856d.6363/545

The Minister in the Netherlands (Tobin) to the Secretary of State

No. 1553

Sir: Referring to my telegram No. 34, of July 7, 1928, 3 p.m.,17 I have the honor to transmit herewith copies and translations of three communications exchanged to-day between the Legation and the Foreign Office with respect to the establishment of reciprocal treatment in petroleum matters between the United States and the Netherlands. Memorandum No. 21432 (Enclosure No. 1) contains the assurances requested in the Legation’s Memorandum of March 5, 1928. The Legation’s acknowledgment is attached thereto (Enclosure No. 2). The second Memorandum, No. 21433 (Enclosure No. 3), to which no acknowledgment was made, records certain views of the Dutch Government with regard to possible legal and other difficulties which might arise in connection with the exploitation of concessions in the United States public lands.

For the sake of the record and as a matter of convenience I am likewise enclosing, in addition to copies of the final memoranda, copies of the first two drafts (Enclosures Nos. 4 and 5)17 which were tentatively submitted to the Legation for consideration. A comparative study of these various documents will show that throughout the negotiations the Legation has been actuated by a desire first to obtain definite and satisfactory assurances as to Dutch future policy with respect to petroleum requested in the Legation’s Memorandum of the 5th of March. The second object in mind was to persuade the Foreign Office to omit [Page 399]any reference in the discussions or correspondence to the ambiguous, extraneous and what the Legation considers as theoretical arguments which the Dutch Foreign Office advances to illustrate an alleged discrepancy in the security offered by the legal systems of the two countries. While, for reasons mentioned below, it has not been possible to bring about the elimination of all references to this subject, it has been possible to have these considerations included in a separate minute and in a form so modified as to make them comparatively innocuous. It is evident from the elliptical phraseology employed that the Foreign Office is itself none too sure of the arguments advanced. Admittedly, they have been introduced into the discussion because of a promise to do so made to the Royal Dutch, which sees in them a basis for an argument in the future should any difficulty arise on this score in connection with the operations of any of its subsidiaries in our public lands.

I have [etc.]

Richard M. Tobin
[Enclosure 1—Translation18]

The Netherlands Ministry for Foreign Affairs to the American Legation

No. 21432

Memorandum

The Ministry of Foreign Affairs has noted with great interest the viewpoint of the Government of the United States concerning the exploitation of petroleum fields in the United States and in the Netherlands Indies as set forth in the American Legation’s memorandum of March 5, 1928.

In response to the desire expressed by the American Legation to receive assurances on three points regarding the Netherlands policy with respect to the exploitation of petroleum fields in the Netherlands Indies, the Ministry of Foreign Affairs has the honor to inform the American Legation as follows:

1.
The Netherlands Indies mining law (Indische mi jnwet) makes no objection to the granting of rights for the exploitation of petroleum fields by United States citizens or by companies with American capital, provided that such citizens or such companies comply with the stipulations of article 4 of that law.
2.
The law of February 9, 1928 (S. 23), authorizes the Minister of Colonies to sign contracts with a company in which American capital is heavily interested, which will make it possible for that company to exploit important petroleum terrains in the Netherlands Indies. The Minister of Colonies is prepared to sign these contracts. It is understood [Page 400]that, as soon as the signature of these contracts shall have been notified to the Legation of the United States, the latter will transmit to the Ministry a communication to the effect that the Government of the United States recognizes the Netherlands as a reciprocating country in the sense of the mineral leasing act of February 25, 1920.
3.
Her Majesty’s Government has no intention of abandoning the open-door policy in so far as the granting of rights for the exploitation of oil fields in the Netherlands Indies is concerned; and consequently the opportunity will remain open for American interests to participate in the exploitation of the petroleum wealth of the Netherlands Indies. It is, however, understood that this policy does not imply that in each specific instance of the granting of petroleum rights to other than American interests, the question of the granting of identical rights to American interests can be raised.

In the conversations between the American Legation and the Royal Ministry of Foreign Affairs, which were held upon the proposal of the American Government, the Ministry thought it advisable to request the American Legation to inform its Government that a Netherlands company, controlling an important American petroleum concern in which American capital likewise is interested, has as a shareholder for a minor part of its capital a company belonging to a nonreciprocating country. The Royal Ministry inquired how the Government of the United States would view a request on the part of such a company tending to obtain a concession covered by the mineral leasing act. In reply the American Legation informed the Ministry that in each specific case it would of course be necessary that the fact of Netherlands control be shown to the satisfaction of the competent officials by the production of evidence regarding the organization and stock ownership in the American company in question, and that these authorities would be disposed to consider in the most friendly spirit means to facilitate access to the public mineral lands of the United States on the part of American companies controlled by Netherlands interests.

[Enclosure 2]

The American Legation to the Netherlands Ministry for Foreign Affairs

Memorandum

The Legation of the United States of America at The Hague acknowledges the receipt of the Foreign Office’s Memorandum No. 21432, of July 10, 1928, setting forth the latter’s views in reply to a Memorandum submitted by the Legation on March 5, 1928, in regard to the question of reciprocity between the two Governments in matters relating to petroleum.

[Page 401]

The communication under acknowledgment confirms the Legation’s understanding of the informal conversations which have taken place between it and the Foreign Office. The assurances it contains adequately meet the contentions of the American Government as set forth in the Memorandum of March 5th.

[Enclosure 3—Translation19]

The Netherlands Ministry for Foreign Affairs to the American Legation

No. 21433

Memorandum

In the course of the conversations between the American Legation and the Royal Ministry of Foreign Affairs, mentioned in to-day’s Memorandum No. 21432, the Royal Ministry pointed out that after the granting of the concession in question the company concerned will be able to exploit its fields under complete legal security, whereas the situation of [sic] American companies with Netherlands capital which desire to obtain and exploit fields in the public lands run grave risks by the absence of legal security.

In the first place, it should be noted that a company exploiting a petroleum concession conferred by the Federal Government in public lands must conform to the general laws enacted by the State in which the concession is situated. No guarantee exists that this State will not by its legislation render exploitation practically impossible.

Moreover, every American citizen may contest before the courts the legality of a granted concession. The American judicial authorities therefore could annul in practice rights granted by the Federal Government.

Finally, the present Government of the United States can bind only itself with regard to the application of the mineral leasing act. A succeeding administration might have a different opinion regarding the interpretation and application of this law, as a result of which American companies with Netherlands capital might not be able to obtain any further concessions in public lands.

From the information in its possession concerning American legislation, the Ministry of Foreign Affairs understands that in theory the position of companies with Netherlands capital could, in the face of the lack of legal security, be remedied either by the conclusion of a formal treaty or by a modification of the legislation. It is, however, of the opinion that in the present circumstances these solutions are impracticable [Page 402]and that all other remedies are defective. The Royal Ministry consequently contents itself with merely noting the points raised above.

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