Papers Relating to the Foreign Relations of the United States, With the Address of the President to Congress December 5, 1916

File No. 812.6363/239

The Oil Fields of Mexico Company to the Secretary of State

Philadelphia, June 26, 1916.

Sir: I beg to enclose herewith copy of Decree No. 24, dated Orizaba, Vera Cruz, May 6, 1916, and copy of an Aviso relating to the same decree, dated Orizaba, May 4, 1916; both emanating from the Governor of the State of Vera Cruz.

These copies have been forwarded to me by a friend in Tampico, and I am certain that they conform to the original decree, except, perhaps, in certain evident typographical errors. As soon as the original copies have been received, I will take pleasure in forwarding them to you for your files.

Meanwhile, in the name of the Oil Fields of Mexico Company, an American company, I protest against the application of this decree, and more especially to article sixteen (16) pages 7 and 8. No attempt, to my knowledge, has yet been made to put into effect, as against us, any portion of this decree, but as soon as such attempt is made, I shall take the liberty of advising you in full detail, and appeal for assistance in case our rights are threatened.

I am [etc.]

The Oil Fields of Mexico Company,

Arthur E. Payne

, General Manager

[Inclosure 1—Translation]

decree no. 24

I, Heriberto Jara, governor and military commander of the free and sovereign State of Veracruz Llave, hereby make known to the inhabitants thereof:

That, by virtue of the powers with which I am invested, and

Whereas the industries in the State of Veracruz have obviously been experiencing an extraordinary development in recent times, especially as regards the petroleum industry, though official action on the part of the government has failed to keep pace with this rapid growth, the result being an absolute lack of official data concerning the industries and a complete neglect of their administration, supervision, and encouragement; and

Whereas the present condition of affairs is unconducive to the progress of our industries and prevents the government from applying uniform and general measures which would afford a just and equitable solution of the problems relating thereto while at the same time forming the basis for a rational system of revenue measures to be subsequently adopted by the government when such measures, based on accurate knowledge and past experience, would not create disorder or adversely affect vested interests, and furthermore would enable the government to utilize this source of wealth, which is one of the most important and most highly developed and must inevitably be drawn upon by the government in meeting its expenses and needs; and

Whereas, particularly with respect to the petroleum industry, the organization of stock companies for the purpose of working the deposits of bituminous substances and hydrocarbons found in the subsoil of the state has been constantly increasing and has attained proportions which may be termed alarming, since not only do these companies fail to comply in all cases with the provisions of the code of commerce in regard to corporations, especially those of this nature, but grave defects exist with respect to the lands on which the companies claim they are going to begin operations; and

Whereas the stock companies organized in this manner not only violate the law in their organization (often in a manner warranting the imposition of real penalties), but offer the public opportunities to make investments of capital which subsequently prove disadvantageous, encouraging unlawful speculation on the part of the organizers even to the grave detriment of public interests; and

Whereas at the present stage of legislation, although the laws relating to these subjects are federal in character it is the duty of the state government, for easily discernible reasons of common interests and patriotism, to look after the strict enforcement of these laws within its territory and as far as its sovereignty is concerned, and in order to accomplish this purpose and those contemplated in the preceding paragraphs there is nothing more in keeping with the sovereign rights of the state than to issue a permit or license to every company doing business within its territory, authorizing it to undertake and even continue the business, such measures affording a positive basis for official action and being dictated by the interests of the state itself, which ought to concern itself in interfering justly and appropriately in that which constitutes its economic life, of which these companies form one of the most important elements, especially when they are engaged in exploiting its national wealth and when the company, owing to the nature of its business and the close contact it has by virtue thereof with all the inhabitants of the state, is really performing a public service hitherto entirely neglected;

I have deemed it proper to decree as follows:

Article 1. Civil and mercantile corporations, companies, enterprises, and associations of any nature already established or in future to be established in the State of Veracruz shall enjoy the rights and be subject to the obligations granted to or imposed upon them by the laws which are applicable to them, by the present decree, and by such other provisions as the State of Veracruz may enact on the subject.

Article. 2. Concessions granted by the Federal Government or the State, articles of incorporation, minutes of meetings, and other documents of any nature showing the creation or organization of civil or mercantile corporations or companies of any kind in accordance with the laws of the Republic shall not authorize such corporations or companies to operate and transact business within the boundaries of the State of Veracruz unless accompanied by a permit to be obtained for the purpose from the governor of the State.

Article 3. Permits granted under the foregoing article shall be effective only for a period of one year from the date on which issued and shall be renewable on January 1 of each calendar year, the application being presented to the Government at least one month prior to said date.

Article 4. The corporations, companies, and enterprises shall solicit the permit referred to in Art. 2 from the State Government in writing, embodying the following sworn data in their applications:

I. Personal or firm name or title.

II. Kind of business or operations in which engaged.

III. Date on which they have begun or are to begin operations.

IV. Domicile, stating the offices they have in the State, in the Republic, and abroad.

V. Amount of capital stock, stating that which is fully paid up and that which is free because consisting of real estate or personal property or contributions in kind, the shares into which it is divided, the various series of these shares and the preference of certain thereof over others or the character of each series, new issues which may have been ordered, and all other information regarding the capital.

VI. Nationality of the concern and laws under which it has been organized, stating date and purport of the instrument of organization.

VII. Real estate or personal property owned or controlled by it, even though it is not using the property at the time, separately specifying the value of each piece of property situated within the boundaries of the State.

VIII. Mortgage or other bonds which it may have issued, stating the total amount of the issue or issues and the bonds or series of bonds and denominations of each series, the mode of redeeming the principal and paying the interest, the rate of interest, the mortgages given as security for the bonds or any other kind of security that may have been given therefor, together with all additional data relating to the loan.

IX. Names, nationalities, and residences of the members of the board of directors, managers, and other officials and employees who constitute the directing staff of the company.

X. Federal, State, and municipal taxes which they may be paying on any score.

XI. Such other data as the State Government may deem appropriate.

Article 5. The application referred to in the foregoing article shall be accompanied by a certified copy of the charter, articles of incorporation, minutes of meetings, or other document showing the organization of the company in accordance with the laws governing the subject, as well as by any subsequently executed documents which may amend the charter in any way, including extension of the life of the corporation, increases of capital stock, and other like documents. It shall not be necessary to exhibit these documents with the applications to be filed each year subsequently to the first application filed unless changes have occurred during the year with respect to some of the points referred to in this article.

Article 6. When there are several companies which are subsidiary to or branches of the main concern or which are connected therewith in any manner as regards their interests or business, the permit granted to the parent company shall not extend to the offshoots, the latter being obliged to obtain their own individual permits.

Article 7. Foreign companies shall furthermore demonstrate that they have complied in every respect with the provisions of Arts. 15, 24, and 265 a 2 of the code of commerce.

Article 8. Companies already organized or to be organized for the purpose of anywise working the substances situated in the subsoil of the State shall likewise be obliged to prove:

I. The rights they have acquired to work such substances.

II. Certain or present (?) oil-bearing nature of the lands to which such rights are established according to Art. 10.

Article 9. In complying with the provisions of Sec. I of the foregoing article, the companies shall embody the following data in their applications in addition to those prescribed in Art. 4:

I. A detailed description of the lands they own or control for the purpose of working the petroleum therein, stating exact location and area of each tract.

II. Names of owners of lands which the companies hold under lease or other precarious title, as well as names of assignees or other persons now holding or having held rights to such lands under any title.

III. The value at which they estimate each tract, the amount of rent paid by the company itself or by the other lessees, sublessees, or assignees who may have rights to the lands, and all other data which may exist and throw light on the pecuniary evaluation of the lands.

Article 10. Other companies asked to do so by the State Government shall be obliged to comply with the provision of Sec. II, Art. 8, they being required in that event to inclose with their application not only the documents mentioned in Art. 5 but also a certificate from the petroleum department of the State Government or from an authorized geological or mining engineer in regard to the character of the companies’ lands.

Article 11. The State Government shall refuse the permit referred to herein in the following cases:

I. When the company fails to comply with the provisions of Arts. 4, 5, 6, 7. 8, and 9 of this decree.

II. When the object of the company is to engage in business within the State and it has not its main office or a branch in some town thereof or a representative accredited to the State Government.

III. When it appears that the organization of the company does not comply in every respect with the provisions of the Mexican laws which govern or apply to it, and in any other case in which a violation of said laws is proved to exist.

IV. When it engages in speculations differing from those which constitute its object.

V. When there appears to be bad faith or a malicious design to cause confusion in the minds of the public in regard to the business of the company, its economic or financial circumstances, or its mode of transacting business.

VI. If it is a question of companies organized for the purpose of working the subsoil when their lands are such as are referred to in the decree of the Commander in Chief of the Constitutionalist Army acting as Chief Executive of the Nation, under date of Jan. 6, 1915.

Article 12. After the permit provided for in this decree has been granted, it may be revoked by the governor of the State in any of the cases mentioned in the several sections of the foregoing article.

Article 13. The proper department of the State Government shall keep a register in which shall be recorded the companies to which this decree relates, giving the data embodied in their respective applications.

The permit granted by the State Government shall be recorded in the appropriate public commercial register for each company.

The data in question shall be strictly confidential in character and shall not be revealed or communicated to third parties for any reason or under any pretext, unless they are asked for by the authorities in the discharge of their lawful duties.

Employees and officials who may have knowledge of said data by reason of their office and who reveal or publish them shall incur such official and criminal responsibility as may be determined by the laws.

In the official gazette of the State Government shall be published a list of the companies which have secured the permit prescribed in this decree, though the data relating to each company shall not be given.

Article 14. The permit to which this decree relates shall cost a fee of $100.00, which the companies shall pay upon being registered by the State Government, the money going to the public treasury.

To associations created for charitable, educational, philanthropic, or other purposes than mercantile speculation, the fee shall be reduced to $5. Each fee shall be payable by the companies or associations concerned upon annually renewing their permit.

Companies in whose behalf there is some exception embodied in the general laws applicable to them shall be exempted from payment of any fee.

Article 15. Without the permit prescribed in Art. 2 of this decree, the companies or enterprises which ought to obtain it shall not be permitted to operate or do business within the State of Veracruz or conclude contracts relating to persons or things situated in said State or subject to its jurisdiction and laws.

All contracts concluded by said companies and enterprises shall be null and void within the State if they lack the said permit, and they shall give rise to no rights, obligations, or claims which the authorities and courts of the State are bound to uphold and respect. This applies also to all acts of such companies and enterprises.

Article 16. The maintenance and operation of companies and enterprises within the State of Veracruz without the permit prescribed in this decree shall be subject to the following penalties, independently of the provisions of the foregoing article:

I. A fine of $5 to $500.

II. Imprisonment from one to thirty days of the manager or any official or employee of the company who may be found guilty.

III. Closing of the offices and establishments of the company for a period not to exceed 15 days in any case, with suspension of all operations for a like length of time.

IV. Confiscation of all or part of the property of the company situated in the State.

V. Expropriation of the property in question, with no further obligation than that of paying the proper indemnity, for which purpose the same value shall be taken as a basis as the company has stated to the State Government upon obtaining its permit.

None of these penalties shall be imposed without an express order from the governor of the State, who may hear the interested parties in court before enforcing the penalty imposed in each case.

transitory articles

Article 1. Applications for the first permit referred to in this decree shall be filed with the State Government within 30 days from the” date of organization of the company.

In case of companies already formed, the period shall begin on the date of publication of this decree in the official gazette of the State Government. The first permit shall take effect from the date on which granted until December 31 of the current year.

Article 2. Until otherwise provided by the State Government, none of the permits mentioned in this decree shall be granted to any foreign company except those now existing, and the permits granted to those of the latter which are found to have acquired within the territory of the State real estate belonging to Mexicans in violation of the provisions in force on the subject shall be canceled.

Therefore I order the above printed, published, circulated, and duly enforced.

H. Jara

Orizaba , May 6, 1916.

[Inclosure 2—Translation]

Notice. Petroleum department. Conditions to be fulfilled by applications filed with this Department in order that action on them may be ordered.

1. Application for confirmation of contract shall be presented duly stamped and signed by the applicant or his attorney or legal representative, stating his residence, and it shall relate to a single class of transaction, such as sale, lease, assignment, gift, organization of a company, etc.

2. The following documents shall accompany the application:

I. The power of attorney together with an ordinary copy when the application is not made by the contracting parties themselves.

II. The contract concerned together with a certified copy thereof and (in the proper case) the charter and by-laws of the company, always stating the nationality of the contracting parties.

III. A certified copy of the greater number of titles which record the rights being alienated.

IV. A plan or sketch on strong paper drawn to scale with a heliographic copy or a copy on tracing linen of the lands affected by the transactions. This plan or sketch shall contain the following main data: Location of the land, number of the lot, ranch, municipality, and canton to which it belongs, shape and area of the land, boundaries, scale of construction, and bearings, even approximate. These sketches shall be accepted only temporarily, subject to replacement by the final plans to fulfill the requirements laid down by the petroleum department.

V. An appraisement made by a professional expert or one authorized to do so by the civil authority of the municipality.

3. In case the contract should be concluded among foreigners or the seller or lessor is a foreigner, the application should be accompanied by a declaration signed by all the parties to the contract to be confirmed, to the effect that they consent to be considered as Mexican citizens for the legal purposes of the contract and that they waive their alien rights whatever may be their original citizenship and will not in any case solicit protection or aid from foreign diplomatic or consular officers or Governments of other countries or assert any rights except such as are granted to Mexicans by the laws of the country.

4. In case of the organization of a petroleum company there shall be furthermore appended an authentic expert geological report adequate to afford an idea of the commercial magnitude and value of the oil lands worked by the company. This report shall contain the following technical and commercial data: Location and area of the land, means of communication, local topography and geology, petroleum deposits with proofs of likelihood of their existence in the subsoil of the land covered by the report, economic conditions of the locality, living and labor resources, water and fuel, approximate depth to be reached by the well, estimated cost of boring and of transporting the machinery and the oil to be produced by the wells to the nearest port or railroad station, average value which may — — — to a hectare of land in the tract covered by the report, and a summary or extract of the report.

5. A duplicate list showing the documents, plans, and other appendices which the applicant hands in with his application.

B

1. Applications for authorization of contracts, as well as accompanying documents, shall be the same as those indicated above for applications for confirmation, with the sole difference that instead of the contract or charter two certified copies shall be presented of the draft of the contract which has been recorded and signed by the two contracting parties, or (in the proper case) two copies of the draft of the charter.

2. When it is a question of the organization of a company, a clause of the following tenor must be embodied in the charter:

All bearers of shares or certificates of this company shall, by virtue of the fact of being such and for all legal purposes, be considered as Mexican citizens whatever may be their original citizenship, and they shall not in any case be permitted to invoke rights as aliens, solicit protection or aid from foreign diplomatic or consular officers or from the Government of another country, or assert any other rights than those granted to Mexican citizens by the laws of the land. This clause shall be inserted in the by-laws of the company and in all its shares or certificates of shares.

General rules

1. No class of contracts shall be acted upon in this office or permits granted for their conclusion when the seller or assignee is a Mexican citizen or the buyer or assignee is a foreigner.

2. After each application and its accompanying documents have been examined and found to comply with all the above-mentioned conditions, the case shall be ordered taken up for action and given a due serial number. If the application and appendices fail to fulfill the aforesaid conditions, no action shall be taken on the case but it shall be returned to the interested party in order that the missing documents may be supplied or a new application filed.

3. Once a case has been assigned a number, it shall be acted upon in its strict numerical turn.

4. As soon as a case has received a number, the original documents accompanying the application shall be returned to the interested party, the duplicates thereof being retained in the files of the department.

5. The hours during which the public will be received in this department shall be 3.30 to 5 p.m. on working days, and only during these same hours will applications be received.

6. Applications and appended documents shall be delivered solely to the chief clerk of the department, all other official business being transacted by the public exclusively with the director of the department, for no private matter will be dealt with in this office.

7. All reports presented to this department must be written in Spanish, and in case it is necessary to employ some foreign technical term untranslatable into Spanish the meaning of the foreign technical term so employed shall be defined in Spanish.

Constitution and reforms.

Orizaba, May 4, 1916.