411.12/1780: Telegram
The Secretary of State to the Ambassador in Mexico (Daniels)
50. Your cable No. 38 and despatch No. 1301, April 5.89 Form of protocol with that despatch will be correct for signature after the following verbal changes. [Verbal changes which here follow are omitted.]
It is feared that there is a misunderstanding regarding proposed addition to paragraph 1, Article I of the Convention. The fundamental principle underlying the en bloc settlement of special claims is, of course, equality of treatment with European countries. Clearly, such equality would not result by computing the percentage of payment on different bases for European countries and for the United States. Since the total of our special claims is approximately three hundred millions, a difference of one-half of one percent in the basic rate amounts to one and one-half million dollars of liability. It is therefore of the greatest importance that the calculation of the basic percentage of liability shall be done with accuracy. It has been assumed all along, of course, that the same method of computation would be applied to European claims as to American claims—otherwise the basic consideration of equality would be destroyed. The indicated addition was suggested merely for the purpose of removing any doubts on this subject at the time of actual computation by the Joint Committee provided for in Article V of the Convention. It is incomprehensible how the Mexican Government can think this addition involves any change of principle. While, as you say, there have been certain discussions with respect to a “general average of approximately [Page 454] 2.6 percent”, it has been the basic theory that the question of approximation must be reduced to a certainty by the Joint Committee. That process requires a precise formula. It is only desired that that formula should represent the basic principle of the Convention, namely, equality of treatment. With this explanation, it is believed the objection of the Mexican Government will be admitted to be untenable.
With reference to paragraph 4 of Article IV of the Convention please note the following: supposing claim A for $100,000 is eliminated from special claims settlement because it “in fact or apparently should have been registered only with the General Claims Commission”, but suppose the Commissioners provided for in the protocol should, in applying General Claims Convention, as provided in this provision, find they have no jurisdiction because claim is actually special. The result would be, of course, complete elimination of that claim from both sides as basis for possible liability. That fact will doubtless establish the necessity for alteration in the terms of Mexico’s proposed substitute for paragraph 4, Article IV.
The provision, as originally drafted, was based on the theory that the Commissioners or Umpire having definitely determined in advance which claims were properly classified as general claims before the Joint Committee would be called upon to make the final computation of liability on the special claims. In view of the apparent desire of the Mexican Government to have the Joint Committee begin its work promptly after exchange of ratifications of the Convention, this Government would be willing to accept Mexico’s substitute for paragraph 4, Article IV with the following addition thereto: “or the Special Claims Convention of September 10, 1923 and the Protocol of June 18, 1932, in the event it shall be found by the Commissioners or Umpire to have been improperly eliminated from the special claims settlement”. This seems to be the only means of avoiding the unfortunate possibility indicated above. Also add “case” after “determined in each” in third line from bottom of this provision as contained in Enclosure 3 with despatch 1267 and also correct the date from 1924 to 1923.90
Full powers to sign convention will be sent you as soon as President returns to Washington. Meanwhile confirmation copy of convention as amended herein and heretofore will be sent you by air mail.