852.75 National Telephone Company/84: Telegram

The Secretary of State to the Ambassador in Spain (Laughlin)

109. I received the Spanish Ambassador this morning at his own request. The Under Secretary was present during the interview.

The Ambassador stated that he desired to make some explanation in regard to his Government’s reply of December 3 and he stated verbally, apparently reading from instructions, that his Government desired to handle the matter in a most friendly way, and pointed out that it was trying to guide the legislation in the Cortes into a solution which, by joint examination by both parties, would permit a revision of the contract.

We told the Ambassador that we were troubled because the Spanish note referred to the situation as a purely domestic question between the Spanish Government and a Spanish corporation. We said that, on the contrary, it represented a very large American investment made by American citizens under a concession granted by the Spanish Government, which was threatened with confiscation by unilateral action on the part of the Spanish Government. I pointed out that this could not be a domestic question, but was regarded by us as a very serious international question between our Government and Spain.

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Mr. Castle and I further pointed out that there is already legislation in Spain (referred to specifically in your note of November 23), under which any such concession could be revised on a basis of mutual agreement; that action under such legislation would be satisfactory to us and to the corporation; but that instead of invoking this legislation, the Spanish Government seemed to be supporting unilateral action by the Cortes, since it had announced from the Government bench some days ago that it approved the confiscatory bill now pending. We stated that the Spanish Government ought to point out to the Cortes that unilateral action was improper, and that if necessary the Spanish Government should prevent such unilateral action.

In reply to the Ambassador’s statement that he did not think that the Spanish Government had any power to interfere with the action of the Cortes, I told him that he must recognize that it did not make any difference to us whether American rights were injured by the Cortes or by the Cabinet—that in either case it would equally be an injury and a violation of American rights, and that if his Government stood by and allowed the Cortes to approve unilateral action, we should be obliged to regard it in a very serious light. In conclusion we informed the Ambassador that for the foregoing reasons the Spanish note seemed to us to be an unsatisfactory answer to the American protest.

The Ambassador seemed much troubled by the situation and said he would report our remarks to his Government.

Subsequently the Under Secretary and I received the press correspondents at a special meeting. They were given a very full oral description of the development of the present situation, including a reading of the notes exchanged and of the translation of the confiscatory bill of December 10, 1931 (which I understand is identical with the one now before the Cortes). They were informed that this information was “for background purposes only” and that there was to be no direct quotation made from the notes, which they have been permitted subsequently to study. In reply to an inquiry by one of the correspondents as to what we should do in the event the Spanish Government should nevertheless take confiscatory unilateral action, I stated that we should regard this violation of contractual American rights “very seriously”; that we should have to consider the question of a direct diplomatic claim against the Spanish Government; and possibly your own withdrawal from Madrid.