Foreign Relations of the United States Diplomatic Papers, 1938, The American Republics, Volume V

812.52/3126a

The Secretary of State to the Mexican Ambassador (Castillo Nájera)

Washington, August 22, 1938.

Excellency: I have the honor to acknowledge the receipt of the Mexican Government’s note of August 3 last delivered to the Ambassador of the United States in Mexico City, which note was intended to be a reply to my note of July 21 addressed to Your Excellency.

I

In my note under reference this Government called to the attention of Your Excellency’s Government the fact that many nationals of the United States, chiefly the owners of farms of moderate size with a claimed value of $10,132,388 which have been expropriated by the Mexican Government subsequent to 1927, have not only been left without any payment for the properties so taken, but likewise without assurance that any payment would be made by the Mexican Government to them within any foreseeable time. I further stated, “The taking of property without compensation is not expropriation. It is confiscation. It is no less confiscation because there may be an expressed intent to pay at some time in the future.”

I said that the Government of the United States cannot admit that a foreign government may take the property of American nationals in disregard of the universally recognized rule of compensation under international law or admit that the rule of compensation can be nullified by any country through its own local legislation.

My Government had in mind that the doctrine of just compensation for property taken originated long in advance of international law. Beyond doubt the question first arose when one person sought to take the property of another. Civilized society determined that common justice required that it be paid for. One nation after another decided that it was fair and reasonable, equitable and right, to accompany a taking of property by payment of just compensation. In due time the nations of the world accepted this as a sound basic rule of fair play and fair dealing. Today, it is embodied in the constitutions of most countries of the world, and of every republic of the American continent; and has been carried forward as an international doctrine in the universally recognized law of nations. There is, indeed, no mystery about international law. It is nothing more than the recognition between nations of the rules of right and fair-dealing, such as ordinarily obtain between individuals, and which are essential for friendly intercourse.

In the reply of Your Excellency’s Government now under acknowledgment the Government of Mexico states that it maintains “that there is in international law no rule universally accepted in theory nor carried out in practice, which makes obligatory the payment of immediate compensation, nor even of deferred compensation, for expropriations of a general and impersonal character like those which Mexico has carried out for the purpose of the redistribution of the land.” The Mexican Government further states that “there does not exist in international law any principle universally accepted by countries, nor by the writers of treatises on this subject, that would render obligatory the giving of adequate compensation for expropriations of a general and impersonal character”, and continues by declaring that while Mexico admits “in obedience to her own laws that she is indeed under obligation to indemnify in an adequate manner” … “the time and manner of such payment must be determined by her own laws” and that such assertion is “based on the most authoritative opinions of writers of treatises on international law.”

My Government has received this contention on the part of the Government of Mexico, I feel it necessary to state with all candor, not only with surprise, but with profound regret.

Reduced to its essential terms, the contention asserted by the Mexican Government as set forth in its reply and as evidenced by its practices in recent years, is plainly this: that any government may, on the ground that its municipal legislation so permits, or on the plea that its financial situation makes prompt and adequate compensation onerous or impossible, seize properties owned by foreigners within its jurisdiction, utilize them for whatever purpose it sees fit, and refrain from providing effective payment therefor, either at the time of seizure or at any assured time in the future.

I do not hesitate to maintain that this is the first occasion in the history of the western hemisphere that such a theory has been seriously advanced. In the opinion of my Government, the doctrine so proposed runs counter to the basic precepts of international law and of the law of every American republic, as well as to every principle of right and justice upon which the institutions of the American republics are founded. It seems to the Government of the United States a contention alien to the history, the spirit and the ideals of democracy as practiced throughout the independent life of all the nations of this continent.

If such a policy were to be generally followed, what citizen of one republic making his living in any of the other twenty republics of the western hemisphere could have any assurance from one day to the next that he and his family would not be evicted from their home and bereft of all means of livelihood? Under such conditions, what guarantees or security could be offered which would induce the nationals of one country to invest savings in another country, or even to do ordinary business with the nationals of another country?

II

The fundamental issues raised by this communication from the Mexican Government are therefore, first, whether or not universally recognized principles of the law of nations require, in the exercise of the admitted right of all sovereign nations to expropriate private property, that such expropriation be accompanied by provision on the part of such government for adequate, effective, and prompt payment for the properties seized; second, whether any government may nullify principles of international law through contradictory municipal legislation of its own; or, third, whether such Government is relieved of its obligations under universally recognized principles of international law merely because its financial or economic situation makes compliance therewith difficult.

The Government of the United States merely adverts to a self-evident fact when it notes that the applicable precedents and recognized authorities on international law support its declaration that, under every rule of law and equity, no government is entitled to expropriate private property, for whatever purpose, without provision for prompt, adequate, and effective payment therefor. In addition, clauses appearing in the constitutions of almost all nations today, and in particular in the constitutions of the American republics, embody the principle of just compensation. These, in themselves, are declaratory of the like principle in the law of nations.

The universal acceptance of this rule of the law of nations, which, in truth, is merely a statement of common justice and fair-dealing, does not in the view of this Government admit of any divergence of opinion. Merely as one of many examples of enlightened authoritative opinion of present times upon this subject, I cite the following authority as a pertinent example.

In 1903 in the arbitration of the Selwyn case which had arisen between the Governments of Great Britain and Venezuela, the umpire in the case stated: “The fundamental ground of this claim as presented is that the claimant was deprived of valuable rights, of moneys, properties, property and rights of property by an act of the Government which he was powerless to prevent and for which he claims reimbursement. This act of the Government may have proceeded from the highest reasons of public policy and with the largest regard for the state and its interests; but when from the necessity or policy of the Government it appropriates or destroys the property or property rights of an alien it is held to make full and adequate recompense therefor.”⁴¹

With regard to the further fundamental issues presented in the reply of Your Excellency’s Government the Mexican Government now advances the surprising contention that it may expropriate property and pay therefor, insofar as its economic circumstances and its local legislation permit, but that if these circumstances and legislation do not make possible the payment of compensation, it can still take the property. If this theory were sound, the safeguards which the fundamental laws of most countries and established international law have sought to provide for private property would be utterly worthless. Governments would be free to take private property far beyond or regardless of their ability or willingness to pay, and the owners thereof would be without recourse. This, of course, would be unadulterated confiscation.

As I stated to Your Excellency in my note of July 21, the Government of the United States cannot admit that any government may of its single will, whether through its municipal legislation or by pleading economic inability, abandon the recognized principle of international law requiring just compensation, whenever the purposes for which expropriation is undertaken may seem to that government desirable.

My Government considers that its own practice has amply demonstrated that it is the consistent friend of reform, that it has every sympathy with misfortune and need, and that it recognizes fully the necessities of the under-privileged. It cannot, however, accept the idea that these high objectives justify, or for that matter require, infringement on the law of nations or the upsetting of constitutionally recognized guarantees. The modern world furnishes many examples of nations which have effected major social reforms, under unusually difficult economic conditions, while complying with every rule of equity, fair-dealing and basic law. Many governments, like the Mexican Government, today face the necessity of planning, as the Mexican Government says it does, for social betterment and for political, social and economic stability. Is it conceivable that in order to attain these desirable objectives it is necessary for governments to rest the entire undertaking on a policy of confiscation? Every sovereign nation is in possession of powers to regulate its internal affairs, to reorganize, when needful, its entire economic, financial, and industrial structure, and to achieve social ends by methods conforming with law.

Instead of using these recognized and orderly methods, the Government of Mexico in effect suggests that whenever special conditions or circumstances obtain in any one country, that country is entitled to expect all the other nations of the world to accept a change in the settled rules and principles of law, which are domestic quite as much as international, solely in order to assist the country in question to extricate itself from difficulties for which it is itself entirely responsible. Specifically, it is proposed to replace the rule of just compensation by rule of confiscation. Adoption by the nations of the world of any such theory as that would result in the immediate breakdown of confidence and trust between nations, and in such progressive deterioration of international economic and commercial relations as would imperil the very foundations of modern civilization. Human progress would be fatally set back.

The policy of expropriation of these lands without any payment as required by law and equity and justice, places this Government in a situation where it must either assert and maintain with all vigor the doctrine of just compensation, or else acquiesce in the repudiation and abolition of that doctrine. Obviously it cannot adopt the latter course. To do so would make it a party to an undermining of the integrity which would characterize the normal relations between all nations and their peoples.

The vital interest of all governments and of all peoples in this question and the imperative need of all countries to maintain unimpaired the structure of common justice embodied in international as well as in basic national law, lead me, particularly in view of the warm friendship existing between the two countries, to appeal most earnestly to the Mexican Government to refrain from persisting in a policy and example which, if generally pursued, will seriously jeopardize the interests of all peoples throughout the world.

III

The Mexican Government rejects the proposal of the Government of the United States that there be submitted to arbitration, in the terms of the General Arbitration Treaty signed at Washington on January 5, 1929, the two following points: first, whether there has been compliance by the Government of Mexico with the rule of compensation as prescribed by international law in the case of American citizens whose farms and agrarian interests in Mexico have been expropriated by the Mexican Government since August 30, 1927, and second, if not, the amount of and terms under which compensation should be made by the Government of Mexico.

The Mexican Government sets forth as its reasons for rejecting the proposal of the United States for arbitration, its opinion that “arbitration should be reserved, as the same Treaty of Washington establishes, for cases of irreducible differences in which the juridical principle under discussion or the act giving origin to the arbitration are of such a character that the two peoples at variance do not find any more obvious way of coming to an agreement”. The Mexican Government continues by stating that, “Such is not the present case, for while it is true that Mexico does not consider that payment of an indemnification for properties which the state expropriates on grounds of public utility is an invariable and universal rule of international law, it is also true that Article 27 of her Constitution ordains payment in such cases, and, therefore, the Mexican Government has never denied such obligation”. “There is no subject matter”, the Mexican Government continues by stating, “therefore, for the arbitration proposed”. Your Excellency’s Government concludes by stating its opinion that, “With respect to the conditions under which the said payment should be made, arbitration is likewise unnecessary and it would, furthermore, be improper under the terms of the Treaty of Washington since the procedures of execution for the carrying out of obligations already recognized by Mexico cannot be a subject for arbitration and would have to be established in accordance with her economic conditions, which cannot but be taken into account by a friendly people, nor can that be the subject for decision of an international court, which by attempting to impose a certain economic organization upon Mexico, would give a death blow to her right to organize herself autonomously, the very basis of her sovereignty.”

The Government of the United States is unable to acquiesce in the reasons so advanced for refusal to accept the proposed arbitration. It is quite true, as the Mexican Government states, that Article 27 of the Mexican Constitution orders payment in cases of expropriation for causes of public utility of private property by the Mexican Government. I need hardly remind Your Excellency, however, that such payments in the cases of the American nationals under consideration have not been made. The very provisions of the Mexican Constitution and of the Mexican laws referred to by the Government of Mexico with such satisfaction have already been negatived in practice. They would now seem to have been abrogated in practical effect by the contention set forth in your Government’s last communication.

While this Government shares the view of the Mexican Government that arbitration should be reserved for cases in which the two countries in conflict can find no other way of reaching an agreement, I may here appropriately quote the first paragraph of Article 1 of the Treaty of Inter-American Arbitration, which has been suggested by the United States as an appropriate vehicle for the friendly and impartial solution of our differences and which reads as follows:

“The High Contracting Parties bind themselves to submit to arbitration all differences of an international character which have arisen or may arise between them by virtue of a claim of right made by one against the other under treaty or otherwise, which it has not been possible to adjust by diplomacy and which are juridical in their nature by reason of being susceptible of decision by the application of the principles of law.”⁴²

I find it necessary emphatically to state that, after many years of patient endeavor on the part of this Government to obtain just satisfaction for these claims without success, the Government of the United States has regretfully reached the conclusion that it is impossible to adjust them by diplomacy. Since they are obviously susceptible of decision by the application of principles of law, it believes that the proposed arbitration is the appropriate and friendly method of solution. Nor can this Government admit that the determination by arbitration of the “amount of and terms under which compensation should be made by the Government of Mexico” is a matter which in any sense impairs the autonomy of Mexico. An agreement to arbitrate on the part of sovereign nations like any treaty as, for example, the Inter-American Treaty of Arbitration itself, ratified by both Mexico and the United States, is a voluntary limitation of the exercise of sovereignty by acceptance of principles of justice, fair-dealing and law. Indeed, the highest attribute of sovereignty is the power to make just such agreements. It is exactly in this manner that civilization has advanced.

Article 1 of the Inter-American Treaty of Arbitration specifies, as questions arising between the American nations which are susceptible to the proposed arbitration: “(b) Any question of international law; (c) The existence of any fact which, if established, would constitute a breach of an international obligation.”

The Government of the United States maintains that in the treatment accorded its nationals by the Government of Mexico, as set forth in my note of July 21, the Government of Mexico has disregarded the universally recognized principles of international law, and that its failure to make adequate, prompt, and effective payment for properties expropriated constitutes the breach of an international obligation. It follows that the controversy which has thus arisen is not one which the Mexican Government can refuse to arbitrate upon the ground that its economic situation impedes it from abiding by the principles of international law, or upon the ground that its municipal legislation provides for a different procedure. My Government, therefore, in the most friendly spirit urges the Mexican Government to reconsider the position which it has taken and to agree to submit to the proposed arbitration the questions at issue between the two Governments, as formulated in my note to Your Excellency of July 21.

IV

The Mexican Government refers to the fact that, when it undertook suspension of the payment of its agrarian debt, the measure affected equally Mexican and foreigners. It suggests that if Mexico had paid only the latter to the exclusion of its nationals, she would have violated a rule of equity. In that connection the Mexican Government refers to Article 9 of the Convention signed at the Seventh Pan American Conference, which says: “The jurisdiction of states within the limits of national territory applies to all the inhabitants. Nationals and foreigners are under the same protection of the law and the national authorities and the foreigners may not claim rights other or more extensive than those of the nationals.”⁴³

Your Excellency’s Government intimates that a demand for unequal treatment is implicit in the note of the Government of the United States, since my Government is aware that Mexico is unable to pay indemnity immediately to all of those affected by her agrarian reform and yet it demands payment to expropriated landowners who are nationals of the United States. This, it is suggested, is a claim of special privilege which no one is receiving in Mexico.

I must definitely dissent from the opinions thus expressed by the Government of Mexico. The Government of the United States requests no privileged treatment for its nationals residing in Mexico. The present Government of the United States has on repeated occasions made it clear that it would under no circumstances request special or privileged treatment for its nationals in the other American republics, nor support any claim of such nationals for treatment other than that which was just, reasonable, and strictly in harmony with the generally recognized principles of international law.

The doctrine of equality of treatment, like that of just compensation, is of ancient origin. It appears in many constitutions, bills of rights and documents of international validity. The word has invariably referred to equality in lawful rights of the person and to protection in exercising such lawful rights. There is now announced by your Government the astonishing theory that this treasured and cherished principle of equality, designed to protect both human and property rights, is to be invoked, not in the protection of personal rights and liberties, but as a chief ground of depriving and stripping individuals of their conceded rights. It is contended, in a word, that it is wholly justifiable to deprive an individual of his rights if all other persons are equally deprived, and if no victim is allowed to escape. In the instant case it is contended that confiscation is so justified. The proposition scarcely requires answer. In addition, it must be observed that the claimants in these expropriation cases did not seek to become creditors of the Mexican Government. They were forced into that position by the act of Mexico herself.

It may be noted in passing that the claim here made on behalf of American nationals is, in substance, similar to the claims which Mexican nationals have against their own Government under the Mexican Constitution adverted to by Your Excellency’s Government. It is, of course, the privilege of a Mexican national to decline to assert such claim, as it is the power of the Mexican Government to decline to give it effect; but such action on the part of Mexico or her nationals cannot be construed to mean that American nationals are claiming any position of privilege. The statement in your Government’s note to the effect that foreigners who voluntarily move to a country not their own assume, along with the advantages which they may seek to enjoy, the risks to which they may be exposed and are not entitled to better treatment than nationals of the country, presupposes the maintenance of law and order consistent with principles of international law; that is to say, when aliens are admitted into a country the country is obligated to accord them that degree of protection of life and property consistent with the standards of justice recognized by the law of nations. Actually, the question at issue raises no possible problem of special privilege. The plain question is whether American citizens owning property in Mexico shall be deprived of their properties and, in many instances, their very livelihood, in clear disregard of their just rights. It is far from legitimate for the Mexican Government to attempt to justify a policy which in essence constitutes bald confiscation by raising the issue of the wholly inapplicable doctrine of equality.

V

The Government of Mexico, in the note under reply, suggests the existence of a number of subsidiary questions. Included in these are questions of the legality of the titles to expropriated property; and considerations of law, equity and valuation arising in individual cases, presenting the problem whether certain claims are just, in whole or in part, and what the amount of certain claims should be. Until the principle of just compensation has been recognized, these subsidiary questions need not be considered. My Government has repeatedly stated that it sought just and not unjust compensation so far as amount was concerned; and that it would support only just and not unjust claims so far as the law and equity of each claim was concerned. But since the Mexican Government has challenged the doctrine of just compensation and proposes to substitute for it, to all intents and purposes, the theory of confiscation, the merits of this fundamental issue must be determined before any others can be considered. It is beside the question to discuss the merits of any claim, or the titles or equities involved, or the facts and factors pertaining to valuation. Once the principle of just compensation is accepted, these become matters relevant to the problem of payment. Until then, their discussion is fruitless.

VI

In concluding the note now under acknowledgment, the Mexican Government invites the Government of the United States “to appoint a representative, so that together with the representative whom my Government would designate, they may fix, within a brief period of time, the value of the properties affected and the manner of payment.” The Mexican Government states that it considers such proposal the execution in part of a “general plan for the carrying out of her obligations in this respect, both in favor of nationals and foreigners”, and asserts its willingness to begin at once the discussion of the terms of this arrangement. In effect, the Government of Mexico now proposes to talk about the valuation of some of the lands of American citizens seized by the Mexican Government in recent years. Yet we have held conversations with regard to payment for many years without result. Seemingly, the Mexican Government proposes to continue the policy of taking property without payment, while continuing discussions of past takings.

In tendering the proposal so made, is the Government of Mexico prepared to agree that no further taking will take place without payment?

Can it hold out any reasonable measures of certainty that a determination of the value of the properties affected and of the manner of payment for them can be had “within a brief period of time”? Pending the reaching of an agreement between the commissioners on all of these points, will the Government of Mexico set aside sufficient cash in order to assure prompt payment in accordance with the terms of the agreement so reached? Is the Government of Mexico prepared to offer satisfactory commitments on these two points?

In the light of its experience in the unfruitful negotiations held with the Mexican Government in recent years on these subjects, my Government believes that, unless the Government of Mexico offers satisfactory commitments on these essential matters, acceptance of the suggestion of the Mexican Government would merely result in discussions which would continue over a period of many years, and which would not achieve that equitable and satisfactory solution which both Governments are assumed to desire. This would assuredly not be the case were resort had to arbitration.

VII

My Government, in its desire to expedite and to facilitate a fair solution of this question in every possible and proper manner, without, however, in any way altering its position as above set forth, will be willing, should the Government of Mexico refuse to agree to resort to arbitration as hereinbefore proposed, to reiterate the proposal contained in the informal communication from Undersecretary Welles to you under date of June 29. Your Excellency will recall that to that communication was attached an itemized list of the claims of American property owners referred to in my note of July 21. It was then suggested that the amount of compensation, together with any subsidiary questions such as the extent of the area expropriated, be determined by agreement by two commissioners, one appointed by the Government of Mexico, the other by the Government of the United States, and that, in the event of disagreement between the two commissioners regarding the amount of compensation due in any case, or of any other question necessary for a determination of value, these questions be decided by a sole arbitrator selected by the Permanent Commission at Washington provided for by the so-called Gondra Treaty, signed at Santiago, May 3, 1923,⁴⁴ to which both our Governments are parties. It was likewise suggested that in order to advance a settlement of the matter, the Governments of Mexico and of the United States name immediately their respective commissioners and request the Permanent Commission to name concurrently the sole arbitrator. This Government further proposed that as an indispensable part of the act of expropriation and compensation, the Government of Mexico should set aside monthly in escrow in some agreed upon depository a definite amount for the exclusive purpose of making compensation for expropriated property as and when definite determinations of value have been arrived at in each case; and that should the determinations of compensation show a reduction from the amounts now claimed, the monthly deposits would be scaled down accordingly.

If the Government of Mexico considers that negotiations for a settlement of these claims have not in fact been exhausted and desires to find an equitable and friendly solution to the question as indicated in the last portion of the note of the Mexican Government of August 3, the most practical evidence of the desire of the Mexican Government to find a fair, friendly and impartial solution would be manifested by its willingness to accept the proposal contained in the communication of the Undersecretary of June 29, and now hereinbefore reiterated. If, on the other hand, the Mexican Government is not desirous of adopting the procedure just outlined embodying safeguards to ensure payment and prevent fruitless negotiation, it would surely seem to be appropriate and fitting, and strictly within the purview of the obligation contracted by both countries under the terms of the Treaty of Inter-American Arbitration for the Governments of Mexico and of the United States to submit their controversy to arbitration in the manner suggested in my note of July 21. In either such case, my Government feels justified in requesting that, during the proposed arbitration, or during the proposed settlement suggested in the communication of June 29, the Mexican Government should agree that no further taking of the properties of American nationals should take place unless accompanied by arrangements for adequate, prompt, and effective payment.

In conclusion, may I say to Your Excellency that this Government has on repeated occasions made manifest its most sincere desire to pursue a policy of intimate and friendly cooperation with the Government of Mexico because of its conviction that the interests of the two nations, as well as the interests of inter-American friendship and solidarity, would thereby be advanced. It is the hope of this Government that it may be able to continue on that course. When two neighbors like Mexico and the United States, jointly desirous of maintaining and of perfecting their friendship, find that differences arise between them which it would appear can unfortunately not be solved by direct negotiations, it is the belief of this Government that the submission of such questions as rapidly as may be possible to an impartial arbitration is the policy required by good neighborliness. I express the very earnest hope of the Government of the United States that the Government of Mexico may speedily indicate its willingness to accede to one of the two alternative proposals above presented.

Accept [etc.]

Cordell Hull

41. Jackson H. Ralston and W. T. Sherman Doyle, Venezuelan Arbitrations of 1903, Senate Doc. No. 316, 58th Cong., 2d sess. (Washington, Government Printing Office, 1904), pp. 325–326.
42. Foreign Relations, 1929, vol. i, pp. 659, 661.
43. Foreign Relations, 1933, vol. iv, p. 215.
44. Foreign Relations, 1923, vol. i, p. 308.