The Secretary of State to the Minister in Ecuador ( Bading )
5. Your 2, January 27, 6 p.m. Please deliver the following note to Minister for Foreign Affairs:
“I have the honor to inform you that I have communicated to my Government your note of (supply date) and am instructed to reply as follows:
The Government of the United States has noted with surprise that Your Excellency’s note gives no indication of any intention on the part of the Ecuadorean Government to meet the situation complained of in my note of (supply date). Your note merely asserts that this is not a case for diplomatic intervention and that no action has been taken in the Ecuadorean courts.
In reply to this contention I am instructed to say that the Government of the United States will always assert the right to interpose [Page 61] diplomatically on behalf of its citizens whenever in its judgment there is occasion for such action. In the present instance it believes that there is such an occasion. My Government considers that the Association of Agriculturists of Ecuador is not to be regarded as a private concern, because of the public functions which it fulfills, and also because the Government of Ecuador has made itself responsible for the operation of the Association and the payment of its debts through the legislative decrees of December 20, 1912, October 13, 1916, and October 15, 1921;6 the action of the Executive in November 1921, directing the apportionment of receipts of taxes among the creditors, and by various assurances given by successive Presidents of Ecuador both to the American Minister and to the Mercantile Bank.
In my note to which your note under acknowledgment is in reply it was pointed out that for the past three years the Association of Agriculturists has made no sincere attempt to reach a settlement in this matter. The equitable proposals on the part of the Mercantile Bank of the Americas, namely, arbitration before the Chamber of Commerce of the United States of America to determine the amount due the bank or, as an alternative, the auditing of the accounts by a well-known and reputable firm of certified public accountants, whose findings would be agreed to by both parties, have not been accepted by the Association of Agriculturists. During all these years no equitable way out has been suggested by the Association whose only proposition, besides refusing to accept accounts previously approved, was the presentation of a counter claim against the Bank based on purely fictitious sales. Furthermore the Association has deliberately discriminated against the Mercantile Bank by paying off all its other debts with the exception of one vale and has recently refused to pay even the twenty-two per cent allocated to the Mercantile Bank for the liquidation of its indebtedness or even to deposit this sum in escrow pending the acceptance of the amount of the accounts. In this connection it is pertinent to point out that the President of Ecuador has failed to take the necessary steps to bring about the satisfactory settlement of the matter, notwithstanding the power conferred upon him by law to control the affairs of the Association.
The only answer made by your Government regarding this most unsatisfactory situation was to maintain that there should be recourse to the courts of justice. My Government considers that it is justified in intervening on behalf of the Mercantile Bank in the present instance regardless of the absence of any litigation in the courts of Ecuador, because the Government of Ecuador through the express agreement of its Executive contained in his letter of February 5, 1922, to the American Minister,7 and through subsequent assurances given by his successor has relieved the American claimant from any obligation to appeal to the courts. It may be added in this connection that no judicial remedy would be adequate which did not embrace a decree subjecting the state or Government to an [Page 62] obligation to provide by law through appropriate taxation for the payment of the debts of the Company. Inasmuch as legislative action appears to be requisite, my Government sees no alternative short of an urgent request through the diplomatic channel that the State of Ecuador by the appropriate domestic process make the necessary provision for the payment of the debts due the Bank which have been lawfully incurred by the Association.
The facts in this case are so clear and indisputable that it was a source of sincere regret to my Government that the Ecuadorean Government should make no serious effort to bring about its proper solution but was rather content to fall back on generalities regarding diplomatic intervention and the pursuing of legal remedy in the courts of justice. I have just made known to you the reasons why my Government, which insists upon the right to interpose diplomatically in behalf of its citizens whenever occasion requires, feels that it is justified in interposing in the present case without awaiting litigation in the courts. My Government furthermore desires me to make known to the Ecuadorean Government that a continuance of the course followed in this case, especially the refusal of the Association of Agriculturists of Ecuador, a quasi-public institution, to make any attempt to meet its just obligations as well as the failure of the Ecuadorean authorities to take the necessary measures to that end, for which they hold authority of law, cannot be regarded as a stable basis on which to maintain international relations between friendly states, and it therefore expects to be informed of the measures contemplated by the Ecuadorean Government to bring the matter to a satisfactory conclusion. My Government is confident that, notwithstanding what has occurred, the Ecuadorean Government animated by the high purposes which the Government of the United States imputes to it will make adequate and prompt response to the request hereinabove set forth.”
Upon handing this note to the Minister for Foreign Affairs you may inform him orally of the seriousness with which this Government regards the situation and especially the attitude heretofore maintained by the Ecuadorean Government. Keep Department fully advised of the results of your representations.
[Paraphrase] The Department has carefully considered this case; if the Ecuadorean Government should continue to maintain its unreasonable attitude and not present a satisfactory reply within a reasonable time, the Department would give serious consideration to the recall of the Minister for consultation in regard to the situation, after which it will decide whether or not it will continue to be represented by a Minister Plenipotentiary and to receive a diplomatic representative of like category from Ecuador in Washington. [End paraphrase.]