411.12/2471

The Secretary of State to the Ambassador in Mexico ( Daniels )

No. 1855

Sir: The Department has received and carefully considered your despatch no. 5811 of December 11, 1937 and the enclosed memorandum of December 1, from the Mexican Foreign Office. With a view to assisting you in your further negotiations with the Mexican Government, the Department desires to direct your attention to certain phases of the background of the claims negotiations and to indicate to you the reasons for the Department’s feeling that the attitude of the Mexican Government, as explained in its abovementioned memorandum, is unjustified, and for its desire that you procure an agreement to proceed in this matter in accordance with the obligations of paragraph “Fifth” of the Protocol of April 24, 1934.

In this connection the Department would suggest that you review the memorandum enclosed with the Embassy’s despatch no. 1626 of June 30, 1932.90 That memorandum summarizes the negotiations which had taken place between the two governments with respect to the pending claims matters up to that date. An examination of that memorandum, especially from pages 31 to 55 thereof, will serve to show you that, at that time, the contention of the Mexican Government was that all of the pending claims, both general and special, should be settled by en bloc agreements; that, in the absence of such agreements, there should be but one further extension of time for the final disposition of all the claims by means of pleadings, and that that period should be limited to two years with a possible extension, in case of extreme necessity, to three years, and that the series of pleadings necessary for the development of the cases should be curtailed as much as possible and that those claims which could not be supported upon the merits should be withdrawn. When negotiations were initiated for the purpose of concluding the agreement of 1934, this Government was, in principle, in general agreement with the Mexican Government in all those points except that with respect to an en bloc settlement of the general claims and in the firm belief that it would be utterly impossible to develop both the general and the special claims, even by a curtailed series of pleadings, within three years. It seemed clear that an en bloc settlement of the general claims, in the then existing state of affairs, was entirely impracticable because it was wholly impossible for either government to have any definite idea as to the extent of general liability of itself or the other government on such claims, and because the Mexican Government was insisting upon the validity [Page 696] of the numerous so-called Texas land claims,91 amounting to approximately $235,000,000, which subsequent pleadings have shown to be wholly worthless. In that situation, the en bloc settlement of the special claims and the Protocol of April 24, 1934 were agreed upon as the nearest possible approach to the Mexican Government’s demands. That protocol embodied the principles for which the Mexican Government had contended, so far as concerns the matter of pleading the general claims, and, in accordance with its demands, the time allowed for the development of the cases was limited to about 30 months, whereas the time allowed the commissioners of the two Governments for the consideration of the claims, after being fully developed, was greater than the maximum for which the Mexican Government had contended, namely, more than three years. In this connection your attention is directed to the fact that although the protocol was concluded on April 24, 1934, the Embassy reported, on October 13, 1934 (your despatch no. 1845),92 that the Mexican Government had decided to “continue” as its General Claims Commissioner Dr. Fernandez MacGregor who was already familiar with the claims work and, presumably, with the hundred or more already pleaded cases, that on October 19, 1934, the American Commissioner was appointed in pursuance of the protocol, and that the final report of the two national commissioners was not filed until the end of October 1937. It is obvious, therefore, that, under the terms of the protocol, the commissioners of the two governments were allowed more than three years for the consideration of the remaining claims, after the cases had been completely pleaded for their convenience, and after the elimination by the two Agents of approximately 1500 claims which they did not consider supportable on the merits.

It is hoped that in the memorandum attached to your despatch now under consideration, the Mexican Government contends that the failure of the two commissioners to decide more than 1000 of the claims submitted to their consideration was not due to any fault on the part of the Mexican Commissioner, who, it was said, “has always been prepared and willing to discuss all claims.” In connection with that statement there is quoted below, for your confidential information, and for such discreet use thereof as may properly be made with a view to furthering the next step in the proceedings under the protocol of April 24, 1934, the following quotation from a communication of the American Commissioner, Oscar W. Underwood, Jr.

“During the Mexico City conference in February and March of this year, some cases belonging to these categories [business losses, contract, [Page 697] tax, expropriation and agrarian cases]92a were brought before the commissioners and it then became evident that the commissioners lacked a common objective with regard to such claims.…93 [The discussion of those cases]92a brought to me the realization that the commissioners were about to reach a dead end. I did not, however, let the matter rest with this realization, but subsequently and in fact until June 1937 I sought by deferential suggestion to convey my own impression with regard to the arbitration, which was that the commissioners could reach a substantially successful conclusion if they would continue to make endeavors to reach a common ground for appraising the meritorious cases justly, and I tried to make it clear that I was not disturbed by the fact that there is naturally and historically a peculiar Mexican viewpoint in matters of international law. I suggested that if we should go ahead along these lines, it would become evident that I was willing to recognize the lack of merit of American cases, however large, when they did lack merit; but I hoped for a reasonable showing that those which were meritorious would be recognized as such, rather than be rejected upon points of local municipal law, or those technical but unsubstantial objections which may be made in any case. I asked for suggestions but there was no response. I was forced to the conclusion that present events and the developments of the times are such that conditions are not yet right for a full and free arbitration of these matters between Mexico and the United States.”

There is an obvious inconsistency between the above-mentioned memorandum of the Mexican Foreign Office and Mr. Underwood’s statement unless the Foreign Office intended to make a distinction between “discussing” claims and deciding them.

It will be obvious to you, moreover, that in the conclusion of the protocol and in the development and submission of the pending claims in pursuance thereof, the wishes of the Mexican Government were fully observed and that the failure of the two commissioners to consider and to agree or disagree with respect to all the claims submitted to them, was apparently due to lack of cooperation on the part of the Mexican Commissioner rather than to any fault on the part of the United States. In this connection it is also worthy of note that the failure of the Mexican Government to cooperate fully in that respect apparently was not due to the fact that the services of its original appointee, Dr. Fernandez MacGregor, were discontinued after approximately one year of the three year pleading period and that a new commissioner was appointed, since it is said by the Foreign Office that the new commissioner was “prepared” at all times to discuss the claims.

The objective of the foregoing is to demonstrate to your satisfaction and for your assistance in your negotiations, the fact that there are still pending some 1100 claims, which the two commissioners failed to discuss but wholly without fault on the part of this Government in [Page 698] the matter of compliance with the theretofore expressed demands of the Mexican Government that the claims be disposed of in a maximum of three years.

It is also important for you to have in mind, in connection with the pending negotiations, the fact that paragraph “Fifth” of the Protocol of April 24, 1934 provides that “upon the basis of” the joint report of the two commissioners and “with the least possible delay” the two governments shall “conclude a convention for the final disposition of the claims, which convention shall take one or the other of the two following forms, namely, first, an agreement for an en bloc settlement of the claims wherein there shall be stipulated the net amount to be paid by either government and the terms upon which payment shall be made; or, second, an agreement for the disposition of the claims upon their individual merits.” The report of the two commissioners has now been filed and the obligation of the two governments to conclude the convention called for by that provision of the protocol now unequivocally rests upon them. The memorandum attached to your despatch no. 5811 indicates that the Mexican Government now desires to evade that obligation of the protocol and to proceed to some informal, ex-conventional, en bloc negotiations, without any binding obligation on its part in the matter of the conclusion of an en bloc convention as the only alternative to umpire proceedings on the pending claims, because of the technical contention that since the two commissioners did not succeed in discussing all of their cases, and did not file written opinions in the cases not discussed, it would be impossible, in the event of failure to conclude such an en bloc convention, to continue to the umpire proceedings because there would not be available for submission to the umpire the separate opinions of the two commissioners in the cases not discussed by them. In such a technical contention this Government, of course, cannot in any respect concur. In the first place, the American Commissioner has prepared his opinions in all cases—those not discussed as well as those decided. In the next place, during the pendency of the en bloc negotiations called for by paragraph “Fifth” of the protocol, such opinions are unnecessary and no provision for their use in such negotiations was even contemplated by the protocol. In the third place, if it is the desire of the Mexican Government that such opinions of the Mexican Commissioner be prepared for submission to the umpire, in the event of failure to conclude the en bloc settlement convention, ample time would apparently be available for the filing of such opinions as the umpire proceedings progressed. It could not under any circumstances be conceded by this Government that the failure of the Mexican Government, through its two Commissioners, to cooperate with the American Commissioner in an intensive effort to appraise [Page 699] the claims submitted to their consideration in compliance with the Protocol obligations, especially under the circumstances outlined above, could constitute any proper basis for contending that the obligations of the protocol have thereby been set aside, and that the two governments are now under the necessity of proceeding to further negotiations with respect to the pending claims released from the obligations of either the Convention of September 28, 1923 or the Protocol of April 24, 1934. The Department considers it of great importance to proceed to the conclusion of this long pending matter precisely in accordance with the obligations of the Protocol of 1934, which was the result of several months of negotiations, and therefore expects that the Mexican Government will cooperate in the matter of concluding the further convention called for by paragraph “Fifth” of that protocol by first designating a representative to confer with a representative of the United States with a view to concluding, if possible, an en bloc settlement of the claims. If the Mexican Government is prepared to send such a representative to Washington this Government will, as indicated in the Department’s telegram no. 234 of November 26, be prepared to share in equal proportions the expenses of the two governments in that connection.

It is desired that you take this matter up with the Mexican Foreign Office in the sense of foregoing, emphasizing the fact that this Government cannot concede that such negotiations have any other character than that of compliance with article “Fifth” of the Protocol and requesting that everything possible be done to bring about the beginning of such negotiations “with the least possible delay.”

Very truly yours,

For the Secretary of State:
R. Walton Moore
  1. Not printed.
  2. Mexico submitted claims to the General Claims Commission for Mexican land grants in Texas which were disallowed by the state of Texas, but nothing came of the claims.
  3. Not printed.
  4. Brackets appear in the original.
  5. Omission indicated in the original.
  6. Brackets appear in the original.