Foreign Relations of the United States, Diplomatic Papers, 1933, The American Republics, Volume V

825.6374/1138

The Chilean Ministry for Foreign Affairs to the American Embassy in Chile⁵⁷

[Translation]

No. 1956

In conformity with its instructions, the Embassy of the United States has made known to the Ministry of Foreign Affairs, by an Aide-Mémoire of March 24, 1933, the opinion of its Government concerning an order recently given to the Customhouses not to continue collecting a charge of sixty pesos per ton of nitrate which Decree Law No. 12 had established.

After considering the matter attentively, the Ministry of Foreign Affairs hopes that the enclosed Memorandum will demonstrate to the Embassy of the United States the good basis of the measure taken by the Government of Chile and of the position and general points of view which the Ministry maintains with relation thereto.

From the said Memorandum the Embassy of the United States will be able to see how remote (distante) is the situation produced, in so far as the Government of Chile is responsible therefor, from compromising the respect due to international obligations to which the said Aide-Mémoire refers, a matter in which the Government of Chile has always conformed and will conform fully with the principles of International Law which such obligations impose and govern.

Santiago , April 3, 1933.

[Enclosure—Translation]⁵⁸

Memorandum

With regard to the order of the Government of Chile to suspend the collection by the customhouses of the charge of 60 pesos per ton of nitrate which Decree-Law No. 12 had imposed, there exists no contract whatever between the Government of Chile and the holders of the bonds in question, much less international obligations with reference to that matter.

The Compañía de Salitre de Chile which issued the bonds in question, had it had a legal existence, would have been a Chilean corporation with its own juridical personality, in which the Government of Chile would have had no greater participation than that which, within legal limits, it would have had in its capacity of shareholder of the Company.

The order issued by the Government of Chile to the customhouses to suspend the collection above referred to, has not been an arbitrary measure but, on the contrary, a well-founded one, which point will be discussed again further on.

In any case, if the interested parties believe the Government of Chile responsible for the damages which the resolution may have caused them, they should have initiated the judicial action which they believed applicable before the ordinary courts of justice whether the said interested parties are Chilean or foreigners, notwithstanding this these latter proceed to employ the diplomatic channel when they have not exercised and exhausted the remedies which the laws of the country place at their disposition and there has not been a denial of justice in the case.

The established principles of International Law in that sense are enriched with the following citations from Moore’s Digest of International Law:

“The ground of diplomatic intervention in behalf of individuals, for injuries in person or in property, is a denial of justice”. (Vol. 6, page 651).

“In a note to Mr. Hunter of the 23d of July last, the Brazilian minister of foreign affairs positively declined entering into a diplomatic agreement in the case of the John S. Bryan, upon the ground that the claimants had a remedy at law, of which they had not availed themselves. This remedy is understood to be in the nature of an execution against the imperial treasury itself. By a letter to Mr. Hunter from the Department of the 4th of March last, he was instructed to endeavor in a confidential conversation with the minister to induce him to retract his decision. If, however, the minister should adhere to it, Mr. Hunter was to inform the agent of the claimants that the course indicated by the minister must, at all hazards, be pursued before further diplomatic interference on the part of this Government could be exercised.” (Mr. Forsyth, Secretary of State, to Mr. Saltonstall, June 13, 1840, Moore, Vol. 6, page 658).

“A citizen of the United States, residing in Canada, whose property there situate has ‘been destroyed and pillaged by British troops,’ must first seek redress from the ‘tribunals of the country under whose laws he had settled’; and until this remedy has been exhausted he is not entitled to the intervention of the Department of State in his behalf.” (Mr. Buchanan, Secretary of State, to Mr. Larrabee, March 9, 1846, Moore, Vol. 6, page 658).

“The Department of State can not take cognizance of claims which are cognizable by the judicial tribunals of the United States”. (Mr. Seward, Secretary of State, to Lord Lyons, January 12, 1863, Moore, Vol. 6, page 660).

“A claimant must exhaust his remedy before the local tribunals, when there are such, and when he is admitted to equal privileges in them, before he can claim diplomatic intervention”. (Mr. Davis Acting Secretary of State, to Mr. Taylor, October 20, 1871, Moore, Vol. 6, page 661).

“The acts of an inferior judicial authority do not compromise, in general, the responsibility of the State, under the international point of view, when the claimant has not exhausted all legal remedies, such as judicial appeals or in other manner.” (Blumhardt, U. S. vs. Mexico, July 4, 1868, Moore, Arbitration, 3146).⁵⁹

“Moreover, it is believed to be a general rule with all governments to abstain from a direct application for amends in case of injury to a citizen or subject, which injury is capable of redress through the ordinary process of law, at least until reparation shall have been sought through the judicial tribunals.” (Mr. Fish, Secretary of State, to John Warren, February 26, 1875, Moore, Vol. 6, page 661).

In a communication of the British Government, dated November 14, 1928, which is inserted in the volume “Conference on the Codification of International Law, Bases of Discussion, Volume 3, Responsibility of States for Damage Caused in Their Territory to the Person or Property of Foreigners,” publication of the League of Nations in 1929, there is stated the following:

“As was said by His Majesty’s Government in Great Britain in the memorandum enclosed in a note to the United States Government, dated April 24th, 1916:

‘His Majesty’s Government attach the utmost importance to the maintenance of the rule that when an effective mode of redress is open to individuals in the courts of a civilized country by which they can obtain adequate satisfaction for any invasion of their rights, recourse must be had to the mode of redress so provided before there is any scope for diplomatic action.’ (American Journal of International Law, 1916, Special Supplement, page 139).

“The note goes on to point out that this is the only principle which is correct in theory and which operates with justice and impartiality between the more powerful and the weaker nations.

“If a State complies with the obligations incumbent upon it as a State to provide tribunals capable of administering justice effectively, it is entitled to insist that before any claim is put forward through the diplomatic channel in respect of a matter which is within the jurisdiction of those tribunals and in which they can afford an effective remedy, the individual claimant, whether a private person or a Government, should resort to the tribunals so provided and obtain redress in this manner.

“The application of the rule is thus conditional upon the existence of adequate and effective local means of redress. Furthermore, in matters falling within the classes of cases which are within the domestic jurisdiction of the State, the decisions of the national courts in cases which are within their competence are final unless it can be established that there has been a denial of justice.” (Page 206).

The above-cited bases of discussion for the Conference on the Codification of International Law which the League of Nations published in 1929 on the subject “Responsibility of States for Damage Caused in their Territory to the Person or Property of Foreigners” contain the following point XII:

“Is the enforcement of the responsibility of the State under International Law subordinated to the exhaustion by individuals concerned of the remedies afforded them by the municipal law of the State whose responsibility is in question?”

The said publication inserts the replies given on that point by twenty-two of the governments to whom had been submitted the questionnaire containing it.

Not one of the replies was negative, for which reason the said publication adds as a synthesis thereof: “Affirmative replies have been given to this question and this solution has been adopted in recent treaties of arbitration, etc.”

With respect to those treaties of arbitration, it should be recalled that the General Inter-American Treaty concluded at Washington on January 5, 1929, was signed by the Chilean delegates, Messrs. Manuel Foster and A. Planet, with the reservation that Chile does not accept obligatory arbitration “for those questions which, being under the exclusive competency of the national jurisdiction, the interested parties claim the right to withdraw from the cognizance of the established judicial authorities, unless said authorities decline to pass judgment on any action or exception which any natural or juridical foreign person may present to them in the form established by the laws of the country.”⁶⁰

That has always been the doctrine of the Government of Chile on this point.

In the Memoria de Relaciones Exteriores of 1844, Minister Ramón Luis Irrarázaval says:

“It is a recognized rule of International Law that the claims of a Government to a Government through the diplomatic channel in behalf of private parties who complain of injuries or damages and whose rights must be submitted to the cognizance of the tribunals, must be preceded by the corresponding judicial processes. Only in the case of a denial of justice, or of a manifestly unjust sentence, based on the authority of an adjudged case, after the interested parties have availed themselves of all legal remedies; only in this extreme case is there occasion, according to practices of nations, for the claims of a Government to a Government with the object of indemnifying the injured parties.”

The Minister for Foreign Affairs, Mr. Antonio Varas, wrote to the British Chargé d’Affaires in a note of December 14, 1850, on a case of this kind:

“The Government believes that to discuss this claim now through diplomatic channels would be to give to the subject a turn which would not be in conformity with regular and constitutional order, and that the interested party should be content to resort to the judicial authority which, under our laws, is the one empowered to decide all contentious questions.”

By note of July 12, 1852, the same Minister, Mr. Varas, said to the British Chargé d’Affaires:

“The diplomatic measures are in order when a foreigner, who presents a claim against the Government, has availed himself of the ordinary remedies which the laws place at his disposal in order to obtain justice and he has not been heard by the judicial authorities, etc.”

On April 23, 1853, the said Minister for Foreign Affairs, Mr. Varas, wrote to the British Chargé d’Affaires:

“There is no doubt that the injustices of the tribunals committed with respect to a foreigner would give the right to the State to which he pertains to demand reparation through diplomatic channels; but before that injustice has been committed diplomatic intervention would be not only untimely, but also contrary to the independence of each State which has an indisputable right to demand that other States respect the action of its laws and tribunals and allow them to resolve on matters of their cognizance.”

In the Memoria de Relaciones Exteriores of 1861, the said Mr. Varas stated:

“The foreigner who has been injured in his property or in his person must, the same as a Chilean, resort to the judicial authority so that this authority, in conformity with justice and the laws, may pronounce the decision which is applicable. Only in the case that the judicial authority should pronounce a decision openly unjust, without the same channel permitting a correction, would there be grounds to demand diplomatic intervention.”

On January 17, 1863, the Minister for Foreign Affairs, Mr. Manuel A. Tocornal, wrote to the Brazilian Chargé d’Affaires:

“The conditions indispensable to every claim, whose object may be obtained through diplomatic channels, are lacking when there have not been exhausted, on the one part, all the processes and remedies which our laws place at the disposition of the litigants and which constitute a safeguard of his rights, etc.”

The Minister for Foreign Affairs, Mr. Alvaro Covarrubias, said on November 26, 1864, to the Consul in Buenos Aires:

“It is not possible that the Government should interpose its diplomatic action, which could be in order only in case of a manifest denial of justice.”

Without further citations of the Chilean doctrine, all of which are in accord with the foregoing and which could be added in abundance, it is expedient to note that, at the Pan-American Conference in Mexico in 1901, the Chilean Delegation formulated and submitted to the consideration of the Assembly a project which is expressed as follows:⁶¹

“The Parties shall not officially support any claim which must be brought before a court of the country against which the claim is made, except in those cases in which the court may have shown a denial of justice, or an abnormal delay, or an evident violation of the principles of International Law.”

In the Conference on the Codification of International Law, held at The Hague in 1930, the Chilean delegate, Mr. Miguel Cruchaga, stated⁶² that “a State’s municipal responsibility is determined by its national law and that is a precedent of its international responsibility,” and he added: “For the purposes of the Convention which we are drawing up, no international obligation arises, in my opinion, unless the remedies established by the national law and the procedure devised for securing a pecuniary reparation have been exhausted.”

As was said above, in the order which the customhouses have received with respect to the charge of 60 pesos per ton of nitrate which Decree-Law No. 12 had established, there is nothing arbitrary or without consultation (inconsulto).

In the antecedents of the debate in Congress of Law No. 4945 of extraordinary powers on which it was endeavored to base the said Decree-Law No. 12, it was unequivocally established that in the exercise thereof “the guarantee of the State would not be given to the Compañía de Salitre de Chile”. (Page 1131 of the Bulletin of Sessions of the Senate, 1931).

One of the sources of interpretation of the law, in conformity with the general principles which the Civil Code provides in this respect, is “its intention or spirit clearly manifested in the law itself or in a trustworthy history of its enactment”. (Article 19).

The Minister of Hacienda who, endeavoring to exercise the extraordinary powers which the said law No. 4945 granted to the Government, promulgated Decree-Law No. 12, was accused in conformity with the Political Constitution of the State by the Chamber of Deputies before the Senate of having “infringed the Constitution, violated the laws, left others not carried out and seriously compromised the honor of the Nation.” (Page 1 of the Bill of Charges).

Among the bases of the said accusation there was expressly mentioned not only, in general, “to break the word solemnly pledged in the name of the Executive Power with respect to the use which would be made of extraordinary powers which were requested from Congress”, but also, in particular, the promulgation of Decree-Law No. 12 (page 2 of the Bill of Charges).

In the accusation formulated by the Chamber of Deputies before the Senate, the following was said about this last point:

“Shortly after the enactment of the said law of extraordinary powers, the same Minister who before Your Excellency had made such positive statements, promulgated Decree-Law No. 12 of February 24 of the present year, which permitted Cosach to effect the payment of the annual quotas fixed by the same law in a manner different from that fixed by Congress and thus … changed the payment in cash to 7% bonds. The payment of these bonds was guaranteed by a tax of sixty pesos per ton of nitrate which would be exported.

“This aspect of the question alone is serious, since it substantially alters the intention of the legislator. But even more serious yet, is the hidden and malicious part of these provisions. The tax established to guarantee the payment of the bonds issued in favor of the State must serve also to guarantee any other bonds which the same Corporation may decide to issue in favor of individuals.

“Opposing the will of the legislator and breaking the word solemnly pledged before Your Excellency, Mr. Castro Ruiz compromised the guarantee of the State which has gone so far as to use its own Customhouses in order to insure the payment of the obligations which the Company may wish to guarantee in this manner and our sovereignty has been threatened, since it will not be possible that a single quintal of nitrate shall leave our ports unless there has previously been obtained the consent of the bankers which the Company itself has designated to exercise this control.” (Page 32, Bill of Charges).

Under date of November 3, 1931, the Senate approved the accusation thus initiated before it by the Chamber of Deputies against the ex-Minister, Mr. Carlos Castro Ruiz, “for infractions of the Political Constitution of the State, declaring that the accused is guilty of the crime (delito) and of the abuse of power with which he is charged.” (Page 54, Expediente de Acusacion).

With those antecedents, the Government had not only the right but the duty, increased by the situation created for the nitrate industry and the vital necessities of the State leagued with that industry, to order the suspension of the arbitrary and illegal collection which had been prescribed in Decree-Law No. 12.

If that order injured the foreign holders of the bonds arbitrarily and illegally issued (Constituidos), the responsibility for that injury would not fall upon the Government, because its responsibility can be compromised by public authorities or officials who function within their legal powers, but not by the acts which they commit outside of those powers.

According to Article 4 of the Political Constitution of the State, “no magistracy, person or assembly of persons, not even under the pretext of extraordinary circumstances, can attribute to themselves any other authority or rights than those which have been expressly conferred upon them by the laws. Every act in contravention of this article is void”.

Moore says in his Digest of International Law:

“In respect to the liability of a Government for the acts of its agents, a distinction has been drawn in international discussions between different kinds of agents, and, as in private law, between acts done within and those done outside of the scope of the officer’s agency.” (Volume VI, page 740.)

“In the transaction of public affairs, there are two classes of officers, one employed in the collection of the revenues and the care of the public property, who represents the proprietary interest of the Government; and another class, who are the agents of society itself, and are appointed by the Government only in its relation or capacity of parens patriae. For the acts of the former, the Government holds itself responsible in many cases, because their acts are performed for the immediate interest of the Government. But, for the acts of the latter, no Government holds itself pecuniarily responsible. It provides means to make them personally responsible, or to punish them for malfeasance in office, and in so doing it does all which the people have by their constitution and laws required of the Government.” (Cushmg, Attorney General, March 27, 1855, Moore, Vol. VI, pages 740 and 741.)

On the other hand, the Compañía de Salitre de Chile in liquidation has declared itself to be and continues disposed to consider with the greatest interest the proposals which interested individuals have made to it or may make in the future, in order to place the nitrate industry in a position which will best guarantee the legitimate interests of all.

The Government, in its’ turn, will be pleased to see a satisfactory agreement in such sense reached.

Santiago, April 3, 1933.

57. Copy transmitted to the Department by the Ambassador in Chile in his despatch No. 1423, April 5; received April 13.
58. File translation revised.

59. The full text of the above citation from Moore’s Arbitration, p. 3146, reads as follows:

    “Again, in the case of Wm. J. Blumhardt v. Mexico, No. 135, he said: ‘The umpire is of the opinion that the Mexican Government can not be held responsible for the losses occasioned by the illegal acts of an inferior judicial authority, when the complainant has taken no steps by judicial means to have punishment inflicted upon the offender and to obtain damages from him. The umpire does not believe that the Government of the United States, or of any nation in the world would admit such a responsibility under the circumstances which appear from the evidence produced on the part of the claimant, showing that Judge Alvarez was the person to blame, and that it was against him that proceedings should have been taken’”.

60. Foreign Relations, 1929, vol. i, pp. 659, 664.
61. For text of the Chilean project, see Second International American Conference, Mexico, 1901–1902, Organization of the Conference, Projects, Reports, Debates and Resolutions (Mexico, 1902), pp. 273–275.
62. League of Nations, Acts of the Conference for the Codification of International Law, held at The Hague from March 13th to April 12th, 1930, vol. iv, p. 53.