File No. 422.11G93/927

The Secretary of State to Minister Hartman


Your despatch No. 213, March 27, 1917, enclosing note of February 28 from the Ecuadorean Minister of Foreign Affairs, contending that the case of the Guayaquil and Quito Railway Company is not a proper one for diplomatic intervention. In view of the fact that the original contract of 1897 between the railway and Ecuador contemplates that such differences as might arise between the parties would be matters of diplomatic concern of sufficient importance to be settled by arbitrators to be appointed by the President of the United States and the President of Ecuador; that by the arbitration agreement of 1908 the contract was given the value and status of an arbitral award, which has been repeatedly violated by Ecuador and which it is now apparently the desire and intention of the Ecuadorean Government to violate again; that the daily allotment of customs receipts to be set aside according to the arbitral agreement of 1908 from the customs [Page 747] revenues, and to be placed “to the credit of the Council as representing the holders of the bonds,” places the Ecuadorean Government in the position of a trustee, as it were, of such funds for the bondholders, which trusteeship the Ecuadorean Government now wholly disregards and violates; and that finally the failure of the two attempts at arbitration in 1913 and 1914—the method of procedure specifically provided in the contract for the settlement of disputes thereunder—constitutes a denial of justice, the Government of the United States perceives nothing in the Ecuadorean note of February’s, 1917, to occasion any change in the attitude of this Government, which has for years been repeatedly made known to the Government of Ecuador, namely that it has and intends to exercise its undoubted right to interpose diplomatically to protect American interests involved in the Guayaquil and Quito Railway controversy.

This Government is constrained, therefore, to notify the Government of Ecuador that the resumption of deposits which it is in duty bound to make under the arbitration contract in the service of the railway bonds, or otherwise, should be immediately resumed, and to invite the Government of Ecuador to fix a date in the near future when such payments will be resumed.

As to other matters of differences between the railway and Ecuador the Government of the United States withholds comment, pending the outcome of the negotiations between the Ecuadorean Government commission and the railway.

You will bring the foregoing textually to the notice of the Ecuadorean Government in a formal communication, and emphasize orally the gravity with which the Government of the United States views the situation into which Ecuador has allowed the disregard of its solemn obligations to bring the relations of the two Governments. You may add that this Government cannot permit the destruction and annihilation of this important and legitimate American enterprise.