The Secretary of State to American Chargé d’Affaires.
“Present Nicaraguan Government” applies to Government of President Estrada. This provision was inserted because the decree organizing the tribunal provides for the cancellation and annulment of contracts and concessions by executive decree. Against executive action of this sort there is a strong prejudice in this country, and concessionaires losing their rights by mere executive decree would surely make such representations to this Government as would lead to the embarrassment of both the Department and Nicaragua. Therefore, in order adequately to protect American citizens and thus avoid criticism and opposition here, it is deemed best to provide, first, that no concession be canceled by executive decree except for illegality or unconstitutionality; and, secondly, that before such cancellation or annulment is put into effect its propriety be determined by the commission. In the case of onerous contracts which, though not illegal or unconstitutional, are of such a character that the economic welfare of the country requires their modification, rights which they cover should, in the Department’s opinion, be obtained by the Government through regular expropriation proceedings instituted under the laws of Nicaragua.
You will impress upon the Nicaraguan Government that this Government is wholly disposed to so assist the Nicaraguan Government as to enable it to place itself in all respects upon a sound financial and economic basis. But in order to avoid criticism here and to enable that Government so to place itself it is obvious that the plans recommended must adequately protect legitimate American interests by providing, among other things, a legal procedure recognized as appropriate here in analogous cases. It is believed that this double [Page 636] remedy (first by expropriation proceedings in court under general law, and second by annulment and cancellation under the decree creating the commission) will afford Nicaragua ample machinery for meeting the whole situation.