852.75 National Telephone Co./337: Telegram

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

66. Referring to Department’s telegram No. 36, April 2, 7 p.m. In accordance with the foregoing instruction I requested on April 3 an interview with the Chief of State. Since the last paragraph of the memorandum to be submitted contemplated a request that instructions issued to restore the management and control of its properties to the International Telephone and Telegraph Company without further delay, I deemed it appropriate to informally apprise the Foreign Minister of what I wished to discuss with his Chief.

On April 6 the Foreign Office telephoned to say that I would be informed on Monday72 on what date Franco would receive me. However, on Monday a further telephonic communication was received inviting me to call on the Foreign Minister today.

This interview lasted an hour and a half. On entering, the Foreign Minister handed me a memorandum, a translation of which follows.

“The Chief of State would be very pleased to receive the American Ambassador, and an interview will be granted whenever requested, it being understood, however, that in such interview there cannot be taken up or discussed administrative questions of the company, as inferred [Page 867] by the memorandum which in fact expresses an idea which does not conform with reality.

The American economic interests in Spain are guaranteed by Spanish law and in accordance with international procedure.

The following case is proof of the interest with which American matters are considered: The International Telephone and Telegraph Company attempted to collect dividends in arrears from the Telephone Company. The representatives of the state alleged the possible prescription of the right to collect and consulted with the Minister of Finance concerning the matter. The latter will reply recognizing the right of the International Telephone and Telegraph and stating that prescription does not exist as regards the right of collection of dividends in arrears.

The state cannot consider the nationality of shareholders of corporations who have a juridicial personality in conjunction with such Spanish corporation; the personality of a shareholder of another nationality not constituting a factor to be given consideration.

Therefore it is a question of interior relations within a company and notwithstanding contracts between companies not subject to state intervention such intervention being limited only to questions of the morality and conduct of the members of the board of directors and to the fulfillment by the company of the laws and decrees of the nation.”

I read this hastily and said to the Minister that the first paragraph filled me with astonishment, that the succeeding paragraphs I would wish to study more at leisure. I said further that I could not but feel that in the face of such an attitude on the part of the Chief of State that my mission had been a failure and that a year of labor in attempting to improve relations between our two countries had gone for naught, that I equally felt that the effect of the note on my Government would be most painful.

The Minister interrupted me here to say I was misunderstanding the Caudillo’s viewpoint; that to receive me on such a mission would indicate that relations between the two countries were not good and that Franco did not wish to admit that this was the case! I returned to the charge remarking that from all I could gather there were elements in the Government that did not wish to see a betterment of relations between the two countries; that these elements were found in the Ministry of Gobernación and went directly back to the head of that Ministry.

Again the Minister interrupted to say that I misapprehended the situation, that the Government was grateful for the credits extended in the matter of cotton and were not unmindful that for oil and other products his Government was dependent on us.

The Minister said further that the difficulty existing between the Company and the Government was pre-eminently one of personalities, that there were violent political passions at work which could only calm through certain removals, and that he expected to hand me in a [Page 868] few minutes a note from the Minister of Gobernación treating the case of each official whose services the Government felt should be terminated. To this I remarked that to him as a soldier it should be apparent that these men who had never been informed of the accusations made against them or given the opportunity to refute them, were being unjustly treated. He replied that the note which he would hand me was naturally for my comment and anything I would submit would be carefully considered.

I then said that the situation was apparently exactly where it was months ago, that the representatives of the majority stockholders were not permitted to take over the property, that the Minister of Gobernación had prevented the holding of the stockholders meeting to renovate and complete a new board of directors and that even those employees not mentioned as undesirable were still prevented from discharging their duties.

The Minister remarked here that the stockholders meeting could be held in 3 weeks but added textually (I wrote it down at the moment) that a stockholders meeting could not be held until the balance sheet was ready to be submitted, for reasons of public order, and that at the end of 3 weeks within which time the balance sheet could be ready was not a long time to wait. I asked him who had told him the foregoing and he named Serrano Suñer.

I pointed out here that from all I could gather the balance sheet could not be ready in 3 weeks and, furthermore, that the reason it had not been prepared before was due, so far as I could ascertain, to the refusal of the Government to allow the American officers of the Company to carry out their auditing duties. I added further that under the law the Company was required to hold its stockholders meeting within a certain time limit which was now exceeded and this by order of the Minister of Gobernación and that there was no reason why a meeting should not be held even without a balance sheet, he returned to his old argument that breaches of public order would be provoked if the balance sheet was not ready at the meeting of stockholders and that he added textually “is a matter of Spanish interior order.”

I returned to what I told him was the unsatisfactory situation in which Franco’s unwillingness to receive me left this whole subject, that my wish in seeking this interview was to post Caudillo concerning certain facts which apparently were not within his knowledge, I felt sure, and to illustrate this assertion pointed out that although the Caudillo himself had promised me the release of all American prisoners in July 193973 it was only within the past few weeks and through the intervention of the Minister of War that the last one had [Page 869] been sent home; I added that equally nearly a year ago the Caudillo at my request had authorized the entry into Spain of Behn,74 that I felt sure he did not mean a mere physical entry but that he should enter and be permitted to carry out his duties; that in both cases the will of the Chief of State appeared to have been defeated. The Minister heard me in silence on these points and finally said that he would faithfully report my words to Franco.

In concluding the interview I repeated to the Minister my sense of disappointment and discouragement, and my fears for the reaction of my own Government to his memorandum and that I could not see that any progress whatever had been made in settling this matter.

The interview took place in an atmosphere of entire courtesy but of some heat on my own side.

Contents of the foregoing communicated to Behn via Embassy at Paris.

  1. April 8.
  2. See telegram No. 136, July 25, 1939, 3 p.m., from the Ambassador in Spain, Foreign Relations, 1939, vol. ii, p. 841.
  3. See ibid .