Papers relating to the foreign relations of the United States, 1928, Volume II

821.6363 Barco/64

The Carib Syndicate, Limited, to the Secretary of State

New York, January 5, 1928.

Sir: We beg to enclose herewith a brief memorandum setting forth the facts and circumstances under which the Carib Syndicate, Limited feels warranted in laying the case of the so-called “Barco Concession” before the State Department with a view to such action in the matter as may appear appropriate.

The Barco Concession was granted by the Government of the Republic of Colombia to General Virgilio Barco in 1905. As is fully explained in the attached memorandum, American interests acquired the Concession in 1918.

Since that date, American interests have held control and exercised rights of ownership over said concession, this control and ownership being continuous and undisputed until February 3, 1926, when the Colombian Government, through its Department of Industries and over the signature of the President of Colombia, declared the Concession forfeited for alleged causes almost in their entirety antedating 1918. The Concession was declared forfeited notwithstanding the fact that the Colombian Government had expressly approved and joined in the transfer of the Concession to American interests in 1918 and had taken advantage of the occasion of that transfer to exact substantial changes in some of the terms of the Concession. Furthermore, the terms of the declaration of forfeiture are in direct conflict with the contention of the Colombian Government as set forth during its boundary dispute with Venezuela. At that time the Colombian Government, in its formal case to the Swiss Arbitral Board, pointed to and stressed the Barco Concession and the fact that it was then, and had been since 1905, in full force and effect. The Barco Concession is located in territory which, prior to 1922, was claimed by the governments of Colombia and Venezuela. The territory was awarded to Colombia by the Swiss Arbitral Board in 1922 and undisputed possession given to Colombia under the Swiss demarkation and survey completed in 1925.

Not only are the alleged grounds of forfeiture, as set forth in the Resolution of the Colombian Government, baseless, but also the Colombian Government has denied and is denying justice by its continued failure to take any action, either adverse or favorable, on the Company’s memorial filed on March 16, 1926, in strict accordance with Colombian law, asking for reconsideration of the resolution of forfeiture. It would appear that the Colombian Government has consumed the period since March 16, 1926, in a vain effort to find some plausible arguments to refute those contained in the Memorial. Further attention is called to the fact that, although the declaration of forfeiture of the Concession was issued by an administrative branch of the Government and has not even become final before that branch by reason of the Company’s appeal and protest for reconsideration, nevertheless the Colombian Government, contrary to Colombian Law, has forcibly ejected geological parties sent to the Concession by the Company.

The Company realizes that the Barco Concession matter is one of importance to the Colombian Government, not only because of the value which the Concession may ultimately prove to have, but also because of the fact that the terms of its resolution of forfeiture might be seized upon by Venezuela as furnishing grounds for requesting a reopening of the boundary question by showing that some of the arguments advanced before the Boundary Arbitral Board were advanced in bad faith. Almost two years have elapsed since the presentation of the Company’s Memorial of protest and no reply has yet been received. Acquiescence in further delay might be looked upon in Colombia as a sign of submission to the confiscatory policy of the Colombian authorities or as an indication of inability to secure that assistance from the Department of State which is now the only effective means of obtaining a decision from the Colombian Government.

In submitting this letter and the annexed memorandum and supporting documents,⁷ the Department of State is respectfully requested to consider whether, for the protection of American interests, it can appropriately communicate to the Colombian authorities a request for an early and definite reply to the Memorial of March 16, 1926, in which the reconsideration of the declaration of forfeiture was requested. All possible means of securing such a reply, which can properly be employed by the Company, have been exhausted. Further delay will constitute a complete denial of justice. We therefore trust that the Department will be in a position promptly to communicate to the Colombian Government a firm request for an early answer to the Memorial of March 16, 1926.

A. H. Bunker

President

[Enclosure]

Memorandum on the Barco Concession⁸

(1) In 1905 General Virgilio Barco, a citizen of Colombia, was granted a fifty year concession by the Colombian Government to exploit petroleum and certain other mineral resources in an extensive area in the Department of Santander on the Venezuelan border. In 1918 a Colombian company, “Compania Colombiana del Petroleo”, was organized by American interests, to take over the concession. The transfer of the concession was formally approved by the Colombian Government which was fully aware that the Colombian Company in question was controlled through stock ownership by American nationals. At the present time the stock of this Colombian company is owned by the Colombian Petroleum Company, a Delaware corporation. The stock of the latter company is in turn controlled as to 75% by the Gulf Oil Corporation of Pennsylvania, through its subsidiary, the South American Gulf Oil Company, and as to approximately 25% by the Carib Syndicate, Limited, through its subsidiary, the Carib Company of Maine.

(2) This memorandum is presented by the Carib Syndicate, Limited.

(3) American interests first became financially interested in the Barco Concession as a result of a trip which General Barco made to the United States in 1917 for the purpose of interesting American capital and disposing of the Concession. General Barco then recognized that neither his own nor other financial and technical resources available in Colombia were adequate for the future extensive development of the concession. In fact by 1914 he had expended the larger part of his private fortune in developing the Concession and he then made a determined effort to interest American capital. At that time he entered into an option contract with a Mr. Frank Keyser, but the latter failed to take up the option. In 1917, however, during the General’s visit to the United States, as mentioned above, he commenced negotiations with Mr. C. K. McFadden, then Chairman of the Executive Committee of the Carib Syndicate, Limited and an option contract was concluded at Washington on January 26th of that year. General Barco received $10,000 down and an additional $90,000 was to be paid if Mr. McFadden or his assigns elected to take over the concessionary rights within a period of 180 days. Also, General Barco under the option contract reserved to himself the right, under certain conditions, to 15% of the gross production of the concession. The Carib Syndicate, Limited, thereupon offered to H. L. Doherty & Company a 75% interest in the rights acquired from General Barco, retaining a 25% interest which the Carib Syndicate has held continuously since that time. The Doherty interests then sent a party to Colombia and caused careful investigations to be made of the concession and the petroleum possibilities of the area and on May 23, 1917, informed Carib Syndicate, Limited, of their acceptance of the proposition.

(4) A Colombian company, “Compania Colombiana del Petroleo” was then formed to take over the concession from General Barco and carry forward the work of development; and the Delaware Company referred to above in paragraph (1) was organized to hold the stock of this Colombian Company. Thereupon final payment was made to General Barco pursuant to the terms of the original option contract with Mr. McFadden.

(5) The transfer of the concessionary rights of General Barco was recorded in a public document entitled “Deed Three Hundred and Thirty-one” to which the Colombian Government, General Barco and “Compania Colombiana del Petroleo” were parties. This Deed, concluded at Bogota, April 3, 1918, contains the full consent and approval of the Colombian Government to the transfer of the concession and embodies certain changes in the Government’s favor which were required as a condition of its assent.

(6) It is pertinent to emphasize that the Colombian authorities in 1918, prior to according their approval and consent to the transfer, gave the most careful consideration and painstaking study to all the facts and circumstances. In the granting of its consent and approval and in the changing of certain of the terms of the concession, the Government specifically recognized, and so stated in the Deed of Transfer, that the concession was at that date in full force and effect, to quote the words of the Minister of Hacienda, who then reported on the matter, “this concession which is in force”. Furthermore, the Government, in the transfer, exacted a bond to guarantee the performance of the obligations undertaken by the “Compania Colombiana del Petroleo”.

(7) The foregoing is set forth for the purpose of showing the facts of American ownership at the time of the approval of the transfer of the concession to “Compania Colombiana del Petroleo” in 1918. In this connection it is to be particularly noted that General Barco solicited American assistance, that he received a substantial payment for the transfer of his rights while reserving to himself valuable privileges and that it was with full knowledge of all the foregoing facts that the Colombian Government approved the transfer.

(8) On February 2, 1926, a resolution declaring the concession forfeited was issued by the Minister of Industries over the signature of the President and on the 16th of that month “Compania Colombiana del Petroleo” was notified to this effect. The Declaration of Forfeiture was based upon an alleged failure to comply with the terms and conditions of the concession: (1) that General Barco had not presented, within the prescribed period of one year, plans of the region to be exploited; (2) that he had not commenced the exploitation within the prescribed period of three years; (3) that the work performed in the territory had not been scientifically conducted; and (4) that the Government had never received the stipulated participation in the concession.

In almost their entirety the alleged causes of forfeiture relate to obligations to be performed prior to the transfer of the concession to “Compania Colombiana del Petroleo” in 1918. These alleged grounds of forfeiture are fully met in the answering Memorial of March 16, 1926 which is mentioned below, but it may be well briefly to deal with them at this point.

(9) As respects the first cause of forfeiture, attention is called to the fact that not only did the Colombian Government attempt to go back of 1918 for this excuse, but also, by resolution issued October 27, 1906 by the Ministry of Public Works and Development (then performing the present duties of the Ministry of Industries), the Government acknowledged “receipt of the plan presented in fulfillment of that stipulated in Article 2nd of the contract with Mr. Virgilio Barco”. As respects the second and third causes of forfeiture, the evidence shows that General Barco did commence exploitation within the term allowed by the concession and that the work from that time up to the present has been done with the degree of scientific skill permitted by the situation. Attention is called to the statements of various Ministers, numerous Memorials and supporting affidavits of private individuals attached to the Company’s Memorial of March 16, 1926. In this connection, again it must be noted that the Colombian Government, notwithstanding its approval of the transfer in 1918 and the changes to its own benefit in the terms of the concession itself at that time, attempts to establish causes of forfeiture long prior to 1918.

(10) Finally, it is even more significant to emphasize that Colombia, in submitting its case to the Swiss Arbitral Board in the matter of the Colombia-Venezuelan boundary dispute (decided in 1922 and made effective in 1925), then pointed to and stressed the fact that the Barco Concession was in full force and effect in order to prove Colombia’s claim to that portion of the disputed territory in which the concession in its entirety is located. The region was claimed by Venezuela prior to the Arbitral Award. Consequently, Venezuela prohibited the transportation of machinery and equipment through Venezuela to the concession, a ruling which as yet has not been revoked. In refuting the claim of Venezuela to this particular territory, the Government of Colombia, in presenting its case to the Swiss Arbitral Board, referred to the petroleum deposits discovered by General Barco “who secured from the Government of Colombia the permit to exploit it and devoted himself to this exploitation more than fifteen years, employing in it his modest resources” …, and then added “Now a company has commenced to exploit those beds on a much larger scale.” The company referred to is the “Compania Colombiana del Petroleo”. After mentioning difficulties caused the concessionnaire by the Government of Venezuela in connection with the importation of drilling machinery, the Colombian case further stated, “That was the first time after the granting of the concession of exploitation to General Barco several years ago that the Government (Translator’s Note—of Venezuela) made any pretension to those beds which the aforesaid Barco ‘had not ceased to exploit, a fact patent to all the world;’ in fact, this concession had been published from the outset in the Diario Oficial of Colombia.” (Translation from page 166 of the answer of the Republic of Colombia, 1920). (Italics—ours).

(11) The fourth ground for the declaration of forfeiture may be disposed of by the fact that, as General Barco was, and the Company has been, prevented by circumstances beyond their control from producing and marketing oil in commercial quantity, there was no net profit (under the original terms of the concession) nor gross production (under the terms of the concession as changed in 1918 in order to meet the then demands of the Government prerequisite to its consent and approval of the transfer) on which to pay any percentage to the Government, and, consequently, no breach of the terms of the concession could possibly be established on this score. In this connection attention is called to the reports of the various Colombian Ministers as set forth in Deed Three Hundred and Thirty-One.

(12) During the period from 1918 to 1926, “Compania Colombiana del Petroleo” took such steps as were possible to exploit the concessionary rights. It constructed camps, made geological surveys and did such drilling as it could with the limited amount of machinery which it was able at the outset to get to the concession through Venezuela before the above mentioned prohibition by Venezuela of this transportation. (Transportation through Venezuela is the only feasible practical method of getting machinery to the concession.) These activities are proved by annexed affidavits. At no time has the Company ceased occupation of or abandoned the territory, and at present maintains two occupied camps on the concession. The Company is not allowed to do any development work, and, although the Resolution of Forfeiture was issued by an administrative branch and has not even become a final administrative, much less judicial, ruling under Colombian Law, the Colombian Government has forcibly ejected the Company’s geologists from the property and prohibited such work. The status of the development work on the concession is shown in the annexed report of the Colombian Government’s Inspector of Petroleum, who visited the concession in 1926, shortly after the Decree of Forfeiture and at the instance of the Colombian Congress.

(13) In considering all phases of the case and the equities of the respective positions, it is reasonable to emphasize that the Compania Colombiana del Petroleo, in acquiring its rights to the concession and in the development thereof including extensive geological surveys, has expended in good faith more than $1,900,000, for which there has not been one dollar of return, the Colombian Government allowing the Company to make these expenditures through a period of eight years following the transfer of 1918. Even now the cost of maintenance and other administrative expenses to the Company is running at $9,000 monthly while the delay on the part of the Government of Colombia is continuing.

(14) On March 16, 1926 and within the prescribed period, “Compania Colombiana del Petroleo” submitted a memorial which contains a convincing answer to the arguments of the Decree of Forfeiture. The refutation is generally by reference to official documents of the Colombian Government. The memorial, which under Colombian law had to be filed within thirty days of notification of the Decree, remains unanswered although nearly two years have now elapsed. An administrative decree of forfeiture is not final under Colombian law until the Government has acted upon the protest filed by the concessionnaire. Again and again representatives of the Company in Bogotá have made oral representations but except for unfulfilled promises have received no reply to the memorial.

(15) The representatives of the Company in Bogotá have exhausted all possible means at their disposition in urging upon the Colombian Government a reconsideration of its position. Further delay in endeavoring to bring the matter to the Colombian Government’s attention through the channels of the American Government might only be interpreted in Colombia as a sign of weakness or of lack of real interest on the part of the Company or as an indication that the American Government was not disposed to support the American interests concerned. In either case delay would only lead the Colombian Government to believe that they could indefinitely postpone any reply to the Company’s Memorial and thus effectually deprive the Company of its rights.

January 5, 1928.

7. Supporting documents not printed.
8. Annexed documents not printed and all citations to them have been omitted.