File No. 837.156/136.
The American Minister to the Secretary of State.
Habana , February 6, 1913 .
Sir: Referring to my despatch No. 610 of the 29th ultimo, in regard to the Habana-Casa Blanca bridge concession, having looked into the question of the right of the Government to annul a concession of this character, I have the honor to report the following upon what I regard as sound legal authority.
It is a well-established principle of Spanish jurisprudence that the Government may at any time revoke or annul a contract or concession, not alone for infraction of any of its terms or conditions by the party or concessionaire but merely on grounds of public interest or convenience. The principle is founded on the rule that the Government may rectify its errors even at the cost or inconvenience of another, because, as distinguished from the errors of a private party, they affect the general public interest. There is such abundant and such a long line of precedent in support of the principle, both in Spain and in Cuba, that no one would venture to question it. The only question that could arise would be as to the authority of the Executive to revoke. Cuba has a constitution and a form of government closely modeled after our own. Many, or in fact nearly all, of the old Spanish laws are still in force in Cuba because no laws better adapted to the changed conditions have been enacted to take their place since the establishment of the Republic. These laws confer upon the Executive many powers that in the United States are legislative and, in the spirit of the Cuban Constitution, should be so in Cuba. Cuban Executives have, however, largely continued to execute powers of doubtful constitutionality, and their right to do so has never been successfully challenged. In the ease in point the concession was granted by Congress; the Executive decrees carrying the act into effect are merely reglementary. On the other hand, according to the practice which ordinarily obtains here in the granting of concessions of this character, Congressional action was necessary in this case only because of the grant of land attached to the concession, the granting of the bare concession being, under the Spanish law, vested in the Executive. Thus viewed, the special act of Congress in this case was merely an enabling act by which the Executive was authorized in this special case to exceed his usual power: his power to grant the bare concession, and consequently to revoke it, being unimpaired. This question is however more academic than practical, because it is hardly likely that there would be any opposition to an attempt upon the part of the Executive to revoke the concession.
[Page 375]In the case of annulment of a concession on the ground of public convenience, the established rule is that the concessionaire must be indemnified all actual moneys necessarily expended by him upon the object of the concession up to the time of annulment, with legal interest on each several amount from the date of disbursement to the date of indemnification, plus one year. The amount of the indemnity is usually settled by mutual agreement, or may, by either party, be referred to the courts for ascertainment. It is usual to allow, in addition to actual expenses of execution, if any, all reasonable lawyers’ and engineers’ fees and expenses legitimately incurred in procuring the concession and in preparing for its execution; but it is very doubtful whether any allowance could be made for “promotion” expenses (procuring capital, etc.) or for any liability that might attach to the concessionaire (abroad, for in Cuba there could be none) by reason of capital and like engagements, or contracts for materials and services. In no case could the potential value of the concession as a prospective profit-earner be considered. When a controversy regarding the reasonableness of expenses upon which a claim for damages is based is referred to the courts for adjudication, the courts may pass freely upon the reasonableness of the alleged expenses however good a showing claimant might make as to their genuineness.
I have [etc.]