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

812.6363/1823

The Mexican Minister for Foreign Affairs ( Sáenz ) to the Secretary of State ³⁷

[Translation³⁸]

Mexico , March 27, 1926 .

Mr. Secretary: I have the honor to refer to Your Excellency’s note of March 1, 1926,³⁹ in which you were pleased to express your satisfaction that the two Governments find themselves in accord as to the principles that should be applied in the adjustment of certain of the matters now under discussion with regard to the two laws regulating section 1 of article 27 of the Constitution; and subsequently, in view of this accord of principles, Your Excellency states that your Government is desirous of information as to how the Mexican Government regards, in their practical application, some of the provisions of those laws, and for that purpose Your Excellency formulates various questions which I quote in order that each of them may be followed by an explanation of the views of the Executive.

“Is article 1 of this law retroactive and in application will it be given retroactive effect? That is, does article 1 apply to an alien who had acquired, or had an interest in any kind of company that had acquired, direct ownership in lands and waters within the prohibited zones prior to the promulgation of the law on January 21, 1926? In respect of this same article, would Your Excellency inform me as to whether your Government considers the article to apply to mining, transportation, industrial companies, and other enterprises not involving the direct ownership in lands and waters?”

Article 1 of the law published on January 21, 1926, is not retroactive, nor will it be given retroactive effect in its application, that is to say, it does not refer to an alien who had acquired or had an interest in any kind of a company that had acquired direct ownership in lands and waters within the prohibited zones prior to the promulgation of the said law. With respect to that same article my Government considers that it does not refer to mining, transportation, industrial companies, or to other enterprises which have no direct ownership in lands and waters.

“Is article 2 of this law [, promulgated on January 21, 1926,]⁴⁰ retroactive in its application in the sense that an alien who, prior to the promulgation of the law, had acquired an interest in a Mexican Company, will be required to comply with article 2?”

Article 2 is not retroactive in its application, because it does not require compliance by aliens who, prior to the promulgation of the law, had acquired an interest in a Mexican company, since the provision under consideration lays down the requisite therein stated in order that hereafter it be complied with by any alien wishing to join a Mexican company holding rights to the things referred to in article 2.

“Is article 3 of this law retroactive in the sense that it will be necessary for an alien, who possesses an interest in a Mexican company acquired prior to the promulgation of this law, to apply for any permit?”

Article 3 is not retroactive because the alien who, before the promulgation of the law, possessed an interest in a Mexican company, does not need to apply for a permit. This article is connected with the preceding one and therefore also provides for the following article.

In connection with article 4 of the law, Your Excellency understands—

“that any alien who represented [owned], prior to the promulgation of this law, a stock interest of 50 percent or more of the total interest in any kind of company owning rural property in Mexico for agricultural purposes may retain such interest until his death without any permit or without compliance with article 2 of the law and that the right of his heirs as to such interest over and above 49 percent is determined by the provisions of article 6 of the law; but that in the case of a foreign corporation owning stock in Mexican companies, the Government of Mexico maintains that such corporate interest shall be disposed of on or before 10 years from the date of the promulgation of the law.”

As for the first part of the foregoing paragraph, it is true that an alien who prior to the promulgation of the law represented 50 percent or more of the total interest in any kind of company owning rural property for agricultural purposes may retain such interest without the need of a permit, or without compliance with article 2, and that the right of his heirs to such interest in excess of 49 percent is provided for in article 6. As to its effect, however, upon foreign corporations owning stock in Mexican companies under the aforesaid conditions, they must dispose of such corporate interest in excess of 49 percent within the term of 10 years; which does not mean that a retroactive effect is given to the application of the law, since it has to do with an act of the future and not with an act of the past; but if any dispute should arise on that point, that is to say, as to whether or not the application of the law under the terms last mentioned is retroactive it would be for the courts to decide it in accordance with the provision of article 14 of the Constitution.

“On the basis of the principle of nonretroactivity, is it the view of the Government of Mexico that article 5 of the law under consideration is not retroactive, but that the rights, which are sought to be regulated by the law under discussion, legally acquired by aliens prior to the going into effect of the law, shall be conserved by their present owners until their death without the seeking of any permit under the terms of article 2 and by their heirs under the provisions of article 6?”

My Government is of the opinion that article 5 is not retroactive, since the rights acquired by aliens prior to the going into effect of the law shall be conserved by their present owners until their death, without the seeking of any permit under article 2 and by their heirs in accordance with the terms of article 6.

“Reverting to a prior inquiry as to whether mining, transportation, industrial companies, and other enterprises not involving the direct ownership in lands and waters are covered by article 1 of the law, it is, of course, manifest that any acquired rights of aliens in such enterprises in whatever form held do [not]⁴¹ come within [the terms of]⁴¹ article 5, independent of whether the activities in which the alien had an interest prior to the promulgation of the law were conducted within or without the prohibited zones.”

I repeat that article 1 does not include mining, transportation, and industrial companies and other enterprises not involving the direct ownership of lands and waters. Now the acquired rights of aliens in such enterprises, in whatever form they may be held, are included in article 5, independent of whether the activities in which the alien had an interest prior to the publication of the law were conducted within or without the prohibited zones.

“Am I correct in assuming that the provisions of article 7 of the law promulgated January 21, last, are in antithesis to the provisions of article 2 and that an alien who has acquired a right before the law went into effect which otherwise would come within the terms of the law is only required to make a declaration before the Department of Foreign Relations within one year following the date of the promulgation of the law, which in effect gives notice of his prior acquired rights, thus bringing the application of the new law within the principle of nonretroactivity of legislation; and that such declaration will merely be a statement of his existing right and title?”

The provisions of article 7 only apply to the rights which are the subject of the law.

In accordance with the article cited, aliens who before the law went into effect had acquired rights which are the subject matter of the law only have to make a declaration before the Department of Foreign Relations within one year following the date of the promulgation, which declaration must be a statement of such prior acquired rights. The terms in which this declaration may be made are to be provided for by the regulations, since the law does not say in what form it has to be made.

Your Excellency states that in view of the foregoing inquiries, you see no occasion for repeating at length the principles set forth in your note of January 28 bearing on the inability of a citizen of the United States to make any contract or declaration which would be binding upon his own Government not to invoke its right to extend diplomatic protection should there be committed any act of injustice justifying under the rules of international law such diplomatic protection.

On this point and with reference to what I had the honor to state in my previous note, I consider that even though an individual should waive application for the diplomatic protection of his Government, the Government does not lose its right to extend diplomatic protection in case of a denial of justice; but this is independent of the consequences that an individual may incur through failure to comply with an obligation which he has assumed.

With regard to the prohibition laws of the United States, Your Excellency says that the liquor business has not been a property right, but a licensed occupation, which was subject to the fullest extent at all times to the police powers.

Merely as an explanation of the reference made on this subject by this Department, permit me to state to Your Excellency that in Mexico property is understood to mean not only the dominion over a material thing, but also the same faculty over a right, and from this point of view the reference under consideration was made.

As for the declarations made by the Commissioners at the conferences of 1923, my Government does not disavow those made by its Commissioners, nor the fact that the same declarations were approved by President Obregón. Therefore, I have no objection to acknowledging the declaration of the Mexican Commissioners who affirmed in the name of my Government that “they recognize the right of the United States Government to make any reservations of or in behalf of the rights of its citizens,” which declaration was made should diplomatic relations be resumed.

As Your Excellency will agree, that reservation was referred to in your note of January 28 and you stated that “during the negotiations of 1923 the American Commissioners reserved in behalf of this Government all the rights of its citizens in respect of all lands in Mexico acquired by them before May 1, 1917.”

Your Excellency then goes on to say that your Government had expressed the hope that the regulations issued by the President of Mexico would confirm the rights of the owners of the subsoil who had, prior to the going into effect of the Constitution of 1917, performed positive acts as defined in the declarations of the Mexican Commissioners, which hope had all the more foundation in view of the statement in the note of this Department of January 20, 1926,⁴² in which it declares with reference to that same point and in relation to. article 14 of the law regulating section 1 of article 27 of the Constitution in the petroleum department, which the President of Mexico purposes in the regulation of the laws, to conform to the principles of international law, justice, and equity, in the conviction that in the same regulation there would be defined all the points that have been considered by both Governments.

Basing my opinion on these purposes of the President of the Republic I assure Your Excellency’s Government that in the regulations on the subject the rights to the subsoil of American citizens who may have performed any of the positive acts enumerated in my note of January 20 will be confirmed.

Your Excellency adds that you cannot understand why reference is made to an exchange of title when the object is to confirm the titles already held in cases where such positive acts have been performed, and you are pleased to inquire whether the rights of waters under the law of December 14, 1910, were confirmed without any change in the nature of the right or title.

The cases of confirmation of rights to the subsoil are altogether analogous to those of confirmation of rights of waters with regard to which a title of confirmation is issued, as will be done with regard to the said rights to the subsoil. Article 74 of the regulations of the law of December 14, 1910, laid down all the requirements that should be met by an application for a confirmation of rights of waters; and compliance with that provision and others relating thereto has not injured any person, but rather, has served to avoid controversies between persons who have rights of waters.

Your Excellency makes a final inquiry in these words:

“Should a right have been acquired in the year 1885 under the law of 1884 and the works constructed or the intention manifested in 1885, and it would so appear from the nature of the contract or purchase or lease,⁴³ would the Mexican Government think that the rights of the purchaser or lessee would be confirmed if not only the very nature of the title were changed but a concession granted limited to 50 years, computed from the time the works began or from the date the contract was made or the intention manifested? The result would be to limit the use of property [, admitted to be the property]⁴⁴ of the purchaser, to a beneficial use under new conditions for a maximum additional period of nine years.”

In the first place, the fact that the original title is confirmed by means of a concession gives to the owner the right to engage in the same activities which he would engage in under the said original title; in the second place, the period set is sufficiently long to enable him to exhaust a deposit of petroleum, and even were this not so, no damage would result, because the concession can be extended; and, in the third place, the extension of the concession does away with the limitation of the period set for the exercise of the right. As I have stated on another occasion, a new law can change the status of a right established by a previous law without its being retroactive; but granting that to be so on this point, that is to say, if it should be alleged in any case that the application of the law is retroactive, and any dispute should arise on that point, I must repeat what I have already stated with regard to the final part of article 6 of the law of January 21, 1926, that it would be for the courts to decide the point in accordance with the provisions of article 14 of the Constitution.

Your Excellency closes with the statement that your Government expresses the hope in the most friendly manner that, in view of the statement in my note of January 20, that the Mexican Government will be able to assure the Government of the United States that the rights of American citizens in respect of certain products of the subsoil, where positive acts of a nature set forth in my aforesaid note have been performed, will be confirmed.

In my turn I cherish the hope that all I have said above will give to Your Excellency’s Government the assurances to which reference is made.

I avail myself [etc.]

Aarón Sáenz

37. Left at the Department by the Mexican Ambassador on Apr. 6, 1926.
38. File translation revised.
39. Ante, p. 631.
40. Omitted in the Spanish text.
41. Omitted in the Spanish text.
41. Omitted in the Spanish text.
42. Ante, p. 605.
43. Mr. Kellogg, however, had said: “—manifested in 1885, or by the nature of the contract of purchase or lease.”
44. Omitted in the Spanish text.