms and conditions of said act, or upon any terms and conditions under which their delivery would constitute satisfaction of said award.

6. Said claimants demand only that the said agreement of August 17, 1903, be carried out in good faith according to its terms and spirit; but they protest that the terms and conditions upon which said bonds are issued and directed to be delivered are in violation of most important provisions of said agreement; and particularly in this, that they are not secured upon 10 per centum or any amount of the customs of El Salvador; and that it was not contemplated in and by said agreement of August 17, 1903, that the bonds and certificates should be received in payment of, or as satisfaction of, or as substitute for, the award; but, on the contrary, it was distinctly agreed, understood, and specified that the award should be satisfied only upon payment of the moneys for which the said bonds were to be security.

The agreement provides for the issue and deposit of the bonds as security for payments at periods stipulated. It also requires that the bonds be guaranteed on 10 per centum of the customs, to provide the Executive with means for their payment.

The ratifying act of the Salvador Congress provides for the issue of the bonds, but does not guarantee them on 10 per centum of the customs revenue nor provide any other source of means for their payment. It authorizes the Executive “to pay the claimants with said bonds,” and a receipt is demanded of the trustee acknowledging the receipt of the bonds as so many dollars in payment of the claim.

It is plain, then, that the ratifying act does not conform to the agreement; that not providing the means to pay it, equips the Executive with that excuse for default, and that the exaction of a receipt for the bonds as money opens the way to repudiation of the whole obligation.

The Congress of Salvador should correct its statute to conform to its agreement of August 17, 1903, at its impending session of the current month, and we request that it be advised by the United States that failure to do so, and to perform all of its undertakings under said agreement, will constrain this Government to demand immediate payment in full of the award of May, 1902.

• John P. Irish.
• W. Lair Hill.

[Subinclosure 1.]

translation of the act of salvador legislature of september 22, 1903.

The National Legislative Assembly of El Salvador:

Whereas the Executive power has made a report of the agreement made in Washington on the 17th of August last between our plenipotentiary and the Salvador Commercial Company and other American citizens, by which the amount awarded to said claimants is reduced to 67½ per cent, and the conditions and mode of payment are established; and

Whereas, although the arbitral judgment of the 8th of May, 1902, was unjust and illegal, because of its not having been subjected to the bases of the Hay-Zaldivar protocol, and because there was given to the claimants an indemnity purely imaginary and speculative, in express violation of article 6 of said protocol, which constitutes a going beyond its powers of arbitration; and in view of the official and hostile attitude of the American Government, which has demanded compliance with that iniquitous judgment, and to the end that the country may be spared greater humiliation and more grave damages,

It is decreed:

• Article 1. The agreement concluded on the 17th of August last, in the city of Washington, between the Salvadorean legation and the Salvador Commercial Company and other American citizens, by which the amount awarded by the tribunal of arbitration as indemnity due from the Government of El Salvador to said citizens is reduced to 67½ per cent of the same, is ratified.
• Article 2. The Executive power is authorized, to issue the seven series of bonds for which said agreement provides, bearing interest at 6 per centum from the 8th day of May, 1902, in accordance with said judgment and the agreement ratified.
• Article 3. The Executive power is likewise authorized to pay the claimants with said bonds, delivering them, together with the certificates for which said agreement provides, to the Union National Bank of Oakland, Cal.; and
• Article 4. To recommend to the Executive power that there be addressed to the Governments of the Latin-American Republics a history of this scandalous affair by a statement in detail of the causes out of which the Burrell claim arose, of the irregular and anomalous conduct of the arbitrators and that which the United States pursued, with the corresponding protest against the violation of our rights, to the end that sometime we may be able to vindicate them, which we do not doubt will be the case when reason and justice prevail in the Government of that civilized nation.

Given in the chamber of sessions of the legislative power, San Salvador, at 10 o’clock in the forenoon of the twenty-second day of September, one thousand nine hundred three.

• Rafael Pinto, Vice-President.
• C. Cierra, Second Secretary.
• G. Mazzini, First Secretary.

Palace of the Executive,
San Salvador, September 23, 1903.

Let it be done.
P. Jose Escalon.

Manuel I. Morales,
In Charge of the Department of Foreign Relations.

It will be observed that the ratifying clause of the above statute is, by its language, limited to the part of the agreement which reduces the award to 67½ per cent, and may well be taken as excluding ratification of other parts of the agreement, except as to the issue of the bonds provided by another section of the act.

[Subinclosure 2.]

Translation of the receipt demanded by the consul-general of El Salvador.

Thomas Prather, legal representative of the Union National Bank, of Oakland, Cal., duly authorized by said bank, as appears by a document which he exhibits, declares that he has received from Mr. Encarnacion Mejia, consul-general of El Salvador in the United States of America, the sum of $353,145.59 American gold, in seven series on bonds of $50,449.37 American gold each series, which will become due, respectively, on the 8th of May next those of 1904, and on the 8th of January each year those of 1905 to 1910, numbered from 1 to 1,029 and each bond accompanied by a corresponding certificate of ownership of the same value and number, and the delivery of which Mr. Mejia makes in the name of the Government of Salvador to the Union National Bank of Oakland, in fulfillment of the agreement entered into at Washington, D. C., on the 17th of August, 1903, between the authorized agent of the Republic of El Salvador and Mr. John P. Irish as the authorized agent of the Salvador Commercial Company and others, which agreement was approved on the same date by Dr. Rafael Severo Lopez, minister of El Salvador in the United States of America, and ratified by the legislative power of El Salvador on the 22d of September of the same year. The stubs from which the bonds have been detached remain in the hands of Mr. Mejia to be returned to the Supreme Government of El Salvador.

In faith of which Mr. Thomas Prather, representing the Union National Bank of Oakland, as trustee, declares: That by the delivery which is made to him and to which this corresponds, the Supreme Government of the Republic of El Salvador has complied with the obligations assumed in the agreement above cited; and he executes this receipt in quadruplicate before the witnesses and notary public who subscribe, in San Francisco, Cal., on the _______ day of January, 1904.