The British Embassy to the Department of State


His Majesty’s Government have given careful consideration to the State Department’s aide-mémoire of January 11th regarding the Mexican oil controversy in which it was stated that the United States Government were considering proposing to the Mexican Government that so far as American interests were concerned the controversy should be submitted to arbitration. Such a proposal the aide-mémoire stated “would envisage conferring upon the arbitrators the power of instituting a practical method for the fulfilment of their decision.”

His Majesty’s Government are anxious to learn exactly what meaning should be placed upon the words quoted above and in particular to know whether they imply that the terms of reference for the suggested arbitration would be so drafted as to make it possible for the arbitral tribunal, if it considered that the restoration of the properties to the management of the oil companies was the only practical method of securing the execution of its award, to make an order to this effect.

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As His Majesty’s Ambassador explained to the Secretary of State on January 30th42 the objections which His Majesty’s Government originally felt to submitting the oil controversy to arbitration and which were set out in this Embassy’s aide-mémoire of December 12th43 were based on the assumption that under the proposals outlined by the Under Secretary of State in his conversation with His Majesty’s Ambassador on November 14th,44 the arbitral tribunal if it found in favour of the oil companies could only order compensation in the shape of a monetary award. His Majesty’s Government took exception to this proposal since for the reasons given in the aide-mémoire of December 12th they felt that any such monetary award would be altogether illusory.

If however it is intended that the arbitral tribunal should be empowered to make an award whereby the restoration of the properties to the management of the companies could be ordered as the only practical method of fulfilling its decision His Majesty’s Government would be prepared to consider submitting the case of the British companies to arbitration on such a basis by an impartial, disinterested, and appropriate tribunal.

In view of the fact that the essential question to be decided in the case both of the American and the British oil companies is the same, though the claims may differ in minor details, His Majesty’s Government hope that the United States Government will agree that it is desirable that if it is decided to submit the dispute to arbitration the arbitral tribunal should be empowered to deal with both sets of claims. To attempt to deal with the cases separately might well lead to awards based on differing principles, which would almost certainly make both for confusion and injustice and possibly the prejudice of one or both sets of claimants. It is understood that this view is shared by the oil companies themselves, American as well as British, and His Majesty’s Government therefore trust that the United States Government will be prepared to give their sympathetic consideration to the suggestion that any arbitration should cover the claims of both the American and the British companies. His Majesty’s Government themselves are convinced that it would be to the mutual interest of all concerned to have the whole matter settled in one arbitration at which all parties are represented.

Were it decided that the cases of the American and British companies should be dealt with jointly, His Majesty’s Government feel that a very appropriate tribunal to undertake the arbitration would be one composed of three judges selected from the Permanent Court of International Justice at The Hague.

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In view of the fact that both governments would seem to be agreed that the dispute should be submitted to arbitration on the lines set forth in paragraph 2 above, it would seem advisable that consultations should take place between the United States Government and His Majesty’s Government regarding the terms of reference to the proposed tribunal. As explained above His Majesty’s Government feel it essential that these terms should be so drawn as to enable the tribunal, if a denial of justice is established, to order the restitution of the properties to the management of the companies and so as to exclude the possibility of the tribunal being restricted to making merely a monetary award. His Majesty’s Government trust that the United States Government will agree that the two Governments should consult as to the terms of reference. In that case His Majesty’s Ambassador will be happy to depute a member of his staff to discuss the question with the appropriate official of the State Department.

  1. No record of conversation found in Department files.
  2. Foreign Relations, 1939, vol. v, p. 716.
  3. For memorandum of conversation, see ibid., p. 709.