The Secretary of State to Senator Couzens

Dear Senator Couzens: I have received your letter of November 15, 1923, in which you again discuss the question of the Salvador loan and express the opinion that difficulties might arise between this Government and the Governments of other countries, should our public officers be generally engaged in deciding matters of arbitration between foreign Governments and citizens of the United States.

It has been customary in contracts between American companies and Latin American Governments to provide for the arbitration of controversies by disinterested third parties, sometimes specified in the contract and sometimes left to be selected by common accord when the occasion might arise. In some instances the contract has designated an official of the United States Government as arbiter. In the case of the Salvador loan both parties desired to provide in the contract a definite procedure for the settlement of disputes. They therefore expressed a desire that the Secretary of State should consent to use his good offices in arranging for the submission of such disputes to arbitration by the Chief Justice of the United States, if he were able and willing to act, or by some other member of the federal judiciary who might be in a position to undertake the duties of arbiter. Since it was manifestly desirable, in the interest of American citizens who might [Page 828] buy the bonds, that there should be an appropriate manner of deciding controversies between them and the Government of Salvador, I consented that the Secretary of State should use his good offices in the manner requested. I felt that a provision for the settlement by arbitration of controversies which would otherwise be likely to resolve themselves into diplomatic claims would be most helpful in preventing friction between this Government and the Governments of other countries.

The stipulations of the exchange of notes with Salvador of course imply no obligation whatever upon the Chief Justice, or upon any other federal judge, to act as arbiter if he does not consider it convenient and proper to do so. I do not consider it probable that the members of our federal judiciary will be called upon to act very frequently in questions arising under this loan agreement, because it is not, of course, contemplated that any dispute should be submitted to a member of our federal judiciary for arbitration until it has proved incapable of settlement by direct negotiations between the interested parties. If, however, a situation did arise where the services of one of our judges were invoked, I should imagine that he would deem it a public service to assist in bringing about a settlement of a controversy which might otherwise injuriously affect not only the interests of some thousands of American citizens, but also the friendly relations between this Government and one of its neighbors.

In conclusion permit me to express my appreciation of your courtesy in communicating to me your views upon this matter. I hope that the information furnished above will prove useful to you, and I shall be very glad to furnish any further information which you may desire.

I am [etc.]

Charles E. Hughes