The Secretary of State to the Chargé in Spain ( Whitehouse )

No. 516

Sir: Reference is made to the Embassy’s despatches No. 1092 of December 10, 1928,7b 1125 of January 9, 1929, and to your telegram No. 1, January 15, 1 p.m., and other correspondence regarding the Spanish oil monopoly.

As you will appreciate it is the position of this Government that the settlement accepted by the Shell interests has no bearing whatsoever upon the principle involved in its correspondence with the Spanish Government on the subject, which is that of securing full and fair compensation for the American interests expropriated in accordance with the recognized principles of Spanish law and equity and of international practice, and in this connection it will be recalled that by the terms of the Spanish Decree of June 29 [28?], 19277c “industrial value” was recognized as one of the elements to be considered in determining full and fair compensation for the properties expropriated under that Decree.

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On February 4 a representative of the Standard Oil Company of New Jersey called at the Department and left with it a copy of the following telegram which the Company had received from Mr. H. E. Bedford, Jr., in Paris, under date of February 1:

“French Government still acting energetically in Spanish situation but they feel that action of our Government becoming lukewarm and it would greatly assist us at this time if ‘Washington’ should instruct embassy Madrid to move energetically to bring matter to a conclusion. Basis Societe Espagnole d’Achats et d’Affretements settlement have already established precedent for much more liberal treatment than has been offered other companies. Greatly fear unless French Government strongly supported by our own their attitude ‘may’ weaken.”

As you are aware, the United States has no arbitration treaty with Spain and consequently its position as regards arbitration is less favorable than that enjoyed by France. However, it is obvious that should the Spanish Government arbitrate the matter with the French Government this Government, in view of the repeated Spanish assurances as to equality of treatment, would expect the Spanish Government voluntarily to apply the principles established by that arbitration to the valuation and payment of the American interests concerned. In this connection, the Department quotes the following assurance contained in a letter received from Mr. S. B. Hunt of the Standard Oil Company of New Jersey, under date of December 14, 1928, as to the Company’s willingness to accept settlement on such a basis:

“The attention of this Company has been called to the situation as it now stands in Madrid with respect to the claims of this and other companies in Spain. It is the understanding of this Company that the French are urging a settlement by arbitration under their Arbitration Treaty with Spain.

“In view of the repeated assurances made by the Spanish Government that all companies will be treated alike, this Company consents to and will give its support to the arbitration negotiations insofar as it can do so and abide by the results of the arbitration between the French and Spanish Governments.

“We would not be willing to take shares of the monopoly company in satisfaction of any award to which we may be a party. We desire, therefore, that cash compensation will be provided to be paid in any agreement of submission to arbitration between France and Spain by which we may be bound.”

According to the Department’s information the Spanish Government has not replied to Mr. Hammond’s note of December 2, 1928, which supported the French position. You may, therefore, if you consider that such action would be advisable and helpful, advise the Spanish Government either verbally or in writing or both at your [Page 775] discretion, at the earliest opportune occasion, that this Government is following the course of the French-Spanish correspondence with keen interest; that in the event that there is a Franco-Spanish arbitration on the matter it would expect the Spanish Government voluntarily to apply the principles established therein to the valuation and payment of the American interests concerned; that the Standard Oil Company of New Jersey has expressed its willingness to accept settlement on such a basis; and that this Government would be grateful for a reply to the observations contained in Mr. Hammond’s note of December 2, 1928.

It does not seem likely that the Spanish Government will be in a position to give appropriate and adequate consideration to representations on this subject until the present reported political disturbances in Spain have subsided. The Department therefore relies upon you to choose an appropriate time for making the representations authorized by this instruction and requests that you report briefly by telegram when you have taken action in the premises.

I am [etc.]

For the Secretary of State:
W. R. Castle, Jr.