811.7353b W 52/50

The Secretary of State to the Ambassador in Great Britain (Harvey)

No. 799

Sir: The Department received the Embassy’s despatch No. 1839 of November 17, 1922,62 with which was transmitted a copy of the Embassy’s note to the Foreign Office, dated October 18, 1922, and of the reply of the Foreign Office, dated November 14, 1922, in regard to the opposition of British cable companies and His Majesty’s Government to the applications of American cable companies for concessions to land and operate cables in the Azores.

The Foreign Office observes in the second paragraph of its note that the license to land at Miami Beach the cable extending to Barbados was granted only after the Western Telegraph Company had surrendered valuable rights in Brazil, in accordance with an arrangement by which All America Cables, Incorporated, was to abandon similar rights in Colombia, Ecuador and Peru, and states that the exclusive rights of All America Cables, Incorporated, in Colombia have not yet been waived with the effectiveness on which the United States insisted that the Western Telegraph Company waive its rights in the Argentine and Uruguay. The Foreign Office observes further that the Miami transaction should have been complete in itself; that the granting of the license for the Miami-Barbados cable can scarcely be regarded as giving American cable companies a claim to further consideration on the part of His Majesty’s Government; and that in the circumstances His Majesty’s Government would be failing in their duty if they encouraged any further diversion of traffic from the lines of the Western Telegraph Company to American cable companies.

In telegram No. 264 of June 29, 6 p.m., 1922,63 the Embassy reported that the Foreign Office had stated that it was fully cognizant [Page 272] of the activities of the British Minister at Lisbon in opposition co the applications of American cable companies for concessions to land and operate cables at the Azores, which British companies alleged would subject them to harmful competition. The Embassy was further informed at that time that the attitude of the British Government regarding the matter would likely be maintained as long as the United States withheld a license for the Miami-Barbados cable. To this the Department replied by its telegram No. 192 of July 1, 1 p.m.,64 that it perceived no relation between the efforts of American cable companies to obtain landing privileges in the Azores and the application of the Western Union Telegraph Company to land and operate a cable at Miami. In telegram No. 270 of July 3, 6 p.m.,65 the Embassy reported further statements by the Foreign Office indicating that the attitude of the United States toward the Miami-Barbados cable was a large factor in determining the attitude of the British Government towards applications of American cable companies for concessions at the Azores. In a telegram No. 210, of July 17, 4 p.m.,65 to the Embassy the Department stated the policy which the United States was observing in withholding a license for the Miami-Barbados cable and explained the delay in granting the license. In the Embassy’s No. 301 of July 18, 6 p.m.,66 it was stated that the British Postal authorities were not inclined to go out of their way to assist in promoting competition with the British cable companies between Europe and South America so long as the United States withheld permission for the operation of the Miami-Barbados cable. The Foreign Office note of August 18,67 a copy of which was transmitted with the Embassy’s No. 1631 of August 19,68 dealt almost entirely with the subject of the delay on the part of the United States Government in granting the license for the Miami-Barbados cable. In view of the prominence which the British authorities gave to the matter of the Miami-Barbados cable in its discussion of the applications of American companies for concessions in the Azores, as indicated by the foregoing digest of correspondence, it is surprising that they should now deem it pertinent to make the observation that the Miami transaction should be regarded as complete in itself and without bearing on the attitude of His Majesty’s Government toward concessions in the Azores. However, the Government of the United States concurs in the view that the two matters are separate and distinct. The Department so expressed itself on several [Page 273] occasions in the course of the discussion between the two Governments. The United States perceives no reason for having burdened the correspondence regarding the applications for concessions in the Azores with this irrelevant matter. It is noted, however, that notwithstanding the intimation in the Foreign Office note that the Miami-Barbados incident was irrelevant to the applications of American companies for concessions at the Azores, a question is raised in the note of November 14 as to the waiver by All America Cables, Incorporated, of exclusive rights which that company possessed in Colombia, the surrender of which was required by the plan of mutual waiver of exclusive privileges by All America Cables, Incorporated, and the Western Telegraph Company, described in the Department’s note No. 746 of December 6, 1922.69

Inasmuch as the Foreign Office now seems to regard the Miami-Barbados incident and the proceedings relating to it to be irrelevant to applications for concessions at the Azores, no useful purpose would seem to be served by raising or discussing any question regarding the position of All America Cables, Incorporated, in Colombia. However, since the Foreign Office has seen fit to raise the question, it is deemed desirable to discuss it to avert misunderstanding of omission to do so.

On January 30, 1922, the Board of Directors of All America Cables, Incorporated, adopted a resolution, which reads as follows:

“Whereas, the All America Cables, Incorporated, enjoys or claims certain preferential or exclusive rights of entry, connection or operation of submarine cables in Colombia, Ecuador, and Peru; Whereas, the Western Telegraph Company, Limited, enjoys or claims certain preferential or exclusive rights of entry, connection, or operation of submarine cables in the Argentine Republic, Brazil and Uruguay; Whereas, it has been arranged that the All America Cables, Incorporated, and the Western Telegraph Company, Limited, shall renounce all such preferential or exclusive rights; Now therefore, be it resolved that the All America Cables, Incorporated, agrees to renounce, waive, relinquish and surrender, in favor of American and British cable companies only, any preferential or exclusive rights of entry, connection, or operation of submarine cables now enjoyed or claimed by it in Colombia, Ecuador and Peru, or elsewhere in South America. However, the All America Cables, Incorporated, does not give up its rights of entry, connection or operation of submarine cables, but gives up only the preferential or exclusive features of such rights in favor of American and British companies. Provided, that this renunciation, waiver, relinquishment, and surrender shall become effective upon the presentation to the Department of State of the United States, in behalf of Western Telegraph Company, Limited, of the corresponding resolution, renouncing, waiving and surrendering any exclusive rights of a similar character which [Page 274] it enjoys or claims in the Argentine Republic, Brazil and Uruguay, or elsewhere in South America, and upon the acquiescence in the renunciation, waiver, relinquishment and surrender of the All America Cables, Incorporated, by the Governments of Colombia, Ecuador and Peru, and the acquiescence in the renunciation, waiver, relinquishment and surrender of the Western Telegraph Company, Limited, of the Governments of the Argentine Republic, Brazil and Uruguay.

And be it further resolved, that a copy of this resolution shall be transmitted to the Department of State at Washington and to the Governments of Colombia, Ecuador and Peru.”

This resolution which was similar to one adopted by the Board of Directors of the Western Telegraph Company was duly presented to the Government of Colombia with a petition that the Government consent to the waiver which All America Cables, Incorporated, undertook to make by its resolution of January 30. It will be noted that by their terms the waivers were to become effective upon acquiescence of all the Governments concerned. On March 3, 1922, a resolution was issued by the Ministry of Government of Colombia, a translation of which reads as follows:

“Ministry of Government—Section 2—National Telephones and Telegraphs—Bogota, March 3, 1922…71 Be It Resolved: The Government of Colombia finds no legal impediment to the renunciation by the All America Cables, Incorporated, which is the subject of the resolution of the 30th of last January, of the company mentioned, and consequently, the latter may make the renunciation referred to in the petition, in favor of American and British cable companies; it being thoroughly understood that, according to the contract in force, Article I of which is copied above, the latter terminates the 25th day of August, 1924. It is hereby ordered that the above be communicated to the interested party and that notice thereof be given to His Excellency the Minister of the United States of America, as is requested, (signed) The Minister, V. M. Salazar.”

The Government of the United States considers that this action on the part of the Colombian Government constituted acquiescence, within the terms of the resolution of the Board of Directors of All America Cables and the Western Telegraph Company, in the action of All America Cables, Incorporated, in waiving its exclusive privileges in Colombia. The Government of the United States has no doubt that the exclusive privileges of All America Cables, Incorporated, in Colombia, Ecuador and Peru, have been as effectively waived in favor of American and British cable companies as the exclusive privileges asserted by the Western Telegraph Company in the Argentine Republic, Brazil and Uruguay have been waived. The action of the United States in granting a license to the Western [Page 275] Union Telegraph Company for its Miami–Barbados cable was predicated on the effective waiver by both companies in favor of American and British cable companies of their exclusive rights in South America and on the acquiescence in those waivers by the Governments concerned. The action of the Colombian Government with respect to the waiver of All America Cables, Incorporated, was taken on March 3, 1922, and although more than five months elapsed before all the Governments concerned had acquiesced, no question was raised by any of the interested parties as to the efficacy of the waiver of All America Cables, Incorporated. The note of the Foreign Office of November 14 is the first intimation which has come to the attention of the United States that the efficacy of the action of All America Cables, Incorporated, to surrender its exclusive privileges in Colombia, Ecuador or Peru was questioned in any quarter. The attitude of the Government of the United States with respect to the waiver by the Western Telegraph Company of its exclusive rights in the Argentine Republic was fully explained in the Department’s No. 746 of December 6, 1922, to the Embassy and need not be discussed here. The United States did not at any time after the presentation of the waiver by a representative of the Western Telegraph Company to the Uruguayan Government raise any question as to the effectiveness of the waiver of the Western Telegraph Company in Uruguay. The United States is surprised that any question should be raised by the Foreign Office as to the sufficiency of the action of All America Cables and considers that the intimation in the note of the Foreign Office that the United States was more insistent that the waivers of the Western Telegraph Company be effective than it was that the waivers of All America Cables be effective is unwarranted.

With respect to the observations of the Foreign Office that the granting of a license for the Miami-Barbados cable gives American companies no claim to consideration on the part of His Majesty’s Government, and that His Majesty’s Government would fail in their duty if it encouraged any further diversion of traffic from the lines of the Western Telegraph Company to American companies, it may be answered that neither the United States nor the American companies have asked favors of His Majesty’s Government in this matter, but have merely urged that it abandon its unwarranted opposition to the legitimate efforts of the American companies to obtain the desired concessions from the Portuguese Government.

Although it is intimated in the second paragraph of the note of the Foreign Office that the action of the Government of the United States in granting a license for the Miami-Barbados cable has no bearing on the attitude of the British Government toward the applications [Page 276] of American cable companies for concessions in the Azores, reference is made in the third paragraph of the note to the seventh paragraph of the note of the Foreign Office of August 18 and the view is taken that since the United States obtained in the adjustment of the Miami-Barbados incident a recognition of the principle to which it adhered, it would be equitable that the United States accept the views of His Majesty’s Government as a condition to the withdrawal of the opposition of His Majesty’s Government to applications of American companies for concessions at the Azores.

The seventh paragraph of the note of August 18 was, it is believed, sufficiently answered by the Department’s No. 746 of December 6, 1922. As stated by the Foreign Office in the second paragraph of its note of November 14, the Miami-Barbados affair was a transaction in itself entirely separate from the efforts of American cable companies to obtain concessions at the Azores, and there would seem to be no occasion for joining the two subjects in the correspondence between the two Governments. When it is considered that the principle which the Foreign Office states was recognized in the Miami-Barbados transaction was applied by the United States to the granting of a license for the landing and operation of cables in the territory of the United States over which the United States has exclusive jurisdiction, and that the subject of this correspondence is the attitude of His Majesty’s Government toward applications for concessions to land and operate cables in Portuguese territory, the irrelevancy of the Miami-Barbados incident in any discussion of the projects at the Azores will be obvious.

In the fourth paragraph of its note the Foreign Office proposes, apparently for the purpose of effectuating the suggestion made in the third paragraph, namely, that since the United States obtained the recognition of the principle for which it was contending in the Miami-Barbados matter, it would be equitable that the United States accept the views of His Majesty’s Government concerning the Azores projects, that the American and British cable companies be permitted to enter into an arrangement without administrative restrictions in accordance with which the cable of the Western Telegraph Company should be recognized as the normal route for unordered traffic from Europe to South America, and messages ordered to be sent over American cables would be forwarded that way. The United States does not concur in the view of the Foreign Office that it would be equitable to place American companies and British companies in unequal positions in the Azores which the proposal of the Foreign Office seems to entail. The United States does not see its way to participate in any arrangement which contemplates that the Portuguese Government is to grant to British companies concessions [Page 277] which contain no restrictions as to traffic which they are to be permitted to carry, and to American companies concessions which contain restrictions as to traffic in which they are to be permitted to participate. The United States would be unwilling to enter into such an arrangement because obviously the United States and His Majesty’s Government are not in a position to make an agreement as to the character of concessions which the Portuguese Government is to grant for the landing and operation of cables in Portuguese territory and for the further reason that the proposed arrangement would place American companies in a less advantageous position, than British companies would occupy.

His Majesty’s Government is aware that the Government of the United States favors the widest possible development of international cable facilities, the employment of the most modern, approved equipment, and the establishment of as low rates as can be maintained consistently with efficient service and just and reasonable return on the capital invested. The United States supports and encourages American cable companies in extending their systems and providing the best possible facilities and service. It is represented in the Foreign Office note that lines of the Western Telegraph Company afford a more direct and shorter route of traffic from Europe to South America than could be provided over American cables, and that the proposal made would not prejudice the interests of American companies. If for these reasons the lines of the Western Telegraph Company are to be regarded as the normal route from Europe to South America, it would seem that the Western Telegraph Company would enjoy a natural advantage over any American company in competing for traffic from Europe to South America. The Western Telegraph Company would, therefore, have no reason to fear competition by American companies unless the latter afforded better service or lower rates than the British companies maintained. The Government of the United States considers that if American cable companies are able to establish a more efficient service or better rates than their British competitors maintain, they, and those who employ cables in the transaction of their business, are entitled to the benefits of their enterprise, and should not be deprived of them by artificial restrictions such as His Majesty’s Government proposes to place on American companies. Acquiescence in a proposal for restrictions on American cable companies, placing them in a position less advantageous than British companies occupy, would be inconsistent with the practice of the United States to encourage the development of communication facilities and the maintenance of the most efficient service possible.

[Page 278]

For reasons which are obvious from the foregoing, the Government of the United States is not prepared to acquiesce in the proposal of the Foreign Office.

It is noted that Lord Curzon has deemed it proper to inform the Portuguese Government that since the Government of the United States is not party to the International Telegraphic Convention and has not granted to other Powers the benefits contemplated by that Convention, the United States is not in a position to claim the benefits of it. American cable companies operating in the Azores are obliged to comply with the regulations carrying out the provisions of the Convention and it would seem are therefore entitled to the benefits of it. His Majesty’s Government is not, therefore, in a position to maintain that the International Telegraph Convention cannot properly be invoked.

American cable companies have for some time been endeavoring to obtain from the Portuguese Government concessions authorizing them to land and operate cables in the Azores. The American companies are not seeking privileges which exclude British companies or which in any way interfere with the exercise by British cable companies of privileges similar to those sought by American companies. British cable companies have brought pressure to bear on the Portuguese authorities in opposition to the applications of American companies for concessions. A concession in favor of one of the American companies was submitted to the Portuguese Parliament where a condition was inserted requiring that all messages transiting the Azores for South America should be sent via the Cape Verde Islands. The other American company seeking a concession at the Azores has not yet been able to obtain favorable administrative action on its application. His Majesty’s Government has been supporting the British cable companies in their opposition to the American companies and has endeavored to justify its action on the ground that the United States Government withheld licenses for the Miami-Barbados cable which connects at Barbados with the cable of the Western Telegraph Company extending to Brazil, and on the further ground that the entry of American cable companies in the Azores would subject British companies to harmful competition. The United States carefully and fully explained to His Majesty’s Government its position regarding the Miami-Barbados cable. Now that the license has been granted, the Foreign Office intimates that that matter had no bearing on the attitude of His Majesty’s Government toward concessions at the Azores. The Foreign Office emphasizes that the cable of the Western Telegraph Company is the normal route for traffic from Europe to South America, and that an arrangement whereby all unordered messages are to be sent over that route would be of no practical disadvantage to American [Page 279] companies. The Foreign Office represents that the interests of American cable companies would not be prejudiced by an arrangement whereby they would be permitted to carry ordered messages and would be excluded from unordered traffic, while British cable companies were permitted to carry ordered and unordered messages. If the interests of American cable companies would not be impaired under such an unequal arrangement, it is difficult to perceive that the interests of the British cable companies would be injured under an arrangement which placed both American and British companies on an equal basis and permitted both American and English companies to participate in ordered and unordered traffic. It would seem on the reasoning of the Foreign Office that British companies would have no occasion to fear harmful competition of American companies. It follows that the reasons which His Majesty’s Government assigned for supporting British cable companies in their opposition to American companies in the Azores, no longer exist. In the circumstances, the Government of the United States is unable to escape the conviction that action by His Majesty’s Government continuing to support the British cable companies in their opposition to American companies in the Azores and in endeavoring to cause the Portuguese Government to withhold from the American companies facilities similar to those granted to British companies entailing discrimination against American companies, would constitute unwarranted and improper interference in affairs of American companies in the Azores.

You will please communicate with the Foreign Office in accordance with the foregoing, expressing the hope that on reconsideration His Majesty’s Government will deem it proper to withdraw its opposition to the applications of American companies for concessions in the Azores, and to inform the Portuguese Government accordingly.

I am [etc.]

Charles E. Hughes