352.1153 St 2/88
The Ambassador in Spain (Hammond) to
the Secretary of State
Madrid, June 12,
1928.
[Received June 25.]
No. 933
Sir: Referring to my Despatch No. 929 of June
6th, last,37 reporting
recent developments in regard to the Spanish Petroleum Monopoly, I have
the honor to transmit herewith for the Department’s information copy and
translation of a Note from the President of the
[Page 868]
Council of Ministers under date of June 6th (only
received, however, this morning) in reply to my note, copy of which is
transmitted with the Embassy’s Despatch No. 929 of June 6th last.38
While the President’s reply is couched in the friendliest of terms, and
skillfully worded particularly in the handwritten postscript to make it
appear that I am only urging a prompt and adequate settlement of the
companies’ claims because of being “prodded” by the American interests
concerned, I consider the Note entirely unsatisfactory and an obvious,
though friendly attempt to dodge the issue.
Inasmuch as Mr. William Brewster, Managing Director of the Standard Oil
Company of Madrid, has not yet returned from Paris, I shall await his
arrival before making detailed comment upon the particular statements
made in the Spanish note regarding the specific case of the Babel and
Nervion Company.
I have [etc.]
[Enclosure—Translation]
The President of the Spanish Council of
Ministers (Estella) to the American
Ambassador (Hammond)
Mr. Ambassador and Dear Friend: I have not
yet replied to your courteous letter of the 31st of May regarding
the evaluation of petroleum installations on account of the
necessity of obtaining certain data from the competent department
regarding the matter to which you specifically refer. Although you
do not specify in your letter to which American company you refer, I
am able to inform you that the revision of the evaluations of the
above mentioned petroleum installations made by the jury prior to
the month of February has been subsequently completed, the jury
making a new study based on the broadest principles in order that
the possible errors committed may be remitted in the final
evaluation. Specifically, my information relates to the Babel and
Nervion Company, and it appears that in attempting to evaluate
certain properties belonging to it, as the value attributed to the
property of the Company did not coincide with that proposed by the
official commission, the jury decided to ask the official evaluation
of the municipal authorities within whose limits the properties were
situated. The municipal authorities assigned to the properties a
very much smaller figure, not only than the one requested by the
company, but also than the one proposed by the official state
commission, and in view of this, the Government, in harmony with its
spirit of benevolence,’ has ordered the jury to disregard the
official evaluation given by the municipality, and to adhere to the
proposal made by the official commission.
[Page 869]
According to my information, it would seem untrue that the official
commission refuses to take into account indemnifications of a
commercial character in evaluating the petroleum businesses. The
Jury which has received indications from the Government in this
particular has taken into consideration the profits which the
petroleum companies made within a given period of time, capitalizing
them at an average of 10%, which is the profit usually made by
petroleum companies, and rejecting a capitalization at extremely low
rates suggested by the petroleum companies, which have no legal
precedent in Spain or in any other country.
The fact that up to the present writing no indemnification to
American companies has been made is occasioned by the fact that
evaluation has been very slow due in many instances, as I am
informed, to the wishes of the interested parties themselves. At the
present time, the evaluation of the most important foreign companies
has been definitely accorded, and one of these days that of the
totality of the companies will be decided upon, for which reason I
can assure you that the payment will only be delayed during the time
that the companies take to present their titles and other documents
for the purpose of legalizing the pertinent deeds (escritura). At any rate the delay referred to does not
harm the interested companies since, as you already know, the
indemnification which is ultimately granted will be supplemented by
the legal interest from the date of the seizure.
As you see, Mr. Ambassador, the desire to accord fair and just
treatment to which we have referred in our past correspondence on
this subject has not been discontinued, and the legitimate American
interests which are under your protection are not to be
disregarded.
Believe me [etc.]
(in handwriting)
I understand, Mr. Ambassador, the not always justified requests
that hang over you, but my good will, and that of the Finance
Minister, is taking care of all of them, although without going
to the extremes which have been attempted to be demanded in this
matter.
