File No. 422.11G93/604.
The American Chargé d’Affaires to the Secretary of State.
Quito , April 9, 1913 .
Referring to my telegram of March 8, the Railway Company and the Government have reached an impasse in the organization of the arbitral tribunal. It appears that the Government holds the arbitration to be of a quasi-international character and the eventual decision to be final. On March 17 I inquired whether formal confirmation of the organization could be made by the Minister for Foreign Affairs. On April 1 the Foreign Office replied as summarized in the following:
As the original contract between the Government and the Company was a private agreement, the laws of Ecuador were by implication incorporated in it. Therefore any arbitration stipulated therein for settlement of differences arising thereunder must be such arbitration as the local code provides for, even if the persons specified as arbitrators should be Heads of States. Consequently the laws and procedure of Ecuador apply to the constitution of the tribunal as well as to the finality and enforcement of the award. In the preceding arbitration the American Arbitrator, on June 17, 1908, took oath before a local judge. Hence the present Arbitrators should also take possession of office before a local judge, who is later to execute the judgment and who is authorized to review their decision; hence, furthermore, diplomatic cooperation in the formation of the tribunal is unacceptable.
The Foreign Office submitted this statement to the representatives of the Railway Company in order that their views might be considered by the Department in connection with it. The Railway Company’s brief—after considering the steps leading to the formal request of Ecuador for the appointment of an arbitrator by the President of the United States, when the usual local procedure had failed both in this case and in 1907—points out that the Government of Ecuador overlooks the very purpose of article 27, namely to remove disputes from the local jurisdiction and raise them above the recognized influence of the local environment.
Article 27 makes settlement by arbitration exclusive. The President is now acting through his appointee, who is entitled to the same consideration as the President. If local laws and procedure apply, the absurd result would be that the President of the United States and the President of Ecuador have been invited to act as referees whose decisions will be reviewed by a local court of inferior jurisdiction, because under the laws of Ecuador an appeal lies unless a provision against an appeal is stipulated in the protocol.
The organization of the tribunal in October, 1907, before the Minister for Foreign Affairs was eminently proper, as the arbitrators derived their faculties from the appointing power and needed no authorization from a local judge. The action of the American Arbitrator, [Page 493] in deferring to the wishes of the Government of Ecuador by taking an oath before the local judge eight months after the installation of the Tribunal, was doubtless upon the understanding that this could have no further legal effect than that derived from taking an oath before a judicial officer in the United States. In subsequent proceedings the local judge was ignored and the award was notified to the respective Presidents by each Arbitrator and was not submitted to any local court, as required by the code in local arbitrations. If the position of the Government were tenable, the Company would be stripped of every protection and of every hope of redress.
The American Arbitrator has held severely aloof from the preliminary negotiations relating to the constitution of the Tribunal. Since my telegram of March 8, he has made a careful study of the situation and has concluded from a conversation with the Minister of Public Works, the Minister for Foreign Affairs and the President, and an examination of the Legation’s archives, that the Tribunal was intended by the parties to make a final award in settlement of the existing controversies.
By ratifying the provisions of the original contract, it appears that the Congress of Ecuador recognized the quasi-international character of the Tribunal by ignoring the express provisions of the code relating to local arbitrations, which prohibit the Executive from acting as arbitrator, forbid local arbitrations in which interests of the State are involved, and require that in the submission the parties expressly stipulate as to the powers of the arbitrators, the binding force of the decision and the finality of the award.
The American Arbitrator is of the opinion, shared by the Legation, that the parties are unwilling to proceed without some intimation from the Department of State as to the measure of protection that the Government of the United States is ready to afford. He requests that he be immediately instructed.