Foreign Relations of the United States: Diplomatic Papers, 1943, The American Republics, Volume VI

412.11 Oil/161

The Mexican Embassy to the Department of State

[Translation]

Memorandum

The Government of Mexico has given most attentive consideration to the Memorandum of February 16, 1943 submitted by the Department of State of the United States of America in connection with the arrangement—under negotiation—intended to determine the interpretation and the scope of the valuation which fixed the compensation due to the United States nationals whose properties, rights and interests in the petroleum industry in the Republic were affected by acts of the Mexican Government subsequent to March 17, 1938.

With the purpose of obtaining a definitive solution of this matter, in the broadest spirit of collaboration, the Government of Mexico desires to define its attitude by means of the examination of the antecedents which it summarizes below:

1. According to the engagement contracted in the notes which were exchanged at Washington, November 19, 1941⁹⁶ the International Commission of Experts was formed for the purpose of fixing a just compensation for the United States nationals affected by the petroleum expropriation. The said Commission was empowered, by paragraph 10 of the agreement mentioned, to render a joint opinion in which it should fix precisely the indemnities which it might consider proper and recommend the manner and terms of payment thereof. Furthermore, it will be recalled that—in accordance with paragraphs 12 and 16 of the same notes—it was determined that the joint opinion would be not subject to appeal and the compensation and interest fixed by the experts would be of a final character; leaving to the Chancelries only the final decision concerning the form and terms of the payment.

2. On April 17, 1942 the Commission of Experts submitted to the Governments of Mexico and the United States of America a joint opinion resulting from the agreement of the experts. This opinion concludes with five proposals, of which the fourth makes a recommendation while the others are expressed in clearly conclusive form.

Everything seemed to indicate that, with the settlement and the scale of payments which the Government of Mexico submitted to the Department of State on June 30 and July 25, 1942,⁹⁷ the case should be deemed to be settled.

3. Nevertheless, the Department of State thought that the conclusions of the joint expert opinion were susceptible of interpretation and, in its Memorandum of September 9, 1942⁹⁷ it characterized as recommendations the second and third conclusions of the above-mentioned decision. In its judgment, the experts recommended:

(a) That before any payment should be made to the companies concerned the latter would have to deposit in escrow all the documents and instruments of ownership relating to the expropriated properties with a view to delivering them to the Government of Mexico on the date of the complete settlement of the debt;

(b) That the Government of Mexico and the companies should release each other from all unpaid obligations, with the exception of certain claims of the Government of Mexico against the companies; and

(c) That one-third of the amount of the compensation agreed upon by the experts should be paid on July 1, 1942 and the balance in five equal annual installments payable on July 1 of each of the following years.

Furthermore, in the same Memorandum, the attention of the Government of Mexico was called to the fact that six companies whose properties had been affected by acts of expropriation had not been listed in the experts’ opinion and that, of these, the Compañía Petrólera Titania S.A. and the Compañía de Petróleo Mercedes, S.A. had obtained a decision of the Mexican Supreme Court of Justice which implied the return of their properties and rights.

Finally, with the purpose of reaching a definitive solution, the Government of the United States proposed to conclude an agreement along the following lines:

I —That the Government of Mexico should pay the indemnity and interest fixed in the expert opinion.

II —That such payment should be effected in the manner and according to the settlements proposed by the same Government in the course of the formal and informal conversations that were held in the matter.

III —That a general quittance should be declared of obligations and liabilities between the Mexican Government and the expropriated companies; four of the six companies which had been excluded being also considered as included in the opinion.

IV —That the Government of Mexico should assume all claims against the companies; whether fiscal, labor or private.

V —That the companies should deposit in escrow their titles of ownership, documents, et cetera, for delivery to the Government of Mexico at the moment of making the final payment.

VI —That the Government of Mexico should return—in execution of the decision of its Supreme Court—to the Titania and Mercedes Petroleum Companies their properties and rights; granting to them, moreover, additional concessions and giving them facilities for the resumption and increase of their activities.

4. The Mexican Chancelry replied to the foregoing proposal in its Memorandum of November 17, 1942.⁹⁹ It rejected, in the first place, the sixth point, regarding the Titania and Mercedes Companies, as being completely foreign to the negotiations for the purpose of giving execution and practical application to the opinion of the experts, Messrs. Zevada and Cooke. Next, it referred to the manner of the payment of the indemnity and interest fixed by the experts, stating that for it properly to be perfected, the agreement already reached by both Governments only needed to be set forth formally. Lastly it emphasized the impropriety of modifying the experts’ opinion so far as concerns:

(a) The financial liabilities to which the companies mentioned therein were liable; and

(b) the petroleum companies which did not appear by name in the decision of the experts.

As a basis for its attitude on this last point, the Government of Mexico indicated that the experts, Messrs. Zevada and Cooke, when they fixed the indemnity, had in view the existence of certain liabilities against the companies and that, consequently, if the latter were subsequently released from those obligations, the indemnity would be increased by the amount of such charges in violation of the Agreement constituting the expert arbitration, which prescribed that the compensation fixed by the experts jointly could not be changed. So far as concerns the companies which were apparently omitted, it was pointed out that, unless it was shown that the experts failed to comply with the obligations which the Agreement of November 19, 1941 imposed on them, it was evident that all properties of which they had knowledge—including those of the companies which were not listed as appears from the detailed inventory which served as a basis for the valuation—were taken into account when the indemnity was determined and were covered by it.

In spite of the legal strength of the arguments invoked by its Chancelry, the Government of Mexico, in view of the attitude of beneficent compromise and friendly reciprocity which has characterized all the negotiations and agreements for the purpose of putting an end to this matter, made the counter-proposal that: If the Government of the United States of America agreed to consider as included in the expert opinion the six companies not listed (including the Titania and the Mercedes), it would agree in turn to waive the obligations of the petroleum companies which the Zevada–Cooke opinion left against them; and it made clear that there would only be understood as included in the waiver the claims which were within the exclusive jurisdiction of the Mexican courts and not those suits which had been submitted or might be submitted in the future to foreign courts.

5. Now, in the last Memorandum of the Department of State, dated February 16 of the current year, the Government of the United States of America expresses its desire “to receive a more detailed exposition of the attitude of the Mexican Government in relation to the scope of the proposed waiver of obligations”.

Acceding to the request of the Department of State, the Government of Mexico sets forth the following in detail: In exchange for considering the firms Cía. Petrolera Titania, S. A.; Cía. de Petróleos Mercedes, S.A.; J. A. Brown, S. en C; Green y Cía., Doheny, Bridge y Cía. and Cía. Naviera Transportadora de Petróleo, S.A. as expressly included in the Zevada–Cooke opinion, and their demands and claims being covered by the indemnity and interest indicated in the same opinion, the petroleum companies affected by the acts of expropriation to which these negotiations refer shall be deemed to be liberated from:

(a) Taxes and duties not paid to the Government of Mexico;

(b) Payments legally made by the latter for the account of the companies;

(c) Private claims pending in Mexican courts on the date of the opinion, including claims of workers;

(d) Private claims that have been filed or may be filed in Mexican courts and which are within their exclusive jurisdiction.

In virtue of the principle of immunity, universally accepted in international law, the Government of Mexico is not disposed to subject itself to the decisions of foreign courts. Consequently, it finds it impossible to assume the obligation of answering for the suits brought, or which in the future may be brought, in United States courts against the expropriated petroleum companies.

As will be clearly seen from reading all the foregoing, the attitude of the Government of Mexico is most strictly within the spirit and letter of the engagements entered into November 19, 1941. In agreeing to the modification, in the terms of section 5 of this Memorandum, of the third decision of the joint expert opinion of April 17, 1942 (which, from its expressions and purposes, is conclusive and unappealable) the Government of Mexico does so with the purpose of settling discrepancies and concluding this matter on the basis of cordial understanding on which it has been discussed by the two Chancelries.

Being convinced that the American authorities are animated by the same friendly disposition, the Government of Mexico makes bold to hope that the reasoning set forth in this Memorandum will receive from them all the attention it merits and that a conclusion of the negotiations initiated November 19, 1941 may soon be achieved.

Washington , July 24, 1943.

96. For texts of notes, see Department of State Executive Agreement Series No. 234, or 55 Stat. (pt. 2) 1554.
97. Not printed.
97. Not printed.
99. Not printed.