File No. 837.156/237

The Acting Secretary of State to Minister Gonzales

No. 235

Sir: The Department has received your despatch No. 348 of June 19, 1916,1 in which you review developments in connection with the existing difficulties between the so-called Cuban Ports Company and the Government of Cuba growing out of the cancellation of the Company’s contract with the Cuban Government by the President of Cuba.

Since the issuance by the President of Cuba of his decree of August 4, 1913, cancelling the company’s contract, the Department has, as you are aware, viewed with increasing concern the failure of President Menocal and of other competent Cuban authorities to take any satisfactory steps looking to a final satisfactory settlement of these difficulties. In view of this Government’s friendly interest in the welfare of Cuba and in view particularly of this Government’s apprehension that the attitude of the Cuban Government in this matter would seriously impair the credit of Cuba, the Department instructed you to use your good offices with a view to bringing about a satisfactory and amicable adjustment of the case. The efforts made by you in accordance with these instructions have apparently proved unavailing.

The Department regrets that the friendly advice of this Government, the representations which the Department understands have been made to the Government of Cuba by the British Government in behalf of the owners of the beneficial interest in the Cuban Ports Company, and the fact that the cancellation of the company’s concession has apparently created a situation fraught with possibly serious consequences to Cuba have all failed to prompt the Cuban Government to abandon its attitude of inaction respecting the matter of effecting a settlement of the case, and earnestly to take suitable steps looking to such a settlement, and the Department desires [Page 444] that you address a communication, to which you will request an early reply, to the Cuban Foreign Office in the sense of the following:

Under instructions from my Government I have the honor to present to you certain considerations respecting the difficulties that have arisen between the Government of Cuba and the so-called Cuban Ports Company, growing out of the cancellation of the company’s contract with the Cuban Government by the President of Cuba.

Following the issuance of President Menocal’s decree of August 4, 1913, representations were made to this Government by owners of the beneficial interest in the company who being aware of the interest which this Government had taken in the contract just mentioned sought its assistance in protecting their interests. My Government’s good offices were also solicited by the Government of Great Britain with a view to the protection of British investors in the company. And requests for assistance were also received from American citizens whose interests were incidentally affected by the cancellation of the contract.

To these requests and representations this Government replied in effect that they would receive due consideration if a situation should arise in the future in which the case should become the subject of diplomatic discussion between this Government and the Government of Cuba, and that it was understood that the latter had in contemplation the matter of effecting through judicial proceedings or otherwise an adjustment of the questions which arose out of the cancellation of the company’s concession. When it appeared that no satisfactory steps were being taken to bring about such an adjustment, my Government, in view of its friendly interest in the welfare of Cuba and in view particularly of its apprehension that the attitude of the Cuban Government in this matter would seriously impair the credit of Cuba, instructed me to tender its good offices to the Cuban Government looking to an amicable arrangement satisfactory to all parties whose interests were affected by the cancellation of the concession.

You are doubtless aware that on more than one occasion the President of Cuba has assured me of his earnest desire that the rights of all the parties affected by his decree of August 4, 1913, should be protected, and that proper steps should be taken looking to that end. These assurances having been brought to the attention of my Government and of the holders of the securities of the Cuban Ports Company were relied upon by them in good faith. From time to time measures have been initiated in the Cuban Congress for the declared purpose of vesting in the President of Cuba power to effect a settlement of the case. Nevertheless, after the lapse of approximately three years no effective steps have been taken to bring about an arrangement to deal in a suitable manner with the situation created by the President’s decree cancelling the company’s concession. And my Governments is now in possession of an aide mémoire, recently delivered to it by the Minster of Cuba at Washington during the course of an interview which he had with the Department with reference to the Cuban Ports Company, in which it is pointed out that the Cuban courts have declared, in a suit instituted by the Cuban Ports Company, that the company is an illegally organized corporation and in which it is stated that it

“is, therefore, very fundamental to establish whether or not an illegally organized corporation can create obligations and responsibilities to the Cuban Government through its contracts and negotiations with third parties, as it appears equally fundamental to know how far and to what extent any diplomatic action arising as a consequence of claims against the so-called Cuban Ports Company can be justly pressed by any Power against the Cuban Government, and endorsed by the Government of the United States,”

and, further, that it

“is assumed from the urgent recommendations of the United States Minister in Habana, that if the United States Government endorses the pretentions of Great Britain in the emphatic manner in which they have been recommended by the American Legation, it is because this Government is possessed of special knowledge of the question, and, in this case, it would be useful to know the opinion of this Government in the face of the sentence of the Supreme Tribunal of Cuba.”

My Government directs me to inform you that it cannot undertake at this time to discuss the matters referred to in the Minister’s aide mémoire, but that it feels warranted, in view of all the facts and circumstances of the case under consideration, [Page 445] to request that it be furnished with a definite statement on the part of the Cuban Government as to its present attitude with reference to the controversy existing between it and Cuban Ports Company.

However, my Government desires me to point out at this time that, following the enactment by the Cuban Congress of the act known as the Ports Improvement Law, which authorized the creation of the Cuban Ports Company, this Legation was directed to inform the Cuban Government that the Government of the United States regarded as objectionable, under the provisions of the treaty concluded between the two Governments on May 2, 1903, the stipulations of the company’s concession providing for the payment to the company of a specific portion of Cuban revenues derived from the import tax provided for by the Cuban law just mentioned, whether or not such revenues might be necessary to defray the expenses of the Cuban Government; that it appeared possible to obviate this objection by amending the terms of the company’s concession so as to permit the use of this import tax for current expenses if at any time it should be needed for that purpose; and that the desired result might perhaps be accomplished by an amendment to the concession giving the Cuban Government the right to take over the operation of the Cuban Ports Company by purchasing all the outstanding stock of the company at a just and equitable valuation to be fixed by three appraisers. It appears that this Government’s suggestion was adopted by the Cuban Government and by the company, the company’s contract being amended in accordance therewith.

The holders of the securities of the company have represented to my Government that the act of the President of Cuba in cancelling the company’s concession is a taking over of the operation of the Cuban Ports Company by the Government of Cuba within the meaning of the amendment of the company’s concession just mentioned, and that, therefore, it is incumbent on the Cuban Government, under existing circumstances, to take steps to have appraisers appointed in order that the company’s outstanding securities may be purchased at a just and equitable valuation to be determined by appraisers named in accordance with the terms of the contract.

My Government, without desiring at this time to enter into any discussion as to the legal rights of the parties to the contract in question under the terms thereof just mentioned, desires me to point out that the Cuban Government, inasmuch as it has, acting through its President, terminated the company’s concession, would appear to be in a position at once to take steps to effect a satisfactory solution of the existing regrettable difficulties between itself and the company by promptly instituting the proceedings suggested by the holders of the company’s securities.

I am [etc.]

Frank L. Polk
  1. Not printed.