411.12/1736
The Ambassador in Mexico (Daniels) to the Secretary of State
[Received January 29.]
Sir: In the Embassy’s telegram number 3 of January 25, 1934, 5 p.m.,22 I stated that Minister Puig had informed me that he had not discussed the Department’s proposals on claims with Ambassador González Roa and experts in the Ministry for Foreign Affairs. He added that he would also give the whole matter serious consideration and ask for another conference in about a week.
Upon receipt of the Department’s instruction number 214 of December 16, 1933,23 on December 28th I presented the plan to Ambassador González Roa and pointed out that the Mexican proposals were unacceptable, both as to the amount and terms of payment. I gave him a copy of the proposed protocol as to General Claims and told him that if it was acceptable to Mexico and put in operation, the Government of the United States would then be willing, after evaluation, to consider a reasonable en bloc settlement. The Mexican officials clearly understand that the Department wishes a full exploration of General Claims before taking up the suggestion of an en bloc settlement either of General or Special Claims.
While Mexican officials are making up their minds as to what answer they will make to the Department’s proposal, I feel it my duty to state plainly the conclusions I have reached after eight months [Page 399] of study and consideration of the whole matter. In coming to the recommendation I am hereby proposing, I have had no thought except to try to ascertain, not what technically or legally we have a right to insist upon, but to strip the whole controversy of everything else and get down to the basic principle of what in equity and justice we ought to insist upon. In other words, I have tried to go beneath pleadings and agreements, forced or voluntary, and ask what we would expect Mexico to demand of our country if conditions were reversed.
As to the Special Claims, arising between 1910 and 1920, I agree with the conclusions of the Commissions between Mexico and several European Governments, that Mexico should not be required to pay for acts by revolutionists and bandits unless there is shown negligence on the part of responsible governmental authorities. We must take into consideration that for many years there was no stable government in Mexico. To be sure, I recognize that Carranza pledged payments for such acts and that later Obregón made like promises, and promises to pay for losses and damages were incorporated in the Warren-Payne treaty24 which Mexico accepted in order to secure recognition. However, I also am aware that a large number of these claims are made by Americans residing here who preferred to run all risks rather than accept the advice of President Wilson, who offered them safe transportation into the United States in the hectic days of revolution. Instead of accepting his urgent pleas, they elected to remain. Some of them hoped and worked for American intervention and, in lieu of that, demanded that American warships remain in Mexican waters and that American troops be dispatched into the interior of Mexico to protect their property. Inasmuch as I was a part of the administration in that period, those conditions and the serious situation is fresh in my mind. Though Mexico promised to pay damages, many of the claims have no merit. Very few Special Claims have been adjudicated.
In view of the situation thus sketched, I have come to the conclusion that we are justified by the plainest equity to make these proposals to the Mexican Government:
(1) With reference to Special Claims, present at the earliest opportunity to the Mexican Government a counter proposal, which the Department has in mind, providing for an en bloc settlement on a basis of 2.65%. This is the average recovery in the settlement of claims of Belgium, France, Germany, Great Britain, Italy and Spain against Mexico for losses or damages during the revolutionary period of 1910–1920. The claims of those countries are similar to our Special Claims.
This suggestion makes no distinction between memorialized and unmemorialized cases. Ambassador González Roa based his argument [Page 400] for such distinction (proposing 1.25% for unmemorialized claims) upon the statement that under the terms of the 1839 and 1868 Claims Conventions25 the average recovery was 1.25% for American claims. The weakness in his contention is that, in the agreements with the European Governments, no distinction was made between the memorialized and the unmemorialized claims. If we accept the figure agreed upon in the Conventions by those six countries, it seems that the contention that distinction be made between memorialized and unmemorialized claims, which Ambassador González Roa urged, lacks foundation.
If Mexico paid 2.65% on all Special Claims, the sum it would pay would be about seven and three quarter million dollars. In my judgment effort should be made to adjust the Special Claims before pressing the suggested protocol on General Claims, particularly in view of the settlements made by Mexico with European countries having similar claims. Such precedents might serve as a guide to any domestic commission appointed to adjudicate the claims and to pro-rate the amount received from Mexico.
(2) With reference to General Claims, my suggestion is that our Government offer to settle on a basis of 8%. The figure of 8% is the average recovery under the decisions rendered so far by the General Claims Commission, exclusive of the claims of the Illinois Central Railway, which the Mexican Government contends, and with reason, should be eliminated from consideration in fixing the average recovery percentage because liability was admitted by the Government which was ready to settle out of court. Acceptance of 8% for General Claims would amount to about eleven million dollars, exclusive of awards heretofore rendered by the General Claims Commission of about two and a half million dollars, and of interest on awards of about $836,000.
As I understand it, if the protocol suggested by the Department is not agreed to by the Mexican Government, in order to reconstitute the General Claims Commission, it would be necessary only to exchange ratifications of the Convention signed June 18, 1932,26 and to secure an agreement from the Mexican Government regarding the appointment of a Neutral Presiding Commissioner. This sounds easy, but past experience in selecting a Presiding Commissioner, or one who will give his whole time to the duty, does not justify expectation of easy and prompt action in this regard. The Department’s proposal embodied in the suggested protocol is an improvement upon the protocol27 which is part of the Convention of June 18, 1932. However, even with that better plan looking to expedition, it is by no means certain that the pleadings and conclusions could be completed within two years. It is more probable that the delays experienced by [Page 401] the old Commission would be repeated, with the continued expense and no assurance that claimants would get anything in their lifetime.
As I understand it, while the General Claims Commission can carry on by an exchange of ratifications, the Department has held that as regards the Special Commission, the Senate must ratify the protocol, signed by Ambassador Clark and Minister Téllez28 before there can be a reconstitution. While the ratification of the new treaty of the Special Claims Convention was pending, Senator King, in a public statement, objected to its ratification in view of the fact that the change made to the existing Convention would lessen the rights of claimants in the United States, saying that “the present treaty does not exclude from this jurisdiction of the Convention the claims originating from the acts of the Huerta forces or claims originating through the circulation or acceptance, voluntary or forced, of paper money”. He objected to giving consideration to the policy pursued by Germany, Spain, France, Italy, England and Belgium in reaching an agreement with Mexico for claims originating between 1910–1920, the period for which the Special Claims Commission was set up.
Inasmuch as the new treaty to reconstitute the Special Claims Commission had not been acted upon by the Senate, pending negotiations looking to an en bloc settlement, it may be that Senator King would again object to ratification. I judge from the suggestion of the Department, that, after the acceptance of the proposed protocol by Mexico, it would consider an en bloc settlement for Special Claims.
I have kept in mind that my predecessor, Mr. Clark, and Mr. Téllez, former Minister for Foreign Affairs, conducted negotiations looking to an en bloc settlement. The amount the United States representative suggested for a settlement of claims under both the General and Special Claims was fifty million dollars. That figure was reached by applying a percentage basis of 11.5 to the net American claims, after deducting the value of the Mexican claims. That percentage is the average recovery in claims adjustments between Governments covering a period of 140 years. That proposal for Mexico to pay the United States the sum of fifty million dollars was not entertained by Minister Téllez because he regarded it as too large a sum.
If the Department agrees with these recommendations, I would suggest that the United States, instead of pressing for the protocol proposed to the Mexican Government, if Dr. Puig’s answer should be unfavorable, offer a counter proposal for about twenty-two million dollars as a settlement of both General and Special Claims, based on the use of 8% for General Claims and 2.65% for Special Claims, without making any distinction between memorialized and unmemorialized claims.
[Page 402]I sincerely believe, everything considered, including our inability at this time to collect debts due by European countries directly to the Federal Treasury, and the impossibility of our nationals to collect on moneys loaned by them, either with or without governmental quasi-approval, to governments in South America and Europe, that we should substitute an equitable for a strictly legal liability with reference to claims by our nationals against Mexico. The history of claims controversies between the United States and Mexico is a sad, long story of disagreements, mainly growing out of the claims of our nationals, some of whom came into this country seeking concessions and large returns upon their money, rather than to accept the less speculative returns promised at home. Pursuing such course, they have lived in Mexico many years, all the while holding on to their American citizenship in the belief that our country would enforce their claims against the country of their residence.
It is of the highest importance if possible to reach an agreement which will put ancient and revolutionary claims behind us, and seek, in accordance with the Claims Conventions of 1923, to secure something for our nationals who have just claims rather than continue hearings which may not be finished in our day.
I am not unmindful of the disappointment which would be experienced by our nationals following any settlement of their claims on a less basis than they think is their just due. Equally I recognize, if an en bloc sum is accepted, that there are troubles in store for a domestic commission which would be constituted to apportion whatever amount Mexico would pay. There is no escape from difficulties no matter what policy is adopted.
My theory in the present situation is that our Government is in the strongest position when it meets Mexico in a spirit of large liberality and generosity, confident it is demanding nothing more from Mexico than we would expect Mexico to pay us if conditions were reversed.
Of course I have no information as to what Mexico’s response would be to the proposal outlined above, or as to what answer it will make with regard to the proposed protocol. No intimation has come to me since Ambassador González Roa’s proposal of a payment of $13,500,000 in thirty annual installments, and our declination of that proposal. In talking with Minister Puig yesterday, he said that he thought it was a mistake to incorporate thirty years for payment in the González Roa proposition. “It was too long a term”, he said, “and Mexico ought to pay at the rate of a million dollars a year”. Beyond that he volunteered nothing.
As stated above, whether the proposal set forth here would be accepted or rejected by Mexico, I have no means of knowing. One thing I do feel, and feel strongly, is that in submitting it we would [Page 403] be proposing what is manifestly fair and just in view of Mexican pledges and all the present day conditions. I do not hesitate to say that, if there had been no 1923 treaty, I would not feel we should hold the Mexican Government of 1934 responsible for the acts that occurred during the periods of revolution, beginning with the murder of Madero and continuing for years. It is “nominated in the bond”, however, that they shall pay to us as they have agreed to pay to European nations. Therefore, our Government is committed to press for such payment as other enlightened nations will receive for like injuries and damages in the same period. Beyond that, my judgment does not dictate our Government should go in seeking payment to claimants.
I will promptly report the response to the proposition for the proposed protocol and await your further instructions.
Respectfully yours,
- Ante, p. 385.↩
- Foreign Relations, 1933, vol. v, p. 814.↩
- General Claims Convention, signed September 8, 1923, Foreign Relations, 1923, vol. ii, p. 555.↩
- William M. Malloy (ed.), Treaties, Conventions, etc., Between the United States of America and Other Powers, 1776–1909 (Washington, Government Printing Office, 1910), vol. i, pp. 1101 and 1128.↩
- Foreign Relations, 1932, vol. v, p. 740.↩
- Ibid., p. 742.↩
- Foreign Relations, 1932, vol. v, p. 746.↩