File No. 2540/146–150.

Minister Fox to the Secretary of State.

No. 354.]

Sir: I have the honor, respectfully, referring to my No. 346 of September 3, 1908,1 to inform the department that an agreement has been reached between the Government of Ecuador, the English bondholders, and the American stock interests of the Guayaquil & Quito Railway, whereby all difficulties have been settled. A contract has been entered into by the Government of Ecuador, Mr. James P. Cooper, representing the council of foreign bondholders, of London, and Mr. Archer Harman, representing the railway company. The formal obligation to make this contract was signed in this legation on September 26, 1908, and the contract itself was signed in the executive mansion the following day. This contract will now be submitted to the Ecuadorian Congress for ratification. It contains a paragraph fully recognizing the arbitration tribunal, in that the arbiters are requested to inform their respective Governments that a full, definite, and satisfactory settlement of all disagreements has been reached by means of the contract.

As soon as Congress acts I shall advise the department further and in detail. In the meantime I desire to report certain facts with regard to the arbitration tribunal which are of interest, at least in so far as they throw a side light upon the situation. It will be recalled by the record that on June 14, 1907, the Guayaquil & Quito Railway had not been completed. This was the date stipulated by the contract. There was a great clamor to have the road seized on account of failure to comply exactly with the contract stipulations. It was at this juncture that the American interests, engaged in the building of the road, appealed to the department for arbitration of the matter, as provided in the contract. The department’s action in supporting the American interests was successful. The arbitration tribunal was organized. All grounds for distrust on the part of the Ecuadorian people were thus allayed. The consequence was that the building of the railway proceeded under reasonably favorable conditions.

It was tacitly understood between the parties, although, of course, there was no formal declaration to this effect, that the arbitration [Page 274] tribunal would not really begin its labors until the road had reached Quito. This was accomplished on June 17, 1908, just one year and three days later than the contract stipulation.

When arbitration was agreed upon the Government here looked about for a suitable person to represent it on the tribunal. A number of gentlemen declined to serve, but finally Dr. Borja, an eminent practicing physician in the city of Guayaquil, was selected and his patriotism appealed to. While in Quito, still holding the position of arbiter, Dr. Borja was called to the cabinet as minister of public instruction. He held this position for several months, when he resigned. A question having arisen as to the legality of his occupancy of the two positions, in order to cure any defect, President Alfaro gave him a second appointment as arbiter, after he had laid down the cabinet portfolio.

On September 19 instant Dr. Borja called upon me and stated that he had received a communication from the Senate transmitting a resolution passed by that body calling upon “the Ecuadorian arbiter” to transmit to it the original allegation filed by Mr. Archer Harman, president of the railway company, before the tribunal. Dr. Borja further stated that Gen. Alfaro had instructed him not to act without consulting me. I suggested to Dr. Borja that he reply to the Senate that if anything was desired from the arbitration tribunal that it should be called upon, that he himself was only part of it, etc. This was done, and the secretary of the Senate, under a second resolution of that body, addressed a collective note to Dr. Borja and myself.

Before replying to this I prepared an opinion, which I filed in the office of the arbitration tribunal. I took this occasion to elaborate on certain points, especially to document, by inference at least, that the tribunal was an international one.

With my opinion as a basis, Dr. Borja formulated our joint reply to the Senate.

The Senate promptly, upon motion duly carried, in view of our arguments, returned the document, which we had transmitted, to us unread and unacted upon.

I think that the Government will secure the ratification of the recently made contract by Congress. If so, there will remain but for the arbiters to make their report.

I have, etc.,

Williams C. Fox.
  1. Not printed.