File No. 422.11G93/595.
The American Arbitrator to the Secretary of State.
Quito, March 5, 1913.
Sir: Referring to Department’s instruction No. 62 of January 21 last to the American Chargé d’Affaires at this capital, and to my telegram from Panama of January 21, I have the honor to submit a report upon the situation.
After some delay at Panama, I arrived at Guayaquil on the 9th of January, proceeding after a delay of one day at Huigra to Quito, [Page 481] where I immediately made the usual formal official calls and endeavored to cultivate the acquaintance of the members of the Government and to form the closest friendly relations with the circle of advisers surrounding the President. * * * The Ecuadorean Arbitrator reached this city on the 13th of February, about five weeks subsequent to my arrival in Ecuador. * * *
Immediately upon receiving official notice of the arrival of the Ecuadorean Arbitrator, Charge d’Affaires Bingham courteously approached the Foreign Office suggesting the expediency of a meeting of the two arbitrators now present in Quito, in order that the Arbitrational Tribunal might at once be installed. In reply the Minister for Foreign Affairs transcribed a communication from the Minister of Public Works stating that it had been arranged between this official and Mr. Henderson, Manager of the Railway Company, that the arbitrators and the lawyers for both parties should meet at the Ministry of Public Works in order to discuss the preliminaries for the promotion of the organization of the Arbitral Tribunal without delay. Upon learning from Mr. Bingham of the tenor of this note, I called upon Doctor Baquerizo and agreed with him that it would be most inexpedient for the arbitrators to be present at the conference between the parties, inasmuch as it appeared probable that certain subjects might be broached initiating a discussion in the presence of the members of the Tribunal regarding matters which would in due course be formally submitted to arbitral judgment. It further appeared to me most important that I should not permit myself to be drawn into any controversy between the parties which might give an erroneous impression as to my attitude on the questions at issue. Doctor Baquerizo readily assented to the view that the arbitrators in this matter should keep themselves severely aloof from the preliminary negotiations between the parties.
Accordingly, during the past three weeks the attorneys for the Railway Company and the Government have been laboring to arrive at an understanding furnishing the bases for the work of the Tribunal. * * *
The argument that has been put forward during the discussion over the terms of submission, between the attorneys of the parties at the Ministry of Public Works, tends, it is asserted, to show a purpose of the Government to insist upon the Arbitration Tribunal being organized in accordance with the provisions of the Ecuadorean Civil Code and subject to Ecuadorean laws and procedure, with the primary object of making any arbitral decision reviewable by the local courts. Article 27 of the contract between the Government and the Guayaquil and Quito Railway Company reads as follows:
All controversies or disagreements that may arise between the contracting parties shall be settled by arbitration; one arbiter shall be the President of the United States of America and the other shall be the President of Ecuador; should they not wish to act, they will each name an arbiter; and should these not agree, then the said President of the United States of America and the President of Ecuador will name a third arbiter to decide the question.
It would appear that it was the intention of the parties to the contract, in embodying this clause among its provisions, that all future controversies and disputes which might arise between them, growing [Page 482] out of these contractual relations, should be removed from the jurisdiction of the local tribunals and that an appeal for settlement should be made to the sense of justice of the Heads of States therein designated. It is submitted that even to a person casually perusing this clause of the contract it must occur that just such a stipulation should have most naturally suggested itself for adoption by persons pledged to an undertaking of such stupendous magnitude, in the completion of which the least of future difficulties to be reckoned with was certainly not the methods and procedure customarily encountered by foreign companies in the administration of justice by the local courts.
In spite of the difficulties that have been met with, the hope is felt that the representatives of the parties will, if a firm attitude is maintained by the Department in the matter, soon reach an agreement as to a compromise which will eventuate in arbitration. I am informed by the attorneys of the Railway Company that a satisfactory arrangement has been reduced to writing by the Government lawyers and should be signed tomorrow. Should, however, this not be the case, or should further and unreasonable delay be experienced, I would respectfully recommend that the Department intimate firmly to Minister Cordova that the Government of the United States cannot continue to regard as serious the expressed purpose of the Ecuadorean Government to submit the differences existing between the railroad and that Government to arbitration and is considering the advisability of the withdrawing of the representative on the Arbitral Tribunal designated by the President of the United States. I feel confident that a strong attitude in such an eventuality would bring about an immediate solution either in the direction of arbitration or a direct settlement between the parties.
With respect to the note from the Ecuadorean Foreign Office to the American Legation of the 25th ultimo, in reply to Legation’s note of the 21st of that month enclosing a certified copy of the powers of the American Arbitrator, I have learned from Mr. Bingham that the grounds for the action taken by the Legation have been set forth in a despatch to the Department (No. 189, dated Feb. 22). It would appear evident that the expressed preparedness of the Ecuadorean representatives at this date to enter into a satisfactory arrangement covering the terms of submission had postponed the consideration of the controversial matters raised in the note from the Ecuadorean Foreign Office of December 12, 1912, until the time when the cases of the parties shall have been filed and issue joined. The course pursued was particularly recommended by the desire of obviating the loss of time through a discussion between the Governments of those points before the issue between the parties had become definitely joined, thereby affording opportunity for the elimination of many matters of an extraneous character and materially simplifying the problem. It is therefore respectfully submitted that in consideration of all the elements of the present complicated situation, it would be better to await developments which may be of such a character as to make diplomatic representations on those points unnecessary.
I have [etc.]
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