File No. 812.6363/218
Said complaint and the exhibits attached thereto make out a complete case
and show conclusively that the attempted cancellation of the contract by
the Secretary of Fomento of the Mexican Government of General Venustiano
Carranza is without any legal or equitable foundation and is purely
arbitrary act, and amounts to the repudiation of a legitimate obligation
which was undertaken by the Constitutional Government of the Mexican
Republic under and in pursuance of an act of its President, Francisco I.
Madero, and by authority of a law long in force and which had been
adopted by the Mexican Federal Congress on the 18th of December, of the
year 1902.
You will understand, I am sure, that the business involved is a most
honorable and legitimate enterprise; that the contract with the Mexican
Government under which the investment was made was fair, open, public
and in pursuance of the law of the country and was considered by the
President of the Mexican Republic at the time as so advantageous a
contract for the nation that he made special mention of the same in his
annual message to the Mexican Congress in December, 1912, as one of the
praiseworthy acts of his administration which would enable the
Government to obtain substantial revenue from a class of federal lands
or properties that the Government itself could not hope to develop and
which required large capital to successfully exploit; and that the
contract would result in inducing the investment of foreign capital for
the purpose of establishing a precedent that would lead to a very large
increase of revenues for the nation.
The American citizens who subscribed the capital to the company which was
organized for the purpose of operating this contract and carrying on the
work of oil development under its protection were very careful to
investigate the origin of the contract and all matters surrounding it
before making any investment whatever. They obtained the opinions of
several of the ablest and most distinguished lawyers in the Mexican
Republic, one of whom was a member of the Cabinet of President Madero,
and all of whom were members of the Mexican Academy of Jurisprudence and
were among the counsel of the most important American business
enterprises in Mexico. The original of these opinions can be shown to
you (and translations will be furnished) which show that all of these
distinguished
[Page 742]
lawyers
pronounced the contract not only as in strict conformity with the
Constitution of the Mexican Republic but in every way in conformity with
and authorized by an important general law enacted by the Congress of
the nation under date of December 18, 1902, entitled “A law relating to
the real properties of the Federation “, in which the real properties
belonging to the Federation are classified, described, and the method of
their administration, conservation, management, uses and sale are fully
regulated in five chapters consisting of seventy-five articles.
The investment therefore was made in the best of faith. It was honorable
and praiseworthy and from every consideration it is entitled to the
protection of the Mexican Government and of our own Government which
should not permit it to be arbitrarily and unjustifiably confiscated,
which is the actual result that will follow the administrative
cancellation of the contract if it shall be permitted, since this
cancellation declares the forfeiture of the deposit, and the Government
has already taken steps to seize all the property of the company,
personal and real, including the oil well already drilled and the large
investment which it represents. It has been the understanding and belief
of Americans having investments in Mexico that assurances were given by
General Carranza that all legitimate investments would be protected and
that legal contracts and obligations of the Mexican Government would not
be repudiated but would be recognized and faithfully performed. And also
that the attitude of the United States Government in respect to all
contracts which had been entered into by previous constitutional
governments with American citizens, or with any persons from whom an
American citizen has legitimately acquired them, was that they should be
protected and recognized by the Mexican Government.
Doubtless the Honorable Secretary well understands that the most
important branches of commerce and industry not only in Mexico but in
every Latin-American State, such as mining, manufacturing,
transportation, as well as public and quasi-public utilities of all
kinds, in fact almost all business, except merchandising and
agriculture, are conducted under, and depend for their rights and
protection upon, contracts ordinarily termed “concessions,” granted
either by the Federal Government or by State Governments or by local
authorities, in which contracts the parties who propose to carry on such
business are specifically licensed to do so for a period of years, or
indefinitely so long as the provisions of the contract are complied
with, and that the manner and form of conducting the business is
carefully regulated, and the privilege or license is either paid for or
is conditioned upon the payment either of a lump sum or annual or
monthly payments, sometimes in lieu of taxation and sometimes in
addition to ordinary taxation; that these contracts are the only
protection of the vested property rights and interests in Mexico and
other Latin-American countries of American citizens who are conducting
enterprises there, and that they protect hundreds of millions of dollars
of American investments in all the republics and states of the Western
Hemisphere. Therefore if our Government shall permit the Mexican
Government arbitrarily to repudiate these contracts it will cast a cloud
upon the title to all American investments not only in Mexico, but in
Central and South America and will
[Page 743]
be a dangerous precedent which will react to the
detriment of Americans in all the Latin-American States and will be a
great blow to commerce between the United States and those countries
which our Government has shown and announced its great anxiety to
promote and increase.
We understand that it is the policy of our Government to insist that the
Mexican Government of General Carranza shall respect all these
legitimate contracts; that it will take the attitude that these
contracts made with previous Governments, such as that of General Madero
or General Diaz, are legal and binding obligations upon the present de facto Government and must be fulfilled and
protected and cannot be repudiated or cancelled unless it shall be
proved to the satisfaction of the United States Government that any
contract which it is proposed to cancel is illegal for being contrary to
the Constitution of the Mexican Republic or for having been executed
without authority of law, or that the said contracts have been forfeited
according to their terms.
I earnestly request a careful consideration of the accompanying complaint
and documents, confident that you will find the request contained
therein to be just and entitled to the approval of your
administration.
[Inclosure 1]
Mr. Vincent to
the Secretary of State
Sir: The undersigned, Joseph A. Vincent,
has the honor to state that he is secretary and director of the
Compañia Petrolera Maritima,” S. A. (Maritime Oil Company), a
corporation organized under the laws of the Republic of Mexico,
whose stockholders are practically all citizens of the United States
of America, and that he has charge of the business and affairs of
said company in the United States under the direction and control of
its board of directors, and that he files this complaint and protest
in behalf of said company and its stockholders, American citizens,
and states:
First: That under date of the 10th day of the month of June, 1912,
the Minister of Promotion, Colonization and Industry (Fomento,
Colonizacion y industria) in representation of the Constitutional
President of the Mexican Republic, Senor Francisco I. Madero, and in
pursuance of an Act of the Mexican Federal Congress, duly adopted
and which went into effect on the 18th of December, 1902, celebrated
a contract of lease with three individuals, Mexican citizens,
namely, an engineer named José Cos. an engineer named Luis A. Brito
and a lawyer named Francisco Robleda, by which contract the said
three grantees or lessees, their successors or assigns, whether
private individuals or companies or corporations, were granted the
right of exploration and exploitation of the veins of petroleum and
carbonaceous gases of hydrogen existing in the subsoil of the
maritime zone and of the margins, banks and beds of the rivers,
esteros and marshes under federal jurisdiction within four areas
described in the contract, each with a radius of one hundred
kilometers and having for a geographical center the towns of Panuco,
Papantla and Minatitlan in the State of Vera Cruz and Soto La Marina
in the State of Tamaulipas. This contract was promulgated in the
official daily of the Republic in Volume 120, Number 42, under date
of the 18th of June, 1912.
Second: The obligations of the lessees or concessionaires under this
contract were, briefly, the following:
- 1.
- The lessees were to give notice to the Departments of War
and Marine and of Communications and Public Works before
commencing any operation with the end that the Chief of the
corresponding port might be Informed and permit the work to
go forward when in the maritime zone, and to exact that
traffic on the river might not be interrupted when work was
conducted in the
[Page 744]
beds of rivers, and that whatever expenses might be
necessary in the judgment of the Department of
Communications for protecting traffic and navigation from
interruption should be borne by the lessees or grantees
under this contract.
- 2.
- Whenever a fountain of petroleum or gas should be
discovered, notice should be given immediately to the
Department of Fomento, designating the location and the
approximate quantity of the production.
- 3.
- That the grantees were to invest in exploration and
exploitation under this contract within seven years from its
date the sum of $100,000 pesos, Mexican currency, at least,
to be proved by due vouchers.
- 4.
- That the grantees would render an annual report to the
Department of Fomento of the expenses of operation, general
balance, statistics, production, etc., for the fiscal year
closed.
- 5.
- To guarantee the fulfillment of the obligations the
grantees gave a bond of $5,000 pesos, secured by bonds of
the National Debt.
- 6.
- The concessionaires were to pay monthly into the Treasury
of the nation $100 pesos as an inspection fund, as a
minimum, to be increased to $300 pesos as a maximum, when
the Government might require it, after production
begins.
- 7.
- That the lessees should pay into the Federal Treasury
seven per cent and into the treasuries of the States in
whose jurisdiction each well should be found three per cent
of the net earnings and profits obtained in each fiscal
year, whatever might be the quantity of petroleum or gas
obtained.
- 8.
- That the work of exploration should commence in each one
of the zones under the contract within eight months from the
date of the publication of the contract and that exploration
would be considered commenced by the installment of a
derrick for the first well in each zone.
- 9.
- The obligations under the contract were suspended in case
of accident or superior force which might impede the
fulfillment of such obligations, and such time would be
accredited the grantees or lessees if they were so
impeded.
Under Article 13 the contract was subject to forfeiture for any of
the following causes:
- I.
- For not investing the sum of $100,000 pesos within the
period stipulated.
- II.
- For not commencing the exploration within the period shown
in Article 11, namely, eight months.
- III.
- For suspending the work of exploitation or production
(explotacion) for more than six consecutive months without
duly justified cause.
- IV.
- For not constructing the works for the protection of
navigation, etc., as stipulated in Article 3 of this
contract.
- V.
- For alienating or mortgaging the contract to any private
individual or National Company, without previous permission
from the Department of Fomento.
- VI.
- For transferring the contract to any foreign company or
one not organized in Mexico in accordance with Mexican
laws.
- VII.
- For transferring this contract to any foreign State or
Government.
- VIII.
- For not making the payment of the inspection fees
stipulated in Article 8 of this contract to the
Government.
- IX.
- If it is proved that the lessees are defrauding the
Government out of its dues or the participation which must
be paid for the exploitation and operation of the wells,
(that is, the seven per cent to the Federal Government and
three per cent to the State Governments.)
A translated copy of the concession is attached hereto, marked
Exhibit A2.
It will be observed that this is nothing more nor less than a lease
by the Federal Government of certain territories under its control,
namely, the beds and banks of rivers and the maritime zone. For an
understanding of the question it should be known that under Mexican
law, as well as old Spanish law, the maritime zone constituted a
strip twenty meters in width, measured from high tide along the
shores of the sea and estuaries and on river banks upstream as far
as the tide reaches. This zone is and always has been public
property belonging to the nation, and it cannot be alienated to
private individuals. The Honorable Secretary undoubtedly knows of
the maritime zone on account of the many Spanish possessions of our
Government in which this law applies. The margins and banks of
streams constitute a strip of ten meters above high water, which can
not be alienated, and of course the beds of rivers, over which the
rivers flow, belong to the nation.
[Page 745]
It is readily to be appreciated that this is territory in which it
would be very difficult to carry on operations of exploration and
exploitation of petroleum, since to sink wells in a river requires
great expense in the construction of platforms above high water
which can not be swept away by the current and an additional great
expense in taking care of the oil which may be discovered so it
shall not flood the river and cause damages to public and private
interests, and great expense also in providing storage which must
necessarily be obtained from private owners of property abutting on
these streams. It is only recently that the State of Oklahoma has
discovered the value of the river beds as oil territory to be
exploited, although in the State of California it has been customary
to sink wells even in the ocean along shores where the water is
shallow.
Before the above-described contract was celebrated by the Mexican
Government with Messrs. Robleda, Cos and Brito numerous small
leases, or exclusive permits, had been granted to individuals in
pursuance of the petroleum law of the 24th of December, 1901, of the
Mexican Government authorizing the exploration and exploitation of
petroleum in parts of the maritime zone and in the banks and margins
of rivers, but not a single contract had been successfully operated
because of the great expense and the difficulty of work of that
character, requiring large capital and expert supervision. The
rivers in the Tierra Caliente (Hot Lands) are subject to great
variations of high and low water and of extension of the beds
because of the difference of the rainfall in the rainy and dry
seasons, and the drilling of oil wells in the beds, margins and
banks of rivers so as not to interfere with navigation and not to
flood the river with petroleum and so as to avoid polluting the
water requires extraordinary works and expenses and extensive
provision for storage capacity on adjoining lands of other persons
or in barges, and it can only be done successfully by the
expenditure of large capital.
The grantees of this contract were without funds to exploit the same
and they organized a small company with a nominal capital of
$100,000 pesos, called the Mexican Oil Company, Incorporated,
(Compañia Petrolera Mexicana, S. A.) whose capital was fully paid by
the transfer of the contract which was valued at $100,000 pesos.
They then came to the United States to secure capital to operate and
succeeded in interesting a number of Americans who were induced to
organize a company denominated “Compañia Petrolera Maritima”, S. A.
(Maritime Oil Company, Incorporated,) under the laws of Mexico with
a capital of $1,000,000 United States currency, to which the
contract was transferred in the month of August, 1913, with the due
approval of the Minister of Fomento of the then de
facto Government of the Republic and which, at that time,
had absolute dominion and control of all the territory which was
covered by this contract.
Suffice it to say that the contract has been complied with by the
grantees religiously and in every respect. Exploration was begun
within eight months in every zone covered by the contract and
immediately as soon as this capital was obtained, work was started
in sinking a well in a sandbar in the Panuco River near the town of
Panuco in the State of Vera Cruz, in which work of exploration more
than $100,000 United States currency was spent. The well had been
sunk to a depth of some 2,000 feet when the company, “Compañia
Petrolera Maritima,” S. A., (Maritime Oil Company, Incorporated),
was ordered to suspend drilling by the authority of the de facto Government of General Carranza
acting in pursuance of a decree issued by him which will be
hereinafter mentioned.
When the Government of General Carranza took possession of the City
of Mexico in August, 1914, the First Chief promulgated a decree on
the 1st day of September3 declaring that all administrative acts of the
preceding Government of General Huerta should be treated as null and
void dating from the origin of that Government, but at the same time
provided that application might be made at any time within four
months thereafter for revalidation of any administrative act of the
Government of General Huerta which had been invalidated by the
decree of General Carranza last above mentioned. Thereupon, the
Compañia Petrolera Maritima, S. A., through its legal representative
immediately applied for revalidation of the transfer of the
concession which was made by the Compañia Petrolera Mexicana, S. A.
to the said Compañia Petrolera Maritima, S: A. This petition for
revalidation was pending in the Department of Fomento when General
Carranza
[Page 746]
evacuated the
City of Mexico in November, 1914, but the Department officials had
constantly opposed ratifying the transfer that had been made, not
for any just reason but because they maintained that the Department
would not look with favor upon the contract, although its legality
was not questioned, since it was a contract of the Constitutional
Government of President Madero, but the pretense was made that the
contract or lease covered too much ground and that the participation
of the Government was not sufficiently large and that if the
transfer of the concession was revalidated our company might then
refuse to amend the contract as the Government desired, while if
they refused to affirm the transfer they could use this as a club to
compel the company to submit an amendment to the contract.
As to the participation, the ten per cent is the usual amount
stipulated in leases of private lands as the lessor’s portion of the
petroleum production, except in the most thoroughly well proved
territory, and this was a contract where the expense of operation
was far greater than would be required in operating leases upon any
private ground in the same territory. Nevertheless, the company
never refused to modify or amend the contract in any reasonable way,
but insisted that the first step was the confirmation of the
transfer of the concession in order that the company’s rights and
its large expenditure already made should be protected.
The work of drilling the well was continued until some time in the
month of January, 1915, when it was stopped, before the petroleum
was discovered, by order of the Department of Fomento, as we have
above stated, in pursuance of a decree of the First Chief, General
Carranza, issued at Vera Cruz on the 7th day of January, 1915.4 This decree provided that it was necessary
to revise in a complete and radical manner the petroleum legislation
of the country so as to carefully regulate the exploration and
exploitation of the deposits of petroleum. The decree recited that
many companies had been making explorations without authority, and
it was necessary to avoid the continuation of undue and unauthorized
exploitation; therefore it was decreed in substance as follows:
Article I. From the date of this decree, and until new laws shall be
enacted which will determine the juridical condition of petroleum,
all works now being executed for the construction of pipe lines or
the sinking of petroleum wells, and in general any other works
related to exploitation of petroleum must be suspended.
Article II. That under no condition should these works be renewed
without special provisional permits issued by legitimate
authorities, first obtaining the express authorization of this
Government.
Article III. The infraction of these provisions was to be punished
and the works that might be executed would be destroyed.
Our representative immediately applied for permission on the part of
our company to continue operations. This was refused on the ground
that the transfer of the contract from the Compañia Petrolera
Mexicana, S. A., to our company, Compañia, Petrolera Maritima, S.
A., had not been revalidated by the Carranza Government.
Thus our company was absolutely without power to continue its
operations because the Government would not recognize it as the
owner of the contract, and on that ground the Government would not
grant it any permit, and, notwithstanding the fact that the company
had applied for revalidation in due time while Carranza was still in
occupation of Mexico City, no revalidation was granted. The company
meantime having expended more than $200,000 United States currency
in drilling the well and in surveying and other explorations in good
faith, and while the company was making every effort to obtain the
revalidation of its rights under the contract and to obtain permit
to continue its operations, it was refused and the Subsecretary of
the Department of Fomento, in charge of the portfolio, Sr. Engineer
Pastor Rouaix under date of the 7th of August of the year, 1915,
issued a dictamen declaring that the contract was subject to
forfeiture for failure of the Compañia Petrolera Mexicana, S. A.,
that is, the Mexican Petroleum Company, Incorporated, to exploit the
same for a period of six months, basing this forfeiture upon the
provisions of Fraction III of Article 13 of the contract which
provides that the contract will be forfeited “For suspending the
works of exploitation (explotacion) for more than six consecutive
months without cause, duly justified” and the same resolution
conceded to the company the term of one month counted from the date
of its publication to present its defense. This decree was
addressed, as I stated, to the Mexican Petroleum Company,
Incorporated, (Compañia Petrolera Mexicana, S. A.) which was no
longer
[Page 747]
the owner of the
contract, ignoring the legitimate rights of the Maritime Oil
Company, Incorporated, (Compañia Petrolera Maritima, S. A.) which
had acquired the contract and which had expended with the consent of
the de facto Government more than $200,000
United States currency in its development I attach copy of this
decree, marked Exhibit B.
The company through its legal representative immediately presented
its defense, praying that the decree of forfeiture be rescinded as
being absolutely unjust for the following reasons:
First: Because the contract had been transferred to the Compañia
Petrolera Maritima, S. A. with due approval of the de facto Government which was then in control of the
territory and that it wanted only the approval of the Government of
General Carranza to such transfer, which approval should be given
because the company was organized in all respects in accordance with
the laws of Mexico, and had fully complied with the provisions of
the contract and had ample capital to exploit the contract, to carry
out all its requirements, and that it had faithfully complied with
all the provisions of the contract.
Second: Because the company had actually operated under the contract
on a large scale, having expended more than $200,000 United States
currency.
Third: Because the work of exploration carried on by the company had
not been suspended voluntarily but in strict obedience to the decree
of the First Chief, General Carranza, promulgated on the 7th day of
January, 1915, which I have quoted above and which requires all work
to be suspended; and the Government had declined since that time to
grant a permit to Compañia Petrolera Maritima, S. A., to resume its
work.
Fourth: Because the conditions of revolution and disorder which
prevailed throughout the Republic led to the interruption of
communications in all parts of the Republic and made it also
practically impossible to carry on work without great risk and
danger. Communication with the City of Mexico being entirely cut
off, and that the First Chief in various decrees had recognized that
this interruption of communications was sufficient excuse for
failure on the part of companies and enterprises to comply with
decrees, many of which had been repeatedly extended for that reason.
Among the decrees extended for that reason is the decree of General
Carranza of the 29th of January, 1915,5 and which was extended on the 20th of April
and further extended on June 2, 1915, the grounds for such extension
being recited in the decree as follows:
In view of the difficulty of communications that prevails in
some regions of the country, I have considered it prudent to
decree the following, etc.
and the decree concludes with the following words:
In the places withdrawn from the action of this Government,
the extension of time, as well the principal period, will
commence to run from the date in which these places may be
reoccupied by the Constitutionalist Army.
Fifth: The fifth reason why cancellation of the contract could not be
made for failure to exploit was that forfeiture could not be had
under the terms of the contract, itself, for suspension of
exploitation until after production of petroleum had commenced, and
the company being only in the exploration period, it appears clearly
from a perusal of the concession which distinguishes between
exploration and exploitation in its every article. To illustrate,
Article I says:
For the purpose of discovering and exploiting (explotar)
fountains of petroleum, etc., Messrs. Robleda, et al. are
authorized to practice explorations (exploraciones) in the
subsoil of the maritime zone, etc.
Article II says:
The concessionaires are also authorized to carry to a head
the exploitations (explotaciones) of the fountains of
petroleum, etc., within the zones which have been mentioned,
etc.
and Article IV says:
The concessionaires bind themselves to give notice to the
Department of Fomento of the discovery which might be made
of every fountain of petroleum when the same may be in
condition of exploitation (the term used being explotacion)
designating its location with specifications of the
approximate quantity which it may be susceptible of
producing.
and Article V says:
The concessionaires bind themselves to invest in the
“exploration” (exploraciones) and “exploitation”
(explotaciones) spoken of in this contract and within seven
years following its date, the sum of $100,000 pesos,
etc.
[Page 748]
Thus, in the above you will notice a constant distinction between
exploration and exploitation. Exploitation, in the contract, clearly
signifies the production of oil after it has been discovered.
Exploration means searching and boring for oil.
Now Article XIII says:
This contract will be forfeited for any one of the following
causes.
naming nine; and the second and third are as
follows:
- II.
- For not commencing the work of exploration within the
period shown in Article XI of this contract.
- III.
- For suspending the work of exploitation for more than six
consecutive months without duly justified cause.
Thus it will be seen that even in the forfeiture clauses a
distinction is clearly made between exploration and exploitation,
the purpose of the Government being to protect itself after
production begins against the company stopping the production. But
there is no provision in the contract for forfeiture on account of
suspension of the work of exploration. In other words, we have not
yet reached the producing point and consequently have not suspended
exploitation because we have not yet begun it.
Articles VIII and IX of the contract also recognize the distinction
between exploration and exploitation.
Article VIII says:
The concessionaires will deliver to the Treasury of the
Federation for expenses of inspection, beginning with the
date in which exploitation begins, the sum of $100 pesos,
monthly, etc.
The company tendered to the Treasury of the Mexican Government this
inspection fund in the year 1913, and it was refused on the ground
that the contract did not require the payment of the inspection fund
until the beginning of exploitation and that the company was not in
that period, but merely in the exploration period. This was the
interpretation put upon the contract by the Government, itself.
Article IX of the contract provides:
The concessionaires will pay into the Treasury of the
Federation seven per cent and into the Treasury of the State
in whose jurisdiction each fountain or vein of petroleum in
exploitation may belong three per cent of the net revenues
obtained in each fiscal year, regardless of the quantity of
petroleum, etc., obtained.
Here again the contract carefully distinguishes in its use the
difference between exploration and exploitation, and the word
exploitation (explotacion) as used in Article XIII referring to
suspension of work, can not possibly refer to suspension of
exploration, and the contract is not subject to forfeiture until
after production is begun, and then only for six months suspension
of production without cause duly justified (sin causa debidamente
justificada), and, of course, even if suspension of exploration had
been a cause of forfeiture, such suspension under compulsion and by
order of the Government can not be alleged by the Government as
grounds of forfeiture, because it was involuntary on the part of the
company. It will thus be seen that the company’s defenses were
complete and justifiable.
These defenses were filed within the period allowed by the decree,
being filed in September, 1915, both in the name of Compañia
Petrolera Maritima, S. A. and in the name of Compañia Petrolera
Mexicana, S. A. Copies of these defenses praying for revalidation of
the order of cancellation are hereto attached in translation, marked
Exhibits C and D.
In the meantime, our representative visited General Carranza at
Piedras Negras and was assured by him that no action whatever would
be taken by the Department until he returned to Mexico City, and
that the company would be treated justly and fairly and that its
investments would be protected.
Notwithstanding this, we are informed that under date of the 31st of
December a new resolution was issued by the Acting Minister of
Fomento, confirming the nullification, but that the resolution was
newly founded on Paragraphs II, III and V of Article 13 which state
entirely new reasons: Paragraph II provides:
That the concession will be forfeited for not commencing the
exploration within the period which is indicated in Article
II of this contract. (That is, within eight months.)
and Paragraph V of Article 13 provides for
forfeiture of the contract
For alienating or mortgaging the present contract or any of the
concessions therein contained to a private party or national
company without previous permit from the Department of
Fomento.
This is undoubtedly basing forfeiture upon the fact that the
concession was transferred by the Compañia Petrolera Mexicana, S.
A., to the Compañia
[Page 749]
Petrolera Maritima, S. A., without the consent of the Government of
General Carranza, although said transfer was made long before said
Government existed, and furthermore, said transfer was made in
pursuance of the permit and approval granted by the de facto Government in existence at that
time, being during the early days of the Government of General
Huerta when that Government was in control of all of the oil country
as well as the City of Mexico, and practically of all of the
territory of the Republic excepting small portions of Coahuila,
Chihuahua and Sonora, and when our company had no option whatever
except to treat with said de facto
Government. In other words, the Government is now taking the
position that no permit could have been obtained to transfer the
contract except by appealing to the authority of a Government which
did not at that time control any of the departments of the Federal
Government, and which was not recognized by the Government of the
United States as being in control, either de
facto or otherwise, of, or in, any part of the territory
which was covered by the contract.
It does not need any argument to show that this ground of forfeiture
is equally fictitious, because our Department of State has adhered
to the ruling, which is indeed a well-known principle of
international law, that Americans were justified in submitting to
the demands and decrees of the de facto
authorities in control of territory in Mexico in which their
properties were located.
The original contract authorized the concessionaires to transfer it
either to private individuals or Mexican companies organized in
conformity to the laws of the Republic, provided always that the
assignees bind themselves to comply with all and each one of the
obligations which the contract imposes, and the only limitation on
the perfect freedom to transfer the contract was that notice should
be given to the Department of Fomento and the previous permission of
the Department obtained to such transfer. This was for the purpose
of protecting the Government against the contract being transferred
to foreign Governments or to some persons or companies not able to
fulfill the obligations. The approval of the transfer by the
Department of Fomento was a purely administrative act, which could
well be performed by any de facto authority
and had nothing to do with the legality of the contract and created
no rights whatever that the contract did not already contain,
therefore it was an act that must, under international law, be held
as entirely valid, being strictly in pursuance with the provisions
of the contract, and should be revalidated by the present de facto Government, even if it desires to go
through with the formality of rescinding the act and dictating a new
approval. In other words, the company having complied with all the
provisions of the contract, is entitled to the approval of the
transfer, since it did all that in its power could be done at the
time to obtain an approval, and did obtain it from the de facto Government and a Government to which
it was necessary at the time to submit in order to carry on its
operations.
I may state in passing that the Government of General Huerta was
always unfriendly to our company and had placed every obstacle in
its way and finally, just before the fall of the Huerta Government,
it attempted to ignore the existence of the contract and to grant it
to other persons who were its satellites and who attempted to
blackmail our company to purchase their fictitious claims.
Therefore, it can not be claimed in any sense that the Compañia
Petrolera Maritima, S. A., is a creature of the Huerta Government or
was favored by it. On the contrary, its contract and all of its
rights originated with the Constitutional Government of President
Madero and the contract was considered by his Government as so
advantageous to the nation that President Madero in his message or
address to the Federal Congress in December, 1912, made special
mention of having granted this contract and eulogized it as a
praiseworthy act of his administration.
It will thus be seen:
First: That this contract referred to was duly and legally executed
by the Minister of Fomento, Rafael L. Hernandez in representation of
Citizen Francisco I. Madero, Constitutional President of the Mexican
Republic under date of the 10th day of June, 1912, by authority of
and in conformity with a law enacted by the Congress of the Nation
under date of the 18th of December, 1902, and it was therefore a
binding contract of the Federal Government of Mexico;
Second: That it was acquired in good faith by the company represented
by the undersigned, to wit, the Compañia Petrolera Maritima, S. A.,
and by the authority and with the permission of the said de facto Government of the Republic
[Page 750]
in control of all of the
States of Vera Cruz and Tamaulipas in which the territory covered by
this contract or lease is located;
Third: That the company in good faith and in perfect reliance upon
the legality of the contract began the work of exploration and under
it expended large sums of money and raised an ample capital by
selling its stock to American citizens, the number of stockholders
being about thirty-seven and located in various cities and states of
the United States, who have invested their money in good faith,
which is now threatened with absolute confiscation by the
unwarranted and arbitrary acts of the de
facto officials exercising the authority of the Executive
of the Mexican Government in the Department of Fomento;
Fourth: That the grounds upon which the alleged forfeiture is based
are wholly without justification and are fictitious and are in fact,
created by the Government itself.
Fifth: That the suspension of work by the company was wholly
involuntary and was compelled by the inspectors of the Government
acting under the orders of the Government and in pursuance of a
decree of the First Chief;
Sixth: That every effort of the company to obtain permission to renew
its work has been in vain and that the Government refuses to permit
renewal of the work and that this refusal of the Government to
permit the renewal of the work is now made the basis of the
forfeiture of the contract which the company has complied with to
the letter and in spirit.
Seventh: That this large investment of American citizens will be
confiscated and lost unless the Department of State, by its good
offices, shall interfere and require the Mexican Government to
comply with its contract and to permit the company to renew its
work, which is the only manner in which its investment can be
protected.
Therefore, the undersigned, acting in behalf of said company and of
its stockholders, who are American citizens residing in some ten
different states of this Union, respectfully prays for the exercise
of the good offices of the Secretary of State in the protection and
preservation of the rights and property of this company from loss
and confiscation without justification, and further prays that the
Secretary of State will address a communication to the Government of
Mr. Carranza stating that it had been brought to the attention of
the Department of State that an attempt has been made by officials
of the Department of Fomento of the Mexican Government arbitrarily
to cancel the contract entered into between Rafael L. Hernandez,
Secretary of State, Fomento, Colonization and Industry in
representation of the Executive of the Nation, Sr. Don Francisco I.
Madero, on the one part, and Messrs. Robleda, Cos and Brito on the
other part which was promulgated on the 18th of June, 1912, and
which is now the legal and rightful property of Compañia Petrolera
Maritima, S. A., which acquired the same by legal transfer under
permission of the de facto Government then in
control of the territory covered by said contract; that said company
is owned and controlled by stockholders who are citizens of the
United States; that the Government of the United States considers
this contract a legal obligation of the Mexican Government which is
not subject to arbitrary cancellation and that it will not consent
to the cancellation of said contract until it shall be proved to the
satisfaction of the Government of the United States that said
contract was illegal and has been legally forfeited for
nonfulfillment of the provisions thereof by the said company.
Furthermore, the transfer of the contract from the Compañia Petrolera
Mexicana, S. A. to the Compañia Petrolera Maritima, S. A., with the
permission and approval of the Department of Fomento exercising the
de facto authority of the Government at
the time should be revalidated and confirmed by Mr. Carranza because
the approval of the transfer by the Department of Fomento was a
purely administrative act which could well be performed by any de facto authority and which did not affect
the legality of the contract and created no right in the company
which the contract did not already contain, and was made in
pursuance of and in conformity with the contract. Therefore it was
an administrative act of the de facto
Government which must, under international law, be held as entirely
valid and could not be legally made the basis of grounds of
forfeiture of the contract.
Since the foregoing statement was written the undersigned has the
honor to state that he has received from the hands of the counsel of
this company, Mr. D. J. Haff, of Kansas City, Missouri,
authenticated copies of the following telegraphic correspondence
between the said counsel, Mr. Haff, and His Excellency,
[Page 751]
Señor Don Venustiana
Carranza, First Chief of the Constitutionalist Army in charge of the
Executive Power of the Mexican Republic, which I herewith copy and
make a part of this communication:
[Translation]
Kansas City, Missouri,
January 5, 1916.
To His Excellency, Sr. Don Venustiana
Carranza, First Chief of the Constitutionalist Army
Querétaro, State of Querétaro, Republic of Mexico.
In the interview which Your Excellency with so much kindness
granted to me on the 6th of November in Piedras Negras you
delivered to me a letter for the Subsecretary of Fomento in
regard to the matter of the contract of Compañia Petrolera
Mexicana, already transferred to Compañia Petrolera
Maritima, and recommended me to the consideration of the
Department and that it should hear me and you told me that
you would suspend all action and that nothing unfavorable
would be done in the business by the Department until your
arrival at the Capital to study and resolve the matter
according to justice. Notwithstanding, I have just received
notices promulgated of the cancellation of said contract by
resolution of Fomento of the 31st of December. My principals
have confided implicitly in the justice of Your Excellency
and the guaranties of protection to legitimate interests and
they pray revocation or suspension of the act until your
arrival in the capital and defense can be presented to you,
yourself, by the undersigned. I will thank you very much to
do me the favor to answer me. I protest my
consideration.
D. J. Haff
To this telegram the said counsel received the following answer:
[Translation]
Mexican Government, (Via Laredo
Junction.)
Querétaro, Mexico,
January 6, 1916.
Sr. Lic. D. J. Haff, Kansas City, Mo.
Replying to your message dated yesterday, Compañia Petrolera
Maritima, which you represent, can apply to the Department
of Fomento soliciting a new contract in the matter to which
you refer. I salute you.
(Signed) V. Carranza
The foregoing would indicate that the Chief of the Mexican Government
intends to ratify the act of his subordinate in attempting to cancel
the contract referred to.
Respectfully submitted.
