File No. 812.512/2106
As the Department will have noted from the telegrams passing between
the representatives of the oil companies in the United States and
their agents and attorneys here, amparo
proceedings have been instituted in the courts of Mexico against the
recent petroleum decrees. Mr. Rhoades informs me that the
proceedings are progressing satisfactorily, and that he has every
hope of securing what would amount to a preliminary injunction in
our procedure. The issuance at the eleventh hour of the decree of
August 12 has relieved the situation and removed the danger of
arbitrary proceedings against the companies by the Mexican
Government. I gathered from my last conversation with President
Carranza and the decree which was issued the following day, as well
as from the language employed in the reply forwarded herewith, that
the Mexican Government welcomes the recourse which the companies
have had to the courts.
A new Congress in which the Government can rely upon a majority
support in both branches, will convene on the first of September,
and I should not be surprised if an entirely new petroleum law were
proposed by the Government almost immediately, although it may be
decided to await the decision of the Supreme Court as to the
constitutionality and legality of the decrees issued by the
Executive. Should the decision of the courts uphold the contention
of the Mexican and foreign companies and citizens as against the
Government, the troublesome question of enforcing Article 27
retroactively will be removed, and the way will be open for the
Mexican Government to proceed along more moderate and, as we think,
more just lines, with the so-called nationalization of
petroleum-producing lands. At any rate, an acute crisis in this
petroleum matter has been avoided and present indications are that
this difficulty, which seriously threatened the good relations
between Mexico and the United States, will be adjusted by peaceful
and legal methods.
[Enclosure 1—Translation]
The Mexican Undersecretary of State for
Foreign Affairs (
Pérez) to the American Ambassador (
Fletcher)
No. 2772
Mexico,
August 17,
1918.
By direction and raider instructions from the President of the
Republic, I have the honor to reply to note No. 290 which your
excellency addressed to the Government of the Republic under
date of April 2, this year, with regard to the decree of
February 19 which established taxes on petroleum lands and
petroleum contracts, as well as to that addressed to the said
high official on the 13th of
[Page 768]
August last. In the first note, your
excellency presents through me to the President of the Republic,
a formal and solemn protest of the Government of the United
States against the violation of private property rights
legitimately acquired by American citizens, which it is
considered the application of the decree mentioned will bring
with it.
I must not conceal from your excellency the fact that it has been
a matter of surprise for the Mexican Government to receive a
diplomatic representation with reference to an act proceeding
from the legitimate exercise of its sovereignty, such as the
issuance of a decree, and that the said representation contained
the proposition of affording undue protection to foreign
citizens and interests, and which, if made good, would have the
effect of placing them in a better and more privileged situation
than Mexicans themselves.
Your excellency will understand that neither the one nor the
other can be consented to by a government or a people conscious
of its dignity and high duty of preserving unblemished the
national sovereignty.
Of the principal questions covered by your excellency’s note
referred to, one relates to the tax created by the decree on oil
lands and contracts, and another to the system of real property
contained in Article 27 of the political Constitution of the
Republic.
Now, inasmuch as the right of decreeing taxes is an attribute of
internal sovereignty, and the organization of property in the
country is an attribute of territorial sovereignty, neither of
the two questions can be made the basis of diplomatic
representation, and less still of a formal and solemn protest
such as that which your excellency makes in the name of and
under instructions from your Government, as both of these things
imply a real diplomatic intervention in the internal affairs of
Mexico. The Mexican Government has not recognized and will not
recognize that any country has the right to interfere in any
form in its internal affairs nor even of protesting against acts
exclusively within the exercise of its sovereignty.
The tax has been established by a general law which affects
Mexicans and foreigners, and is applicable in any section of the
country where a petroleum deposit may exist or may be
discovered. Nevertheless, your excellency announces that the
Government of the United States might be obliged to protect the
interests of its citizens from the application of said law; and
while the character of this protection is not stated, it
undoubtedly tends to place foreigners in Mexico in a privileged
position which, your excellency will understand, is contrary to
every rule of right and wounds the dignity of the Mexican
people.
The protection of national and foreign interests within the
country is a duty and at the same time a faculty of the Mexican
Government exclusively. By announcing protection by your
excellency’s Government, if necessity arises, the idea is
clearly revealed of obtaining undue preference in favor of
American interests and citizens, this fact being made more
evident still when it is considered that Mexican companies and
proprietors have made no move to escape the tax, and that their
recourse, in case they believe it to be excessive, is to appeal
to the courts of the Republic demanding protection and amparo, and this is the only means which
foreigners also should adopt.
The Mexican Government can not consent to any measure whatsoever
which the American Government may purpose to put into practice
to place its citizens in a more favored situation than that of
Mexicans in their own country; and in so doing is sure of the
unanimous support of public opinion and of the nation in
enforcing respect for its sovereignty.
The criterion of the Mexican Government in this matter is not an
innovation in international law, but the simple application of
the principle of the equality of nations, frequently forgotten
by strong governments in their relations with weak countries. It
is, furthermore, a principle which the President desires to see
implanted and respected in the diplomatic, mercantile, and all
other relations which may be established between countries, and
which he himself has proclaimed on repeated occasions, in the
following terms:
No individual should aspire to a better situation than
that of the citizens of the country to which he goes;
legislation should be general and abstain from
distinctions on account of nationality. Neither the
power of nations nor their diplomacy should serve for
the protection of particular interests or to exert
pressure upon the governments of weak peoples with the
end of obtaining modifications of laws which are
disagreeable to the subjects of a powerful country.
[Page 769]
In fiscal matters, this amounts to a declaration of perfect
equality of nationals and foreigners in the collection of taxes
decreed by the public power of a country.
The protection which your excellency states the Government of the
United States may find itself in the necessity of extending to
its nationals, and which is ratified in the note of August 13,
constitutes a threat which is in contrast with the pacific
ideals of His Excellency President Wilson and does not concord
with the reiterated manifestations of friendship and respect
which he has proclaimed in regard to Mexico.
Whatever may be the intention of the American Government in this
respect, the Mexican Government believes it necessary to state
that it will not accept the interference of any foreign power in
the arrangement of its internal affairs and that it will not
admit any proceeding which under the pretext of protection to
foreign interests wounds the national decorum or impairs the
exercise of its sovereignty.
The issuance of the decree of February 19 is an act which of
itself cannot form the basis of diplomatic representations. If
your excellency’s Government does so it is because it believes
the said decree deprives American citizens of acquired rights
and that the seizure or spoliation of these rights by the mere
will of the sovereign without due process of law, has always
been held as a denial of justice and sufficient cause for
diplomatic representations.
Your excellency states that this seizure or spoliation arises
from the separation which our law makes between the surface and
subsoil rights, which amounts to a denial of justice.
A denial of justice consists in that a judge refuses to impart
justice when it is asked of him, or that any authority does not,
either from negligence or a voluntary refusal, pronounce its
decision. In general language a denial of justice is every
refusal to accord to a person that which is his due.
The Mexican Government has no knowledge up to the present that
either American citizens or any one else who believe themselves
prejudiced by the decree, have resorted to ordinary legal
methods or to the appropriate author ties for relief against the
petroleum tax, since the discussions to which your excellency’s
second note refers were of a private character.
The petroleum tax embraces all the requisites which science
assigns to every impost, but if it be considered that its
application is unjust or the amount excessive, our laws assure
the means of defense and our tribunals are prompt to decide as
to the application of said laws. There is an individual guaranty
established in Article 22 of our political Constitution which
prohibits the confiscation of property, and this is equally
afforded by Article 17 of the same fundamental code, which
provides that the courts shall be open for the administration of
justice at such times and under such conditions as the law may
determine. Nevertheless, the American interests which your
excellency represents and defends have not resorted to the
established legal remedies in order that the proper authority
should decide with regard to the injuries and confiscations
which they believe themselves to have suffered; and yet your
excellency bases the diplomatic representation made in the name
of your Government, on a “denial of justice,” which really has
not taken place.
The seizure or spoliation of property by the mere will of the
sovereign is exactly one of the things which our Constitution
prohibits and condemns in Article 14. If such cases of
spoliation or confiscation should be proven and our tribunals
should deny judgment, or, having pronounced judgment favorable
to the complainant, the Mexican Government should refuse to
respect the judgment, then there would be a denial of justice
and reason for diplomatic representations. In the case which
gave rise to your excellency’s note, the courts have not yet
intervened, and the expression “denial of justice,” which is
used as a basis for the representation, must have been taken in
a sense distinct from that commonly assigned to it in
international law.
The American doctrine in this respect is conclusive. It defines
and considers the tax as a necessary attribute of sovereignty
and teaches that as long as the impost is uniform in its
execution and can be considered as an impost and mot as a
confiscation or arbitrary imposition, no representation may be
made to a foreign government in aid of the foreigners who may be
affected, inasmuch as the only safeguard against the abuse of
the power of levying taxes is found in the structure of the
Government itself, and reclamations or complaints on account of
an excessive tax are properly questions within the competency of
the local tribunals.
[Page 770]
As a matter of fact, the tribunals alone are capable of passing
judgment upon the equality of distribution of the tax and the
other requisites, and it is not just that the very foreigners
who are affected should judge and decide such questions.
Otherwise, it would be sufficient, in order to escape from a
legitimately decreed impost, to allege the pretext that it is
confiscatory. Furthermore, it is customary in all countries that
diplomatic action should be the last to be exercised and that
only after ordinary means have been exhausted.
Your excellency affirms that investments of American citizens
have been effected under the guaranty of the good faith of the
Mexican Government, which virtually has invited them to make
such investments; and that it cannot believe that now this
Government will disregard its obligations, now that the country
finds itself at peace and at a stage of progress.
Your excellency has interpreted faithfully in this part of your
note the disposition of the Mexican Government with respect to
foreign investments, since its conduct and intentions have been
and will be in the future, the conciliation of foreign interests
with the progress of the Republic and its legitimate rights, by
means of a perfect equality before the law of Mexicans and
foreigners.
Assuredly American interests are worthy of every protection and
the Mexican Government recognizes that they may contribute to
the industrial development of the Republic, particularly in the
petroleum industry, and in precisely this spirit has the decree
of February 19 been issued (aside from the fundamental question
which consists in putting into practice the dominion of the
nation over the subsoil) because, respecting the existing
situation, it impedes and prevents speculations in petroleum
lands prejudicial to the operators and to the interests of the
country.
With reference to the request which, on instructions from your
Government, your excellency makes in the second note, to the
effect that the petroleum decrees referred to be not made
effective on August 15, the matter need not be specially
considered, inasmuch as the time for making and the form of
manifestations provided for by the said decrees had been
modified previously to its presentation.
The Mexican Government desires to live in peace and friendship
with all nations and in good harmony with your excellency’s
Government. In order to accomplish this, it will endeavor to
respect the dignity and the interests of foreigners and has no
idea of passing legislation designed to molest a friendly
country or its citizens. These may, with all confidence,
continue to rely upon the laws and institutions of the
Republic.
The Mexican Government hopes it has dissipated with these
explanations all ground for misunderstanding between two
friendly peoples and all apprehension or fear on account of
American interests invested in Mexico; and relying upon the
profound knowledge which your excellency personally has of
existing conditions, is certain your excellency will make plain
to the Department of State the true object of the fiscal
dispositions which brought forth your note, and the Mexican
Government’s reason for maintaining the perfect equality of
nationals and foreigners before the law.
I renew [etc.]
By reason of illness of the Secretary.
The Undersecretary:
E. Garza Pérez
