Memorandum by the Counselor of the Deparment of State (Moore)

I regret to say that the note of March 16, 1940 is a most unsatisfactory discussion of a subject that has been under consideration in one way and another for two years.

The note asserts that the “right of expropriation is beyond discussion” but it fails to recognize that the right cannot be exercised without making effective adequate and prompt compensation to the owner or owners of the property seized. In this instance, not only has there been a failure to make such compensation, but thus far there has even been a failure to make any specific offer of compensation. As heretofore stated in another connection, expropriation, without compensation of the character indicated amounts to confiscation.

The note refers to a suggestion of arbitration which is said to have been made by the American owners of the oil properties that were seized. It is only necessary to say that the suggestion was not made by this Government, which is exclusively concerned with the claims of its own nationals. Relative to possible arbitration, it is very much desired to ascertain whether the Mexican Government is willing to submit to the decision of an impartial arbitration tribunal all of the questions pertaining to the American claims that have been raised or can be raised for final adjudication, and that Government is invited to furnish definite information as to its attitude in that regard.

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Nothing apparently could be gained by this Government extending its “good offices” as proposed in the note, whatever that may mean, nor could anything be gained by the appointment of experts as proposed to develop “points of view regarding the calculation of the value of the expropriated properties and regarding the form and guaranty of the payment of indemnity”. The experts would not be vested with any such jurisdiction as would be vested in an arbitral tribunal, and their recommendations would in all human probability be as inconclusive and futile as apparently have been the results of the conferences between the property owners and the Mexican Government.

At this moment it would seem entirely irrelevant to comment on the statements contained in the note as to the “El Aguila Company” or to comment upon the alleged refusal of the American owners to enter into certain negotiations which it is apparent excluded the possibility of a consideration of some of the basic questions involved.

Unless the Mexican Government, as I am not willing to believe, desires to limit the effort of this Government to obtain a full recognition of the legal rights of its nationals, and complete and adequate indemnity for the injuries they have suffered or may suffer, it is my belief that that Government will promptly agree that the only method of disposing of the controversy is by the creation of an impartial arbitration tribunal that would have unlimited authority to canvass and decide all of the legal and practical questions involved.