The Ambassador in Mexico (Sheffield) to the Secretary of State

No. 1674

Sir: Confirming my telegram No. 33 of yesterday’s date, four P.M.,2 transmitting for the Department’s information the translation of the text of the Mexican note received yesterday in reply to my note of January 8, 1926,3 on the subject of the Mexican land and petroleum alien laws, I have the honor herewith to enclose a copy with translation of the note in question.

I have [etc.]

James R. Sheffield

The Mexican Minister for Foreign Affairs (Sáenz) to the American Ambassador (Sheffield)5

No. 806

Mr. Ambassador: I duly received Your Excellency’s note No. 989, dated January 8, 1926.

Your Excellency states therein that under instructions from your Government you refer to the recent passage by the Mexican Congress of the law regulating land ownership by foreigners, and recall to my attention the statements respecting the bill now enacted which you made to me on November 17 and 27 last,6 in order to say to me that, generally speaking, the observations made in those statements regarding certain retroactive and confiscatory features of the bill are considered to be applicable to the law as passed.7

[Page 606]

With the intention of referring to this matter later, and before proceeding further, I beg to recall to Your Excellency that in my memorandum of December 3 [5?], 1925,8 which is still unanswered by the Embassy, I set forth at length the reasons why the aforesaid legislation cannot be regarded as possessing the character which Your Excellency gives to it.

Your Excellency then discusses principally the petroleum law which was published in the Diario Oficial of December 31 last, after reminding me that on December 16 you conveyed to me,9 in confirmation of the statements made by the Secretary of State to Ambassador Tellez on December 12,10 certain general observations relating to the retroactive and confiscatory character of the bill then pending approval.11 Your Excellency adds that your Government regrets to observe that the last-mentioned law as approved is subject to the same objections which were advanced against the pending bill. Your Excellency then states that from your Government’s point of view you must make the following observations which are not all which might be presented against the law:

First objection: The law does not recognize fully rights acquired prior to the going into effect of the present Constitution,12 when Mexican law provided that the owner of the surface lands owned also the subsoil deposits of petroleum.

With regard to this observation I take the liberty to state to Your Excellency that while it is true that the Mexican law provided what is set forth and that under the new legislation petroleum deposits are the property of the Nation, this does not signify that prior rights lawfully acquired may be disregarded. In fact, a right is not acquired except by its exercise. The owner of the surface could exploit the subsoil as his own property, but so long as he did not do so he could not acquire ownership of anything which might be found therein. A subsequent law may modify a status in law created by a prior law without being retroactive; and not only can it do this, but it must necessarily be so, otherwise legislation would be immobile, which is absurd, because law is no more than one aspect of the life of peoples and has to be continually modified in order to be adapted to the new necessities of peoples. Otherwise slavery would not have been abolished, nor right of primogeniture, nor forced inheritance, nor irredeemable taxes, etc. It is always [Page 607] assumed that a new law is better than the former one, and the only limitation placed on the application of such new law is that it shall not be retroactive, and it is not so when it does not infringe upon any right that has been completed, and in the case under discussion no act was performed. Now, if there are in question cases in which acts have been performed, article 14 of the law provides that it will not apply retroactively.

As a second objection, Your Excellency states that the law not only fails to respect what is indicated above, but that it also fails to respect the decisions of the Supreme Court of Justice,13 according to which the constitutional precepts are not retroactive nor applicable to corporations or individuals who performed any of those acts denominated “positive acts”; an objection which, having a general character, it is sought to base on the following objections having a special character.

(a) That under article 4, foreign corporations, without taking into consideration the time when they acquired their rights and without taking into account any “positive act,” will not be able to obtain the recognition of their rights.

In reply to the foregoing objection, I beg leave to state to Your Excellency that, from a careful reading of the law, it clearly follows that the hypothetical case in question does not come under article 4, but under article 14, according to which foreign corporations which have acquired rights and performed “positive acts,” before the going into effect of the Constitution, will have such rights confirmed.

Article 14, furthermore, should, in this case, be considered along with articles 5 and 6 of the organic law of section 1 of article 27, which provides that rights to real property situated in the prohibited zones, not devoted to agricultural purposes, and lawfully acquired by foreigners prior to the going into effect of the law, may be retained by the present owners until their death.

On my part I beg to call to Your Excellency’s attention that it is not juridical to judge of legislation by a single legal precept, but that it should be examined in its entirety and all the provisions which may be applicable should be taken into consideration in order to determine under which one of them a definite case would come.

(b) That foreign individuals, without regard to the date when they acquired their rights and without taking into account any “positive act” will be deprived of such rights, unless they renounce their nationality with respect to such rights.

[Page 608]

To this objection I beg leave to observe that—leaving aside the last assertion, that is, the one which refers to the so-called renunciation of nationality—the same explanation must be given as was advanced in treating the preceding objection, since the case does not come under article 4, but under article 14, which respects the rights in question.

(c) That the number of “positive acts” recognized shall be much less than those enumerated in the decisions of the Court.

The “positive acts” enumerated are: drilling; leasing; concluding any contract relative to the subsoil; investing capital in land with the object of obtaining petroleum from the subsoil; carrying out the work of exploitation and exploration; concluding subsoil contracts in which the price stated appears to be greater than that paid for the surface, because it was purchased for the purpose of searching for petroleum; and, in general, any other act which indicates a similar intention. It will be seen that this list of “positive acts” is limited to cases where petroleum exploration has been started or where contracts have been concluded to that end—cases which are precisely those set forth in article 14, in order that prior rights legally acquired may be confirmed and, therefore, respected.

Actually, article 14 of the petroleum law provides as follows:

“Article 14. The following rights will be confirmed without cost by means of concessions granted in conformity with this law:

  • “I. Those derived from lands on which petroleum operations were commenced prior to May 1, 1917.
  • “II. Those derived from contracts concluded prior to May 1, 1917, by the owner of the surface (superficiario) or his successors (causa-habientes) for express purposes of petroleum exploitation.
  • “Confirmation of these rights may not be granted for more than fifty years, counting, in the case of section I, from the date when exploitation work was commenced, and in the case of section II, from the date when the contracts were concluded.
  • “III. To owners of pipe lines and refineries who at the present time are operating under a concession or permit issued by the Department of Industry, Commerce and Labor, and for that which relates to the said concessions or permits.”

(d) That even as to foreign individuals who performed “positive acts” and made the renunciation mentioned, confirmation of their rights must be applied for within a year or such rights will be forfeited, according to article 15.

As to this observation, I must state to Your Excellency that this article, far from injuring alien individuals in the case in question, favors them inasmuch as it gives them the right to have a title emanating from the Government; and it is to their advantage, moreover, that this Government have full knowledge of all such titles (adquisiciones) to which the same provisions will not be applied [Page 609] which are to govern subsequent titles (adquisiciones), it being obvious, moreover, that no person can in any way be injured by applying for a confirmation of his rights.

The third objection of a general character made by Your Excellency is that, in contradiction to the statements made by the Mexican Commissioners in the conference held in Mexico City in 192314 as to the policy of the Mexican Government to grant preferential rights to the owners of the subsoil [surface?] or persons entitled to exercise their preferential rights to the oil in the subsoil who have not performed a “positive act,” the law does not recognize such preferential rights.

In this connection, permit me to state to Your Excellency that this supposed contradiction does not exist because the Mexican Commissioners stated that the then Executive15 considered it just to grant the preferential right in question, and they added that this statement was not intended to constitute an obligation for an unlimited time on the part of the Mexican Government. In fact, it suffices to read carefully paragraph numbered IV of the minutes of the meeting of August 2, 1923, which reads literally as follows:16

“IV. The present Executive, in pursuance of the policy that has been followed up to the present time, as above stated, and within the limitations of his constitutional powers, considers it just to grant, and will continue in the future to grant, as in the past, to owners of the surface or persons entitled to exercise their preferential rights to the oil, who have not performed prior to the Constitution of 1917 any positive act such as mentioned above, or manifested an intention as above specified, a preferential right to the oil and permits to obtain the oil to the exclusion of any third party who has no title to the land or subsoil, in accordance with the terms of the legislation now in force as modified by the decisions of January 17, 1920,17 and January 8, 1921,18 already mentioned. The above statement in this paragraph of the policy of the present Executive is not intended to constitute an obligation for an unlimited time on the part of the Mexican Government to grant preferential rights to such owners of the surface or persons entitled to exercise their rights to the oil in the subsoil.”

It suffices, as I said above, to read these minutes carefully in order to dispel completely the alleged contradiction, apart from the fact that the nongranting of preferential rights to the owners of the surface does not imply any retroactivity in the law.

Your Excellency then states in regard to the two laws that your Government does not accept the waiver of its nationality required of aliens and the agreement not to invoke the protection of their [Page 610] Governments, since this would be equivalent to the annulment of the relation between an American citizen and his Government, and, consequently, the releasing of the latter of any obligation to protect the former in the event of a denial of justice.

After reminding you of all that I have stated in this respect in my note No. 12816 of September 28, 192519 and in my memorandum of December 5, 1925, before-mentioned, I wish to observe, in the first place, that there is no such waiver of nationality, since the alien retains the nationality he has. What the Constitution requires of aliens, in order that they may acquire certain property, is, that as regards such property, they agree to consider themselves as nationals. It is, therefore, a necessary consequence that such aliens undertake (only in respect to such property) not to invoke the protection of their Governments. Attention has already been called to the power which all countries have to impose upon aliens the conditions and requirements which they may believe expedient in order to permit such aliens to acquire real property. On the other hand, an alien who acquires property under these conditions, does so under a resolutory condition, and, in conformity with the jurisprudence of all countries, when a condition of this nature is fulfilled, the right so acquired is voided. This is absolutely different from a confiscation.

Your Excellency concludes by stating that, notwithstanding the statements of the Mexican Commissioners at the conferences I have mentioned to the effect that the Executive power would respect and enforce the decisions of the Judicial power, the petroleum law violates rights acquired under the provisions of Mexican law, of the present Constitution, of decisions of the Supreme Court of Mexico, and pledges given by the authorized representatives of the Government.

I must state to Your Excellency with regard to this point that the law does not modify, nor can it modify, these decisions. On the contrary, it gives them universal application through the provisions of article 14. Moreover, these decisions do not restrict the power of Congress to enact laws deemed to be expedient. Those laws which Congress has enacted do not violate rights lawfully acquired under provisions of Mexican law, of the present Mexican Constitution, and decisions of the Supreme Court of Mexico; nor are they contrary, as you say, to statements made by the representatives of our Government.

I must point out to Your Excellency that whatever may have been the offers of the Executive, they were made with the express statement that they fell within the limitations of his constitutional powers and did not encroach upon the prerogatives of the judicial and legislative [Page 611] branches. As organized by our Constitution, no branch of the Government except the Supreme Court had at its disposal any set standard by which to go when applying the provisions of paragraph 4 of article 27 of the Constitution until Congress enacted a law regulating this article. The decisions of the Supreme Court, always respected by the Federal Executive, cannot be considered as a doctrinal interpretation of general character of paragraph 4 of article 27 of the Constitution, but only as decisions rendered in the specific cases which gave rise to them. Such an interpretation, under the Constitution, can be made only by the Legislative power.

In the absence of a law regulating the Constitution in petroleum matters, the Supreme Court was empowered to render decisions in the form in which it did, and it can decide in applying the recently enacted petroleum law to new specific cases, whether this law is, or is not, constitutional. But the Federal Executive cannot give the decisions of the Court a universal application equivalent to a law regulating the Constitution. If he did so, he would exceed his powers.

Moreover, the decisions of the Supreme Court, when precedents are set by them, are only binding insofar as they interpret the law for the Federal courts. But, as indicated above, they can never bind, nor be obligatory upon, the Legislative power, since it alone is empowered to enact laws of general application throughout the nation.

Moreover, I take the liberty to call Your Excellency’s attention to the fact that this happens in the United States where the Supreme Court has been known to change its decisions on various subjects—and not those of minor importance. Further, those variations in decisions were made without the intervention of a subsequent law or regulatory measure by the legislative power, as in Mexico, and in this case.

Referring to suggestions respecting the policy of the Executive, I take the liberty to state to Your Excellency that this policy is entirely similar to that of the Executive of the United States in the case of Japanese immigration. In fact, the Executive had entered into an arrangement—the Gentlemen’s Agreement—with the Japanese Government regarding Japanese immigration into the United States. While this arrangement was in force the Congress of the United States, in the exercise of its sovereignty, which could not have been diminished by any action of the Executive, deemed it expedient, in the interest of the Republic, to pass an exclusion act which modified the arrangement entered into by the said Executive.20 I do not believe that in this case, and in the one under reference, one can accuse the President of having changed his policy.

[Page 612]

These laws, therefore, violate neither the principles of international law nor those of equity. Far from that, they favor aliens in various ways, since they remove all uncertainty from the matters under discussion. And with regard to the petroleum law it may be noted that aliens who have acquired rights in the prohibited zones may retain them, which they could not do except for the provisions of article 14 in conformity with the pertinent section of article 27 of the Constitution. And, if there is nothing in the laws which is either retroactive or confiscatory, there is no just reason for the statement of the Embassy that it is unable to assent to an application of these laws to American-owned properties.

Finally, I take the liberty to call Your Excellency’s attention to the fact that article 11 of the organic law of section 1 of article 27 of the Constitution in petroleum matters, empowers the Executive to regulate these laws. Now, it is known that the object of the regulations was to determine the manner in which the laws which they regulate were to be applied, and it is certain that the Executive, in making use of this authority, would take into account not only the express content of the laws, but also the principles of international law, of justice, and equity.

Only when the regulations shall have been issued will the legislation on the subjects indicated be complete, and only when taken in their entirety will it be possible to judge whether they violate, or respect and protect, the rights of the Nation as well as those of private individuals whether Mexicans or aliens.

I should like also to call Your Excellency’s attention to the measure adopted by my Government in extending a spontaneous invitation to the interested oil companies in Mexico to be present at a conference during which their suggestions and points of view could be set forth in connection with the study for regulating the petroleum law; to hear, in the most ample spirit of equity, such arguments as might be presented, so as to endeavor, within the spirit of that law, to remove any difficulty which may arise, in order that through the enactment of the law, and its regulations, the petroleum industry might enter fully upon an uninterrupted period of prosperity. This attitude, toward which my Government is impelled by no other consideration than that of seeking a solution which will safeguard the interests of both parties, is the best proof of the sentiments of equity and justice which inspire every act of the Mexican Government; and, in this particular case, it is a demonstration of the respect and interest which a solution of questions such as petroleum receives. The Mexican Government seeks only to establish a policy defined by law, which will afford security and confidence for the development [Page 613] of the industry and, in general, for foreign investors in Mexico who, having a proper consideration and respect for our laws, may come to Mexico to cooperate with us.

I also take the liberty to observe to Your Excellency that diplomatic representations are not considered justified because of the enactment of a law. They are only justified when the application of a law constitutes an injury. In such cases those affected have, in our laws, the recourse and means of asserting their rights before the Mexican courts, to which they can go in every case in which they believe their rights have been violated.

I am [etc.]

Aarón Sáenz
  1. Not printed.
  2. See telegram No. 294, Dec. 31, 1925, 9 p.m., to the Ambassador in Mexico, Foreign Relations, 1925, vol. ii, p. 552.
  3. File translation revised.
  4. Handed to the Ambassador in Mexico on Jan. 20, 1926.
  5. See telegrams No. 254, Nov. 13, 1925, and No. 264, Nov. 25, 1925, to the Ambassador in Mexico, Foreign Relations, 1925, vol. ii, pp. 527 and 529.
  6. Text of the alien land law as passed is printed in Diario Oficial, Jan. 21, 1926. For text of the proposed alien land bill to regulate section l of art. 27 of the Mexican Constitution, see Foreign Relations, 1925, vol. ii, p. 522.
  7. Foreign Relations, 1925, vol. ii, p. 540.
  8. See telegram No. 280, Dec. 16, 1925, from the Ambassador in Mexico, ibid., p. 550.
  9. See telegram No. 274, Dec. 12, 1925, to the Ambassador in Mexico, ibid., p. 547.
  10. For text of petroleum bill approved by the Chamber of Deputies, Nov. 26, 1925, see ibid., p. 531.
  11. For text of the 1917 Constitution, see ibid., 1917, p. 951.
  12. In five amparo cases instituted by the Texas Company, International Petroleum Company, and Tamiahua Petroleum Company. See Estados Unidos Mexicanos, Semanario Judicial de la Federation (México, Antigua Imprenta de Murguía, 1922), quinta época, tomo x, p. 1308; Foreign Relations, 1921, vol. ii, p. 464; ibid., 1922, vol. ii, pp. 680681.
  13. See Proceedings of the United States-Mexican Commission, Convened in Mexico City, May 14, 1923 (Washington, Government Printing Office, 1925).
  14. General Alvaro Obregón.
  15. See Proceedings of the United States-Mexican Commission, p. 48.
  16. Foreign Relations, 1920, vol. iii, p. 204.
  17. Not printed.
  18. Not printed.
  19. See Foreign Relations, 1924, vol. ii, pp. 333 ff.