File No. 417.00/48.

The American Chargé d’Affaires to the Secretary of State.

[Telegram—Paraphrase.]

Of the contracts or concessions at issue not more than three are considered either illegal or unconstitutional in the opinion of President Diaz, the president of the assembly and the Nicaraguan member of the mixed commission. In view of this I beg leave to await further instructions before communicating to the Nicaraguan Government the substance of the Department’s telegram of July 7. Nearly all the rights of Americans and other foreigners in the industrially improper concessions, contracts or leases will be obtained by the Nicaraguan Government under the expropriation arrangement proposed, according to the decree as set forth in your telegrams of June 26 and July 7, and the jurisdiction of the mixed commission will be limited to the consideration of the three illegal or unconstitutional concessions, miscellaneous claims and war claims; consequently the Department’s plan adequately to protect the interests of Americans and other foreigners might possibly be frustrated by the Nicaraguan courts, from which foreigners may receive but scant consideration. Payment of damages from the proceeds of the loan must be made in case expropriation proceedings are instituted.

Gunther.