Papers Relating to the Foreign Relations of the United States, 1926, Volume II

812.6363/1765

The Mexican Minister for Foreign Affairs (Sáenz) to the Secretary of State²⁸

[Translation²⁹]

Mexico, February 12, 1926.

No. 1679

Mr. Secretary: I have the honor to reply to your note of January 28, 1926,³⁰ which begins with the following statements:

1st. That the American Government notes with satisfaction that the President of Mexico proposes to issue the regulations of the alien land law and the law relating to certain deposits of the subsoil, in such manner that their application will not be retroactive in respect of rights legally acquired in accordance with prior laws, and it is hoped that these regulations will be in accord with the decisions of the Supreme Court of Justice, with the agreements of 1923, and the principles of the law of nations.

2nd. That the same Government from the beginning has called attention to the vital distinction between future acquisitions of property and acquisitions made under prior laws; and

3rd. That every sovereign state has the absolute right to promulgate laws which determine the acquisition of property in the future, a right which cannot be questioned by any other state; wherefore, if Mexico desires to prevent the future acquisition by aliens of property rights of any nature within its jurisdiction, the American Government has no suggestion to make; but that when any Government seeks to divest aliens of property rights which have already been legally acquired, the American Government, so far as its citizens may be concerned, has the positive duty of making representations and efforts to avoid such action; wherefore, it has been and is now concerned only with the property rights legally acquired in Mexico by American citizens in accordance with the laws existing at the time of the acquisition, and has requested and now requests that the Government of Mexico for the protection of those rights afford the guaranties which the generally accepted principles of law and equity require.

The foregoing declarations are satisfactory to my Government because they involve points of view which are common to the Governments of Mexico and the United States. All the more since the most explicit recognition is given to the absolute right of Mexico to enact such laws as it may deem expedient, even though the effect thereof would be to exclude aliens from all acquisition of property in the country, a stage which has not been reached since the only demand is for certain requisites in cases specified by the laws; wherefore, the entire question is reduced to determining whether or no the laws under consideration are retroactive in their application or whether they assail or respect rights previously legally acquired.

But before proceeding further it is well to reproduce the opinion of Chief Justice Marshall, 7 Cranch, 116, 136, 144, who says:

“The jurisdiction of the nation within its own territory is necessarily exclusive and absolute. It is susceptible of no limitation not imposed by itself. Any restriction upon it, deriving validity from an external source, would imply a diminution of its sovereignty to the extent of the restriction, and an investment of that sovereignty to the same extent in that power which could impose such restriction.

“All exceptions, therefore, to the full and complete power of a nation within its own territories, must be traced up to the consent of the nation itself. They can flow from no other legitimate source.[”]

“When private individuals of one nation spread themselves through another as business or caprice may direct, mingling indiscriminately with the inhabitants of that other, or when merchant vessels enter for the purposes of trade, it would be obviously inconvenient and dangerous to society, and would subject the laws to continual infraction, and the government to degradation, if such individuals or merchants did not owe temporary and local allegiance, and were not amenable to the jurisdiction of the country. Nor can the foreign sovereign have any motive for wishing such exemption. His subjects thus passing into foreign countries, are not employed by him, nor are they engaged in national pursuits. Consequently there are powerful motives for not exempting persons of this description from the jurisdiction of the country in which they are found, and no one motive for requiring it. The implied license, therefore, under which they enter can never be construed to grant such exemption.”

Your Excellency states with regard to article II of the law approved by the Mexican Congress on December 31st, last, that the Government of the United States does not admit that one of its citizens can contract, by declaration or otherwise, to bind his own Government not to invoke its rights under the rules of international law, because the right of the state to extend diplomatic protection cannot be waived by an individual, since it is not his personal right but a privilege of the state which, in spite of everything, must extend the protection referred to.

It appears that the foregoing statement is due to some confusion. It is evident that an individual can not bind the state of which he is a citizen not to exercise a right that belongs to it, and in this sense the American doctrine is entirely correct; but the article under consideration does not so state. What it requires is that the alien shall consider himself a national in respect to the property which may belong to him in the Mexican corporation and shall not invoke the protection of his Government in respect to the same. It is, therefore, an obligation contracted individually and producing effects only between the contracting individual and the Mexican Government, leaving the rights of the foreign state completely without injury. But if the individual who contracted the obligation violates it, the infraction must be sanctioned, because a law without sanctions is not a law. And if the infraction only affects the individual privately, leaving the rights of the state to which he belongs completely uninjured, it is not understood in what way it can be contrary either to international law or to the thesis sustained by Your Excellency’s Government.

It appears, moreover, that in its general terms the Mexican law is less strict than American jurisprudence, because it does not require naturalization as a condition for acquiring any kind of real property, as is the case in other countries.

“Thornton, umpire, Smith Bowen v. Mexico, No. 442, Am. Docket, convention of July 4, 1868, MS. Op. III. 586.

“The umpire is of opinion that with regard to Mexico the claimant can not be considered to be a citizen of the United States. The umpire has always held that the purchase of real property in Mexico gave a foreigner the right to call himself a Mexican citizen if he wished to be so, but did not impose upon him the obligation, if he did not wish it. There being no regulation prescribed for carrying out the law upon this subject, the foreigner’s silence would imply that he wished to remain a citizen of the nation to which he previously belonged.

“But in this particular case the claimant asked to be allowed to become a Mexican citizen for the purpose of being able to consummate the purchase of land in the State of Tamaulipas, on the frontier. The permission was granted him, though his naturalization papers were not issued, apparently because he failed to pay the legal fees. But in the following year, 1863, he purchased real property; and not only did he purchase it, but it was on the frontier, where foreigners were prohibited by law from holding real property; he thus doubly became a Mexican citizen.” (Moore, International Arbitrations, vol. 3, page 2482.)

Your Excellency asserts that article IV prohibits any foreigner who may represent, before the law went into force, fifty percent or more of the total interest in any kind of corporation owning rural property for agricultural purposes, from retaining the interest in excess of fifty percent for more than ten years, after which time the alien must sell a part of his property, so that he loses the benefits of the majority interest in such property, a provision which is clearly retroactive, because it deprives the alien of many rural properties legally acquired, and requires him to divest himself of the ownership, control and management of it. The provision of this article is not exactly as expressed since it provides that aliens, if physical persons, can retain integrally their rights until their death, and therefore, far from attacking acquired rights, it respects them, since the right of an individual can not be extended beyond his own life, except in the case of inheritance, which is provided for in article VI. Treating solely of foreign corporations which are shareholders in Mexican corporations owning real property for agricultural purposes, it is provided that they may retain the aforesaid rights for ten years, since under the Constitution of 1917, foreign corporations can not acquire real property in the Republic and it was necessary that for corporations which might be in such condition a reasonable period be fixed, so as not to cause them any injury. In all legislation it is admitted that the law is free to amplify, modify or restrict the capacity of that class of persons.

The principle in question, with regard to the period allowed for corporations, will be applied in very few cases, because it applies only to those in which foreign corporations are shareholders in Mexican corporations. And since the same article refers to future rights, such as those arising from the death of an individual now living, or the period of time subsequent to ten years, its effects can not be regarded as retroactive, since there was no acquired right but merely expectation of a right. And since the laws in force at the time of the acquisition are invoked, it is proper to recall that the precept of article 729 of the civil code, like all prior precepts on the subject, defines property as follows: “It is the right to enjoy and dispose of a thing without further limitation than those fixed by the laws.” And since the latter are not immutable the right of ownership may be modified by them for the future.

It was in that sense that there were cited in the memorandum of December 5, 1925,³¹ the provisions in force in the States of Arizona and Illinois applying to the acquisition of real property; and though the note I am now answering affirms that both the law of Illinois of 1897 and the provisions of 1913, of Arizona, relating to the ownership of real property by aliens, are made expressly to apply to future and not to prior acquisitions, it is seen that in some cases there is a limit set for the retention of rights already acquired, which is exactly the principle of the Mexican law. In the States cited and in those of Kansas, Kentucky, Minnesota, Oklahoma, Missouri and Washington, whose laws on the subject are similar, it is provided that an alien not domiciled in the country, is incapacitated from acquiring real property, except if he be an heir of an alien who may have previously acquired property; but even in this case he must divest himself of the inherited property within a period varying from three to six years, under penalty of forfeiture to the State. Aliens are also permitted to accept liens and mortgages in security for obligations due them and to acquire at public sale the property so encumbered; but with the obligation of disposing of it within a period generally fixed at three years, under the same penalty as above stated.

Lastly, I venture to remark that when the prohibition law was enacted in the United States it paralyzed established businesses falling under its provisions—the Amendment meant to stop the whole business. (Hamilton vs. Kentucky Distilleries, 251 U. S. 146, 151, No. 1);³² and to paralyze completely a business would seem to be tantamount to destroying legally acquired rights therein, but nevertheless the American Government was not deterred by that consideration.

Your Excellency says that the Government of the United States does not understand and would appreciate clarification of the meaning of the observation made in the memorandum of December 5, 1925, that the limitation imposed by the law upon corporations owning rural property for agricultural purposes tends to preclude possible international conflicts in the application of the agrarian legislation, since, although an alien might hold a minority of the stock in that kind of a company, it is not understood how the agrarian law could be applied to the interest of a Mexican shareholder and not to an American who might be the owner of an interest of less than fifty percent and how any dispossession of agricultural property proportionately owned by Mexican and American citizens, would deprive the latter of any part of their interests.

The observation of the Mexican Government finds its explanation in the fact that when an alien holds fifty percent or more of the total interest in a corporation of the kind under consideration, it is really he who can dispose of it; because, as a rule in corporations, decisions are made by majority vote and when under the application of the agrarian laws a case arises, where rights of the corporation are to be expropriated, if these rights pertain in the majority to Mexicans, the matter is settled in strict conformity to the legislation of the country, but if the said majority pertains to an alien, he applies to his Government for protection, which gives occasion for possible conflicts of an international nature, and it is obvious that if good relations with another State are to be maintained, it is essential to remove as far as possible any cause of friction.

With respect to article 14 of the law relative to the subsoil, which article provides for the confirmation of rights acquired before the Constitution went into effect, Your Excellency remarks that the Government of the United States has taken the position that in lands acquired by American citizens in Mexico in accordance with the laws of 1884, 1892 and 1909, the owners and lessees of the surface are granted the right to the fuels, minerals, and oils in the subsoil, and your Government expresses the hope that the regulations to be issued by the Executive will confirm such rights of owners who may have performed positive acts as defined by the declarations made to the American Commissioners in the conferences of 1923. In this connection there is copied part of the decision rendered by the Supreme Court of Justice on August 30, 1921, wherein it is held that paragraph IV of article 27 of the Constitution of 1917 is not retroactive, which was also decided in four other cases in amparo, and there are likewise copied the declarations of the Mexican Commissioners in the sense that the Executive would respect and enforce the decisions of the Judicial power, confirming that he would continue to observe the principles contained in the decisions of the Court in the sense that the principle cited would not be retroactive in regard to any persons, who prior to the promulgation of the Constitution, may have performed some positive act showing the intention of the owner of the surface or of empowered persons, to exercise their rights to the petroleum in the subsoil.

As article 14 of the law regulating article 27 of the Constitution regarding petroleum provides that rights acquired before it went into effect will be confirmed in accordance with the terms thereof, there can be no doubt that the regulations to be issued by the Executive will cause that provision to be fulfilled, and therefore the rights acquired in accordance with the laws of 1884, 1892, and 1909 will be confirmed; but it must be understood that those laws gave to the owner of the surface, or to the person who had right thereto, an optional right, that is, the power to appropriate for his own use the fuels, minerals, and oils contained in the subsoil, and therefore, until he had performed some act looking to said appropriation, no right was acquired. This was the understanding of the American Commissioners at the conferences of 1923 and they accepted it and Your Excellency’s note reproduces it when it agrees that the rights which are to be confirmed will be confirmed provided there shall have been performed any of the positive acts enumerated in the said conferences and which are substantially the same as those referred to in article 14, and consequently when none of those acts have been performed and, therefore, the right alleged may not be confirmed, there will be no retroactivity since no acquired right will be assailed.

It is not possible to understand, with any degree of reason, that when a law gives to the owner of the surface the right to the subsoil, that it may be believed that he owns from the subsoil to the center of the earth, to use the language of the old Roman law. Otherwise, for instance, when a subway is built without damaging the buildings or any other work whatsoever, it would be necessary to indemnify the owners of the surface which would be inadmissible and wholly unjustifiable. Similarly, the right of the owner of the surface extends upwards, and yet it would be absurd were he to complain that his right had been violated when a balloon or aeroplane passes over his property. Hence the necessity that the owner of the surface perform some positive act, that is, some act which at least manifests his intention to appropriate, and only in that case will he have an acquired right.

The legislation on the subject under consideration does not have in view a lucrative purpose, nor is it intended to secure thereby any advantage, but only to apply a principle of domestic public law which is traditional in the country, and further to define the situation and solve our problems by means of laws which will fix a standard and equable system with guaranties to all. The right of the nation to deposits of specified substances in the subsoil does not constitute an extraordinary principle; the Supreme Court of the Philippines has held in various decisions that the subsoil belongs to the sovereign, and consequently to the State, and the courts of the United States have held that the ownership of hydrocarbonates in the subsoil is governed by principles other than those applicable to the ownership of the surface. The mining law of Mexico establishes a system for mining property similar to that established for petroleum. Its application has given rise to no difficulty, nor has it hindered the development of industry and large enterprises. It has freed them from the difficulties which they would meet if subjected to local legislation. And finally, the declaration that the petroleum industry is a public utility is a guaranty for the interested parties, because it places them under the protection of the Federal power and grants them various advantages such as the right of expropriation.

Furthermore, the petroleum deposits are, for the most part, located in regions where ownership is denied to aliens by the Constitution; wherefore, if aliens were granted dominio directo over those deposits instead of dominio util, they would be placed in a more favorable position than the owners of the surface. Therefore, the law on the subject, instead of injuring the rights of the interested parties, places them in an advantageous position with regard to the law governing those possessing dominio directo, who are, in the majority of cases, owners of the surface.

Your Excellency states that after the negotiations of 1923, the Secretary of State transmitted to the Minister of Foreign Affairs of Mexico the note which you insert in which he stated that President Coolidge approved the declarations of the American Commissioners; that he requested to be informed whether General Obregón approved those of the Mexican Commissioners, and if so, suggested the procedure for the resumption of diplomatic relations. You also insert the reply of this Department of Foreign Relations, in which it was stated that President Obregón approved the declarations of the Mexican Commissioners and proposed certain modifications in the procedure suggested for the resumption of the relations between the two countries, but this latter insertion is not complete since it omits paragraph (b) reading as follows:³³

“Subsequently, that is to say, for instance, ten or fifteen days after the date upon which the respective Chargés d’Affaires may have been formally accredited, that is, diplomatic relations having been resumed, the Conventions shall be signed as suggested by you.

“I make this suggestion being sincerely in the belief that the simultaneity or close proximity between the two acts aforesaid may unjustly give the former the erroneous impression of being conditional, as the Mexican Government since November 19, 1921, spontaneously proposed the signing of similar conventions and, as furthermore, is unnecessary since the Conventions that are to be signed could not come into force before the date of the opening of the United States Senate.

Resolved as it is, the resumption of diplomatic relations, the modifications proposed—without any sacrifice for American interests or for the purposes of the United States Government—tend only to assure the greatest and most firm cordiality in the future relations between the two Governments, permitting them to develop on the solid basis of reciprocal confidence, which is the only possible foundation of true friendship.”

The paragraph that has just been copied is of the utmost importance because it shows plainly beyond question, that the conferences of 1923 were not a condition for the recognition of the Government of Mexico, and consequently, can never be given that character; but this explanation does not mean that Mexico fails to recognize the declarations made by its Commissioners.

Citing again the decisions of the Supreme Court of Justice, the declarations of the Mexican Commissioners, as to the fact that the Government must respect the decisions of the Judicial power and the statements of the Department of Foreign Relations that “the law (article 14 of the present law) does not modify nor can it modify the decisions of the [Supreme] Court,” Your Excellency says that the Government of the United States can not fail to point out that the exchange of a present title for a concession having a limited duration does not confirm the title, nor grant the owner the right to appropriate the products of the subsoil without the necessity of a permit from any authority, nor transmit his rights as he would transfer any other property.

In this connection I again repeat that the decisions of the court can not be modified or altered in any manner either by the Executive or any other authority. On the other hand, there is no objection, since such is the purpose of the Executive himself, to reiterating the declarations of the Mexican Commissioners in the sense that, in conformity with article 14, there will be granted to owners, concessionaires, or other persons having rights to petroleum, permits to drill in the respective lands; although it is proper to state that the decisions of the court have not the scope of laws nor can they signify that the Legislative power loses its powers to issue those which it may deem expedient and that the Executive action is necessarily limited by the contents of the laws themselves.

To grant a concession in exchange for a present title is to confirm the latter, because the granting of the concession will have no other basis with respect to the former; and although it is true that concessions are for a limited duration, on the one hand, to determine the period for the future exercise of a right is not to proceed retroactively, because it does not modify the amount of the right already used up, but only applies a rule for the future, and on the other hand, the period of a concession having expired, the latter may be extended or another obtained, wherefore in practice no injury is caused by the application of the precepts under consideration.

The law of waters under Federal jurisdiction of December 14, 1910, also provided for the confirmation of rights to waters which may have been previously acquired, and it has been so functioning without any difficulty or any injury resulting therefrom to anyone.

Your Excellency concludes by saying that the Government of the United States awaits with deep interest information as to the agrarian law as it affects rural lands and other property rights, and as to the nature of the regulations intended to be issued by the President in accordance with the decisions of the Supreme Court of Justice, the negotiations of 1923, and the rules of international law, equity, and justice. In this connection, I wish to confirm to Your Excellency that the purpose of the President in regulating the laws is to conform to the principles of international law, justice, and equity.

The President is convinced, and it affords me satisfaction so to inform Your Excellency, that in the regulation of the laws which we have just been considering there will be defined all points which have been the object of explanations between the two Governments.

I avail myself [etc.]

Aarón Saenz

28. Left with the Secretary of State by the Mexican Ambassador on Feb. 20, 1926.
29. File translation revised.
30. Supra.
31. Foreign Relations, 1925, vol. ii, p. 540.
32. This parenthetical statement was written in English.
33. See note of Aug. 24, 1923, from the Mexican Minister for Foreign Affairs, Foreign Relations, 1923, vol. ii, p. 551.