The Secretary of State to United Stales Commissioner Warren11

Sir: I have the honor to transmit herewith, for your information and guidance, in accordance with your mission to Mexico, a dossier [Page 537] of the principal correspondence between the Department of State and the administration now functioning in Mexico, in regard to the questions at issue between the United States and Mexico, together with other related papers and documents.

In order that you may appreciate the spirit and purpose of this Government in its policy toward Mexico, I may refer to the following statement which I made in an address upon this subject at Boston in October, 1922:

“Our feeling towards the Mexican people is one of entire friendliness and we deeply regret the necessity for the absence of diplomatic relations. We have had no desire to interfere in the internal concerns of Mexico. It is not for us to suggest what laws she shall have relating to the future, for Mexico, like ourselves, must be the judge of her domestic policy. We do, however, maintain one clear principle which lies at the foundation of international intercourse. When a nation has invited intercourse with other nations, has established laws under which investments have been lawfully made, contracts entered into and property rights acquired by citizens of other jurisdictions, it is an essential condition of international intercourse that international obligations shall be met and that there shall be no resort to confiscation and repudiation. We are not insistent on the form of any particular assurance to American citizens against confiscation, but we desire in the light of the experience of recent years the substance of such protection, and this is manifestly in the interest of permanent friendly relations. I have no desire to review the history of the past. The problem is a very simple one and its solution is wholly within Mexico’s keeping.”

It will be observed that the fundamental question at issue has been the safeguarding of American property rights in Mexico, especially as against a confiscatory application of the provisions of the Mexican Constitution of 1917.12 In view of the fact that the recognition of the government of General Carranza had been based upon his explicit assurances that there would be no confiscation of American properties, and of the subsequent confiscatory measures actually taken, it was deemed important, in order to avoid a serious crisis, that there should be a clear understanding of the policy of General Obregon’s regime before it was recognized and diplomatic relations were resumed. In answer to the objection that General Obregon could not enter into an agreement prior to recognition, I proposed, soon after the present Administration took office, that a treaty should be made between the United States and Mexico, containing appropriate provisions protecting valid titles of American citizens, which had been obtained prior to the Constitution of 1917. It was explained that the signing of this treaty between the President of the United States and the [Page 538] President of Mexico would in itself constitute recognition and thus the act of recognition would be coincident with the formal assurance of protection against confiscation. General Obregon, while profuse in personal statements, in the public press, and in his personal letters that the provisions of the Constitution of 1917 would not be applied retroactively, insisted that he was without authority to sign such a treaty. He urged that such a treaty would be in violation of the Constitution of Mexico, although it was intended to do no more than to give in a binding and suitable manner the assurances which General Obregon had been willing to give in personal interviews. It may be added that it has thus far been impossible to obtain from the Executive branch of the regime in Mexico any appropriate official action to provide the desired guarantees.

It is understood that there have long been pending amparo proceedings, or suits for injunction, before the Mexican Supreme Court, presenting practically all the questions that have been under discussion with respect to the retroactive application of Article 27 of the Constitution of 1917. In order to establish a judicial precedent in Mexico there must be five decisions of the Supreme Court upon the same point. Only one point of special importance has been covered by the decisions heretofore rendered and that is, in substance, that where a contract or lease has been made by the owner of land for the exploitation of subsoil mineral deposits this is to be regarded as an act establishing an acquired right in such subsoil deposits, and where there was such a legitimately acquired right prior to the Constitution of 1917 it is to be deemed to be inviolate. There have been five decisions upon this point.

In reaching its conclusion in the first of these cases (that of the Texas Company, August 30, 192113), the Supreme Court of Mexico held that Article 14 of the Mexican Constitution providing that “No retroactive law shall be enacted to the prejudice of any person whatsoever,” did not apply to the Constitution itself, and hence did not prevent a retroactive application of constitutional provisions if that was their clear intent. It was further held that in order that there may be “a retroactive feature in law” two circumstances are necessary: “that it apply to the past and alter the past; and that it injure rights acquired under the protection of former laws.” It was further held that the fourth paragraph of Article 27 of the Constitution of 1917 was not to be considered retroactive in letter or spirit since it did not injure “acquired rights,” that is, “rights acquired legitimately before the first of May, 1917, the date on which the present Constitution became effective in its entirety.” It is manifest that the interpretation [Page 539] of these judicial expressions depends upon the significance of the term “acquired rights.”

In the first of the five decisions in the case of the Texas Company the Supreme Court, after discussing the general proposition, said:

“In our Republic there have been in effect in successive periods the mining code of 1884, the Mining Law of June 4, 1892 and that of November 25, 1909, which latter in its second article granted the owner of the lands the right to explore and exploit oil freely in order to appropriate what he might find without the necessity of a permit from any authority, and also enable him to transmit the said rights as he would any other property either for a consideration or gratuitously. By virtue of this, Severiana Hernandez, widow of Martinez, and her sons, acting under that law and as owners of lot 36 of Zacamixtle, could explore and exploit oil in that land and also transfer their rights in the exercise of this faculty as they did in favor of Manuel S. Ravise, by means of the contract contained in the deed of April 28, 1917, in which it appears that the grantors fixed and received a price higher than would have been paid them for the surface of the land because it was not sought to cultivate such surface or to build upon it, but to look for oil and to exploit same if found. So that the rights granted to the owners of the land by Article 2 of the said law of November 25, 1909, were converted into positive acts, and we therefore are treating of vested rights acquired by Ravisé as to the exploration of petroleum in the said Zacamixtle lot from the date of that contract, that is, before the present Constitution became totally effective. The purchaser, Manuel S. Ravisé, could transfer those rights, as he actually did, in favor of The Texas Company, S. A., by a deed dated September 21 of the same year, and it is obvious therefore that this company could in its turn enjoy the said rights as thus legally obtained.”

The actual decisions go no further than to hold that there has been an “acquired right” in the circumstances above stated, other suits with broader claims having not yet been determined although it is believed that the Supreme Court of Mexico during the past two years could have determined them at any time. The conclusion is that no adequate protection has thus far been afforded by action of the judicial branch of the Government.

It has constantly been insisted by the Mexican authorities that the Mexican Congress had sole authority to regulate the application of the Constitution of 1917 and thus to give assurance of the nonretroactive character of the provisions in question. This was asserted as one of the bases for the contention that General Obregon, as President, did not have authority to give the assurances desired. Thus Mr. Pani, on behalf of the Mexican Foreign Office, in his note of February 9, 1922,14 said: [Page 540]

“But even though the Federal [Legislative] Power has already eloquently manifested the same opinion, until the Organic Law of Constitutional Article 27 shall be promulgated, the signature of the President of the Republic placed on an international treaty which should fix interpretations of said Article would be equivalent to an undue invasion of the sphere of the Legislative Power, since provided that a constitutional text establishes a principle its particular effects may only be determined by the Organic Law which regulates it and this is still to be enacted by the Congress of the Union.”

This was substantially repeated in Mr. Pani’s note of May 4, 1922,15 in which he said that the proposed treaty contained “interpretations of some of the precepts” of the Constitution of 1917 “not regulated yet by the Honorable Congress of the Union, which is the sole authority to which the Mexican people has delegated the power so to do.”

Without entering into a discussion of the questions of Mexican jurisdiction which this statement suggests, it is sufficient to say that the Organic Law thus described has not yet been enacted and consequently no appropriate assurance has yet been given by the Legislative branch of the Mexican regime.

It should also be noted that the confiscatory measures under Article 27 of the Constitution of 1917 relate not simply to subsoil or mineral deposits, but to agrarian lands, the expropriation of which is authorized under numbered Paragraph VII of Article 27 of the Constitution on the basis of the tax valuation of the property plus ten per cent, with a valuation of the improvements subsequently made, which may be paid by State bonds. The taking out such a valuation and the payment in State bonds which are practically worthless, obviously amounts to confiscation. A considerable number of properties owned by American citizens have been taken under these provisions without the payment of compensation.

This Government has always appreciated the difficulties of the Mexican agrarian problem and has stated that it was deeply sensible of the important public policy that was to be prosecuted in securing the equitable distribution of lands and adequate opportunities for those who have been impoverished. But no reason is known, or right, for the prosecution of this policy in a manner which deprives American citizens of valid titles without being justly compensated. These expropriations of ranches and grazing lands have actually gone to the extreme of injustice in despoiling American owners. The Department of State did not fail to protest against the character of Mexican agrarian legislation when it was in the process of enactment in the Federal Congress of Mexico and in various State legislatures, and give warning that in the event justice were denied [Page 541] American citizens, this Government would be forced to take the matter up for adjustment and reparation.

Aside from the questions raised by these confiscatory proceedings there are also outstanding claims against Mexico which are the subject of two proposed Claims Conventions.16 The first of these Conventions relates to claims growing out of the injuries suffered by American citizens through revolutionary acts during the period existing from November 20, 1910, to May 31, 1920. The other Convention relates to the claims made by the citizens of each country against the other arising since the signing of the Claims Convention between the United States and Mexico of July 4, 1868, excluding the claims growing out of the recent revolutionary disturbances which are the subject of the first Convention.

It is not believed that any serious difference exists between the United States and the Mexican authorities with respect to these two Claims Conventions and it may be pointed out that, although there was opposition to the proposed treaty of amity and commerce with respect to the assurances of protection against confiscation, the Mexican authorities have indicated that they were disposed to sign the Claims Conventions with the understanding that such signing would carry with it full recognition.

There are other questions which have been taken up in negotiations between the Mexican authorities and private persons, including American nationals, looking to an adjustment of the claims of the bondholders or bankers representing the external debt of Mexico. This Government has not been a party to these negotiations, but it was gratified to learn that an agreement had been arranged in New York between the Secretary of the Treasury of Mexico and the International Committee of Bankers which provided guarantees satisfactory to the bondholders and also provided for the return of the National Railways of Mexico to the owning company of which also Americans are the principal creditors.

Negotiations have also been in progress, to which this Government has not been a party, between American citizens and representatives of the Mexican authorities for the purpose of finding an agreed basis upon which the owners would be protected in their holdings of petroleum properties and may be able to proceed to new developments.

On August 3, 1922,17 under my instructions, a note was addressed by our representative at Mexico City, Mr. George T. Summerlin, to Mr. Pani reviewing the existing situation, the following points being made in conclusion: [Page 542]

That the agreement for the adjustment of claims of the bondholders representing the external debt of Mexico was only tentative and that it still awaited the approval of General Obregon and ratification by the Mexican Congress.
That no agreement with those interested in oil properties had yet been concluded.
That no action had yet been taken by the Mexican Congress, to regulate the interpretation of the Constitution of 1917, so as to assure protection of the valid titles of American citizens.
That the decisions of the Mexican Supreme Court were inadequate to protect American rights.
That properties of American citizens had been seized and threatened with seizure under the guise of expropriation without provision for just compensation.

This note was not answered by Mr. Pani until eight months later, when, under date of March 31, 1923,18 it was stated that the reply was delayed in order to await “the weighty evidence which would be presented by other measures that would soon have to be credited to his (General Obregon’s) political policy.” Examining the five points in the note of this Government, Mr. Pani said, in substance:

(1) That the agreement with the holders of the foreign debt had been ratified by General Obregon and the Mexican Congress and was now in full force and effect.

While this agreement may be in force, it is understood that the resumption of payments on the public debt and the return of the railways to their owners have not yet been effected.

(2) That while the negotiations with the American citizens interested in oil properties have not resulted in an agreement, still such an agreement would be “an unnecessary protection additional to that which the future Organic Law of Article 27 of the Constitution will afford.”

(3) That the question of the protection of valid titles of American citizens “also will be solved by the future Organic Law of the Constitutional Article 27.”

(4) That while the decisions of the Supreme Court of Mexico were naturally limited to the concrete cases which gave rise to them, still the Court had defined in an unmistakable manner the “nonretroactive character of Article 27 of the Constitution in that part relative to petroleum.” It is said that “this obstacle therefore is removed.”

In order to support this contention the language of the opinion of the Supreme Court is reviewed.

(5) That by the expropriation of agrarian lands, American interests have been affected only to a minor extent as compared with those of other nationals, especially Spanish nationals, and excuse is sought to be found in the difficulties created by past abuses. The efforts made to improve the administration of the agrarian laws are reviewed.

[Page 543]

The substance of this communication, aside from the reference to the carrying out of the agreement as to the foreign debt and to the decisions of the Supreme Court of Mexico, is that no guaranty of protection has yet been given, and this Government is referred for such assurances to the “future Organic Law” and to future improvement in the administration of agrarian laws.

It thus appears that the questions which you are to discuss with the Mexican Commissioners relate:

  • First. To the obtaining of satisfactory assurances against confiscation of the subsoil interests in lands owned by American citizens prior to May 1st, 1917.
  • Second. To the restoration or proper reparation for the taking of lands owned by American citizens prior to May 1st, 1917.
  • Third. To the making of appropriate claims conventions.

It will be your task thoroughly to explore existing conditions in order to ascertain and report what practicable adjustment may be had, consistent with the principles which this Government has maintained in the interest of permanent friendly relations with Mexico. It is not my purpose to give rigid instructions, but rather to indicate the range of your inquiry, and certain points which should be considered, reserving for specific instructions the particular questions which may arise in the course of your negotiations.

I. As to subsoil interests.

It is not likely that General Obregon will agree to the proposed treaty of amity and commerce, and, on the other hand, we have made it clear that we are intent on the substance and not the form of the desired assurance. The precise point in question should be observed. It is understood that the American owners of lands, which may contain petroleum deposits, have not been dispossessed; the question is one of protection against the execution of confiscatory measures depriving them of their subsoil interests. These measures might take the form of a refusal to allow drilling without permits which would be granted in the discretion of the Mexican authorities and upon terms inconsistent with the recognition of rights of ownership. Or, the Mexican authorities, if the provisions of the Constitution were applied retroactively and it were held that the subsoil interests were thus the property of the nation, might grant such permits or licenses to persons other than the owners.

The inadequate protection afforded by the decisions of the Mexican Supreme Court has already been noted, but the broad assertion of Mr. Pani, in his last note, March 31, 1923, that the Court “had defined in an unmistakable manner the non-retroactive character of [Page 544] Article 27 in the part relating to petroleum” affords a starting point for the discussion of the precise attitude of the Mexican authorities. If there is agreement upon what rights in subsoil interests were vested prior to May 1st, 1917 it would seem, in view of Mr. Pani’s broad assertion, that it would not be difficult to reach an understanding upon this point.

There would seem to be no ground of difference, so far as subsoil interests had been made the subject, prior to May 1st, 1917, of contracts for the purpose of petroleum development. The question arises where American owners had a title to the land (through grant or lease) prior to May 1st, 1917, but had not yet undertaken exploration for petroleum or had not made contracts for that purpose. If it were asserted that in that case they had not acquired vested rights under Mexican law, this assertion would disclose the insincerity of the professions of the Mexican authorities, for there has been no mistake as to the point at issue and there would be no occasion for Mr. Pani to say that the Supreme Court “naturally limited its decisions to the concrete cases which gave rise to them” if the principle of nonretroactivity, which he invokes, had no application outside the circumstances of these concrete cases. Moreover, there is no foundation for a denial of a vested right on the part of the owner of the land in subsoil interests where these interests had not been reserved or separately dealt with. If it be said that under Spanish law mineral deposits were the property of the State, the answer is that the State by virtue of its sovereignty was competent to dispose of such interests and could make such disposition not only by particular grants but “by establishing its laws under which complete title could be obtained. There is believed to be no room for question as to rights in petroleum deposits under Mexican law. The Mining Law of Mexico, promulgated on November 22, 1884, contained the following:

Article 10. The following substances are the exclusive property of the owner of the land who may therefore develop and enjoy them without the formality of entry (denuncio) or special adjudication: … IV. Salts found on the surface, fresh and salt water, whether surface or subterranean; petroleum and gaseous springs …”

On June 4, 1892, a further mining code was enacted which contained the following provisions:

  • Article 4. The owner of the land may freely work without a special concession in any case whatsoever the following mineral substances: mineral fuels, oils and mineral waters.
  • Article 5. All mining property legally acquired, and such as may be hereafter acquired, in pursuance of this law, shall be irrevocable and perpetual.”

[Page 545]

A further mining code was enacted on November 25, 1909, containing the following clause:

Article 2. The following substances are the exclusive property of the owner of the soil: I. ore bodies or deposits of mineral fuels, of whatever form or variety; II. ore bodies or deposits of bituminous substances.”

It is believed that these are the only basic laws relative to the subject which were promulgated in the Republic of Mexico between the date of its independence until the adoption of the Constitution of 1917.

It will also be noted that in the decision of the Supreme Court in the Texas Case it was said:

“In our Republic there have been in effect, in successive periods, the mining code of 1884, the mining law of June 4, 1892 and that of November 25, 1909, which latter in its two articles granted owners of the lands the right to explore and exploit and freely to deal and appropriate what he might find without the necessity of a permit from any authority, and also enable him to transmit the said rights, as he would any other property, for a consideration or a gratuity.”19

While the decisions of the Mexican Supreme Court, treated technically as a precedent, only passed upon the single point of a contract or lease granted by the owner of lands for the exploration of petroleum, still it is manifest that the owner of a full title to the land had, prior to May 1st, 1917, a vested right under the laws of Mexico in petroleum deposits and any attempt to deprive him of his right to utilize these deposits, because he had not made a contract with respect to them prior to May 1st, 1917, would be clearly confiscatory. If the Mexican authorities insist that in such cases the subsoil interests, formerly belonging to the owner of the land, have, by the Constitution of 1917, been appropriated by the nation, then there would be nothing in their protestations of intention to protect valid property rights. But if, on the other hand, the Mexican authorities are in accord with the view of this Government as above stated, then it would seem to be in order to determine what action on the part of the Mexican authorities would be appropriate.

Where the American owners have not been dispossessed of their lands, they should have assurance (1) against the granting of subsoil interests in their lands to others or license to others for petroleum exploration in their lands, and (2) against a demand that they should obtain permits for drilling in their own lands where these permits are not needed for any administrative purpose consistent with ownership, [Page 546] but are required on the assumption that they can be withheld in the discretion of the authorities and thus that the opportunities of exploration can be denied by virtue of the alleged rights of the nation under the Constitution of 1917.

Instead of mere general statements about non-retroactivity it would seem that, expressing gratification for the principles announced, you should be able to obtain a definite application of these principles by proper assurances that no such licenses would be granted or such permits required.

There may also arise questions with regard to taxation which could be so extreme as to constitute confiscation, and while this Government is not a party to the negotiations which have taken place between the Mexican authorities and the owners of oil properties, it is important to ascertain to what point these negotiations have proceeded and the nature of difficulties which stand in the way of an agreement. This is mentioned because it is desired that a basis should be provided for a friendly intercourse which shall be as free as possible from serious controversies.

It is also important to ascertain what terms it is proposed to incorporate in the “future Organic Law” for the application of the Constitution of 1917 as to petroleum, and for this purpose to scrutinize the terms of the pending measure. This inquiry should not be made so as to suggest in any manner a desire to interfere with the domestic legislation of Mexico, but simply to ascertain its bearing upon the question under discussion, and that is with respect to the assurance of protection to valid titles held by American citizens prior to May 1st, 1917. The inquiry would thus have two aspects: (1) with respect to the affirmative protection contemplated by such an Organic Law, and (2) with respect to the absence of requirements in such a law which would operate to deny such protection.

If the Mexican authorities desire to give assurances against confiscatory measures, there is ample opportunity for them to do so without any procedure which could be regarded as derogatory to the dignity or sovereignty of Mexico.

II. As to agrarian lands.

There have been a score or more of cases in which property owned by American citizens, consisting of ranches, grazing lands, etc., have been expropriated without compensation. Mr. Pani’s reference to this, in his note, is an apology without appropriate assurance of remedial action. He refers to the difficulties which confronted General Obregon in connection with the agrarian question, and says “that it was not possible on many occasions for official action to be confined within the limits of strict legality,” when expropriation was made [Page 547] for a distribution of land as commons, because of the violent consequences which might have resulted from delay. It is important to note that Mr. Pani says “That the Federal Executive, who honestly confesses the foregoing and sincerely regrets it, feels on the other hand the satisfaction of having reestablished peace in all the national territory, of having solved the principal financial difficulties, renewing service on the public debt, and of now being able to proceed to the legal indemnification for the expropriations effected.” But this statement leaves much to be desired because in the same sentence Mr. Pani goes on to suggest an inadequate basis for the indemnification. Without reviewing the general statements made by Mr. Pani, it is sufficient to say that the question soon comes to the one of restoration or compensation upon a just basis.

It is important that you should indicate the full sympathy, as already expressed, of this Government to the efforts at a readjustment of large holding, so as to meet the natural demands of the people of Mexico. But this general policy furnishes no answer to the claim of the American citizen who has invested his money in ranch or grazing property in Mexico and has had it taken away without being paid for. This Government has in all cases urged that claims of American citizens should not be aggravated by their refusal to take advantage of any practical opportunities which might be open to them to obtain adjustments. In some cases efforts in this direction have been successful. You may well consider any practical steps that may be suggested which will give a reasonable solution of the problem. But when such endeavors prove fruitless the justice of the claim for restoration or compensation cannot be denied. It will be important for you to ascertain what the Mexican authorities propose in this connection.

It should be added, however, that the second proposed Claims Convention providing for the claims of the nationals of each country, is believed to be broad enough to cover the claims for the taking of properties taken in the execution of the agrarian laws where compensation has not been made. In this view Article 5 of the second Claims Convention becomes important because it provides that no claim shall be disallowed by the Commission by the application of the general principle of international law that legal remedies must be exhausted as a condition precedent to the validity of the claim. It is also important that there should be no doubt in the minds of the Mexican authorities that claims will be pressed where compensation has not been made and that payment in worthless State bonds or upon a basis of valuation utterly inadequate would not be regarded as discharging such claim.

[Page 548]

III. As to the Claims Conventions.

There should be no difficulty in obtaining the signature of these Conventions in case it is decided to recognize the Obregon regime. The drafts of these Conventions, which have been placed in your hands, are those which were received from Mr. Pani on November 19, 192120 as they have been amended by this Government, and these amendments, it is believed, will not raise any serious controversy. It should also be remembered that some time ago the Mexican authorities indicated their willingness to sign the first Claims Convention concurrently with recognition and to sign the second Claims Convention immediately thereafter. There is no objection to this course.

It will be understood, however, that these Conventions cannot be signed unless this Government recognizes the Government with which, they are made. But this Government has always been ready to give this recognition if it obtained in a substantial manner the assurance that the Mexican Government recognized and would discharge its international obligations by giving adequate protection to valid titles of American citizens. While this question of recognition has been uppermost in public discussion, it is essentially a subordinate question, as the object of this Government is to oppose repudiation and confiscation and to refuse recognition to regimes which are bent upon such a policy. This Government does not regard stability as the sole question in determining whether a Government should be recognized. It is a question both of ability and disposition to discharge international obligations.

I hope you may find that the present regime in Mexico has a correct conception of what constitutes the valid rights of Americans in that country and is animated by a sincere desire to recognize and protect these rights, and such a course of action, commending the Mexican authorities to the esteem and confidence of all peoples cannot fail greatly to enhance the prosperity of the people of Mexico.

In conclusion, I may say that the assurance that is desired is one that will voice not simply a personal sentiment or intention, but will show that the good faith of Mexico, through her constituted authorities, is pledged to a course of conduct which will relieve this Government of the uncertainties and apprehensions of recent years, and will enable the people of the United States to give full play to their earnest desire to cultivate the most friendly relations with the people of their sister Republic.

I have [etc.]

Charles E. Hughes
  1. The same to United States Commissioner John Barton Payne (file no. 711.1211/86a).
  2. Foreign Relations, 1917, p. 951.
  3. Foreign Relations, 1921, vol. ii, p. 464.
  4. ibid., 1922, vol. ii, p. 641.
  5. Foreign Relations, 1922, vol. ii, p. 653.
  6. The texts of the conventions, as signed, are printed post, pp. 555 and 560.
  7. See instruction of July 28, 1922, to the Chargé in Mexico, Foreign Relations, 1922, vol. ii, p. 674.
  8. Ante, p. 523.
  9. For a more accurate translation of this sentence, See p. 539.
  10. Foreign Relations, 1921, vol. ii, pp. 508514. The texts of the conventions, as signed, are printed post, pp. 555 and 560.