The Secretary of State to Minister Hicks.
Washington, D. C., April 30, 1907.
Sir: The department is earnestly desirous that you take up once more with the Chilean Government a matter which has been outstanding for a considerable period of years, and to recommend to the well-known sense of that Government a claim the circumstances of which have appealed strongly to the department and toward which it has very great sympathy and concern. The reference is to the Alsop claim.
The object of this communication is to lay certain pertinent facts which are believed to be controlling before the Chilean Government, and to obtain from it, in the light of fairness and justice, the best offer of settlement which commends itself to Chile as just and right. With this end in view, you are instructed to present the matter to the Chilean minister of foreign affairs and express the hope and belief of this department that the claim may have the just and even generous consideration of the Chilean Government which it has been led to expect from the favorable assurances heretofore given by Chile in this regard.
It will be remembered that as far back as 1872 an obligation existed on the part of Bolivia to pay to Don Pedro Lopez Gama (to whom the claimants advanced large sums of money and of whom they became assignees in 1875) the value of 200,000 tons of guano. In virtue of the compromise authorized by the Bolivian law of November 22, 1872, it was agreed in cabinet council on December 21, 1872, to recognize the claimant’s right to the value of 150,000 tons at the rate of 7 pesos and 2 reales per ton, equivalent to 1,087,500 pesos. A later cabinet resolution of December 18, 1875, recognized the principal sum of 870,000 bolivianos, which seems to have been equivalent to 1,087,500 pesos, as the amount due, with interest at 8 per cent. These resolutions likewise contained provisions for the manner in which the debt was to be paid. The subsequent cabinet resolutions of January 22 and February 7, 1876, confirmed the amount of the principal sum due. Finally, a definitive settlement was reached which is set forth in the supreme decree of December 24, 1876, ratified December 26, 1876, by John Wheelwright, liquidator of the firm of Alsop & Co., and confirmed by the decree of the National Bolivian Congress February 12, 1878. By the terms of this settlement the principal sum was reduced from 870,000 bolivianos to 835,000 bolivianos; the sum of 230,000 bolivianos was allowed for unpaid interest; and the interest upon the new principal sum was reduced from 8 per cent to 5 per cent. Special provision was made for the” payment of the interest account, and a considerable percentage thereof was paid.
For the payment of the principal sum of 835,000 bolivianos (the Bolivian silver dollar then being worth 96½ cents) two kinds of security were given: (1) A charge was created upon the customhouse at Arica, in which Bolivia then had an interest; and (2) a [Page 139] share was granted in the rich Government mines of Caracoles along the Bolivian littoral. The precise nature of these charges it is perhaps not necessary to discuss, but the important fact is that after the war between Chile and Peru and Bolivia in 1879 and 1880, the territory which had been charged with the payment of these obligations passed into the hands of Chile; and the claimants, deprived of their security, have never been able to recover their debt.
It is not proposed to consider at present the broad question as to whether territory acquired by conquest is acquired cum onere—indeed, such a discussion is quite unnecessary in view of Chile’s action in this case, for in the negotiations prior to the definitive treaty of peace between Chile and Bolivia the question of the charges upon the Bolivian littoral which passed to Chile was fully considered, and it was finally agreed that Chile should assume and satisfy them. It is understood that the delay in the conclusion of the treaty was for years made by Chile the reason for withholding action in favor of the claimants, and meanwhile many assurances were given that eventually their interests would be justly provided for. It has been the confident reliance upon these expectations which has led the department to hope that in the final consideration of the matter full justice would be done, and though disappointed until now, it still has strong grounds for believing that the Chilean sense of fair play will assert itself in a satisfactory settlement of the claim of Alsop & Co.
It will be recalled that as far back as 1891 a preliminary engagement was signed looking to the payment of this claim, for in the preliminary protocol of a treaty of peace between Bolivia and Chile, signed May 9, 1891, known as the Matta-Reyes protocol, in which the definitive transfer of the Bolivian littoral to Chile was provided for, Chile agreed to assume the Bolivian foreign debt, including the credit in favor of Alsop & Co., to the amount of $850,000 with interest; and although the treaty was not perfected, the Chilean minister for foreign affairs stated to the American minister the following year, June 18, 1892, that the Alsop claim amounting to $835,000, as of December 26, 1876, had been mentioned in the protocol as “among the liabilities that the Government of Chile engaged to pay for account of Bolivia.” The correspondence of this period, and of the few succeeding years, between our diplomatic representatives at Santiago and the Chilean minister of foreign affairs, to which you are referred for fuller information, will show the considerate forbearance with which the legation refrained from any action on behalf of American claimants which would in any way tend further to embarrass Chile at a time when, in addition to her domestic troubles, other foreign countries were pressing her for satisfaction of their demands. Again in 1895, when the treaty of peace and friendship was signed on May 18, it was provided that Chile should be bound to pay, in a manner subsequently to be agreed upon, the debts which encumbered the Bolivian littoral, among them being “the credit of Don Pedro Lopez Gama, now represented by the firm of Alsop & Co., of Valparaiso.” The proposed treaty, however, appears to have failed of ratification.
In 1900 the claim was again taken up by the Chilean minister at La Paz, who had proposed to the Bolivian Government the bases for a definitive treaty of peace. The Alsop claim was described as [Page 140] one of those “affecting the Bolivian littoral”, and a stipulation was included for its settlement similar to that contained in the unperfected treaty of May 18, 1895.
The claim was presented to the United States and Chilean Claims Commission in 1901 and dismissed by that commission for want of jurisdiction. The Chilean agent, in support of his motion to dismiss the claim, stated:
It (the claim of Alsop & Co.) is among the liabilities that the Government of Chile engaged to pay for the account of Bolivia. This explains exactly the situation of the claim. The Chilean Government has always regarded it and does still regard it as a liability on the part of Bolivia toward the claimant, and in order to induce the Bolivian Government to sign the definitive treaty of peace which has been negotiated for many years, the Chilean Government offers to meet this and other claims as part of the payment or consideration which it offers to Bolivia for the signature of the treaty. This has always been the position of the Chilean Government and is its position to-day, and if Bolivia signs the treaty the claim of Alsop & Co., as well as the other claims mentioned, will be promptly paid under the treaty engagement as a relief to Bolivia from the liabilities which that Government has incurred and for the account of Bolivia.
“The claimant is therefore,” said the commissioners in their decision, “remitted for relief to the Government of Chile, whose assurances are thus given, and the case is dismissed.”
The claim was again brought by the department to the attention of the Chilean Government through our minister at Santiago during 1903. On December 4 of that year the department received from its minister at Santiago a telegram in which he stated that the Chilean minister of foreign affairs wished to know if an offer would be accepted in settlement of the claim of 954,285 Chilean dollars of 18 pence, and that in case the claimants declined this offer the sum in Chilean bonds would be paid to Bolivia, who would assume responsibility and settle with the claimants. The department telegraphed in reply that the Alsop claimants declined the offer as inadequate, and that the department was unable to recommend its acceptance. It may be stated with regard to the refusal of Chile’s proposition that, irrespective of the enormous depreciation in the value of the coin in which the original indebtedness should have been paid, the offer of December 4, 1903, was less than one-half of the amount to which the claimants were entitled under their agreement of December 26, 1876, with the Bolivian Government.
In view of the disposition of the claim that was afterward made by Chile, it would seem that that Government’s intention as expressed in the telegram of December 4, 1903 to convert her offer of $954,285 into Chilean bonds and turn them over to the Bolivian Government in case of the refusal by the claimants of her offer of cash payment, was never carried into effect.
Not many months after the correspondence by cable in December, 1903, the department received from Minister Wilson a cablegram to the effect that the definitive treaty of peace between Chile and Bolivia would surely be concluded in the course of a few months, and that the Chilean Government would then take up the Alsop claim and give it particular and generous consideration. The department accordingly awaited the action of the Chilean Government with much expectancy. Its disappointment was not little, therefore, when, after the conclusion of the treaty, it was found that the provision for the payment of the Alsop claim would amount to only 525,332 Chilean pesos. Notwithstanding the early negotiations from 1891 to 1900 looking to [Page 141] the conclusion of the treaty of peace, the assurances of payment given by the Chilean agent, to the United States and Chilean Claims Commission in 1901, the reliance by the commissioners upon these assurances, which are quoted by them in their judgment dismissing the claim, and the promise of “particular and generous consideration” given by the Chilean minister of foreign affairs to Minister Wilson in the summer of 1904, the arrangement made by the treaty contemplated a settlement with the claimants at a little more than half of the amount previously offered through Minister Wilson by cable of December 4, 1903 to the Secretary of State. The department, therefore, in a note of January 10, 1905, informed the Chilean minister at Washington that the amount appeared to be “entirely inadequate to the just satisfaction of the claim, and not in correspondence with the previous assurances given by the Chilean minister of foreign affairs to the United States minister at Santiago that the Alsop claim should receive just and even generous treatment.” The department in conclusion stated that it would be pleased, in view of the foregoing, to receive a further offer from Chile corresponding to the expectations raised by its assurances and by the equity of the claimants.
There has recently been brought to the attention of the department the fact that, in addition to article 5 of the treaty of October 20, 1904, providing for the assumption by Chile of the claim of Alsop & Co. and others, and the appropriation of the sum of 2,000,000 Chilean dollars in liquidation of these debts, further memoranda were exchanged between the representatives of the two Governments on the day after the signature of the treaty defining the extent of the responsibility which was laid upon Chile by the assumption of these credits. The Bolivian plenipotentiary inquired whether the purport of the article was to eliminate entirely Bolivia’s liability in the premises, and he requested that the Chilean plenipotentiary state on behalf of his Government whether such was the purport to be given to that article of the treaty.
The Bolivian representative expressed his Government’s understanding of the agreement as follows:
It has been agreed that the Government of Chile shall permanently cancel all of them, so that Bolivia shall be relieved of all liability, the Government of Chile being obligated to answer every subsequent claim presented either by private means or through diplomatic channels, and considering itself liable for every obligation, bond, or ducument of the Government of Bolivia relating to any of the claims enumerated, Bolivia’s liability being entirely eliminated for all time and the Government of Chile assuming all liabilities to their full extent.
The Chilean plenipotentiary replied as follows:
My Government considers that the obligation which Chile contracts by article 5 of the said treaty comprises that of arranging directly . . . . . . for the permanent cancellation of each of the claims mentioned in said article, thus relieving Bolivia of all subsequent liabilities.
It is consequently understood that Chile, as assignee of all the obligations and rights which might be incumbent on or appurtenant to Bolivia in connection with those claims shall answer any reclamation which may be presented to your excellency’s Government by any of the parties interested in the said claims.
The department considers that this language contains ample justification for the ground that, as between Chile and Bolivia, the latter country is relieved of entire responsibility for the payment of [Page 142] the claim of Alsop & Co. in the full amount that may have been due. It does not feel that the offer made in pursuance of the treaty in which their claims are disposed of at a fraction of their original value is a satisfactory settlement of the matter, and it would urge upon that Government, in consideration of all the equities involved, again to submit an offer of settlement.
It must be stated, however, that while as between Chile and Bolivia the former is bound to pay whatever the latter owes to the claimants, the department does not understand that this obligation of Chile to Bolivia, if unsatisfied by Chile, will operate to release Bolivia from her obligation to the claimants concerning unpaid balance of the debt.
It would seem that the various agreements entered into between the two Governments supplementary to and in explanation of the treaty of October 20, 1904, had a peculiarly unfortunate effect upon the interests of the Alsop claimants. It will be recalled that article 5 of the treaty providing for the assumption of the Alsop and certain other debts, which was a part of the consideration moving from Chile in return for the cession of Bolivia’s coast line, appropriated only $2,000,000 to the payment of these debts, whereas it was well known that their face value without interest was $3,185,000.
Some disappointment arising on account of this apparently unjustifiable reduction, the plenipotentiaries on November 15 following signed a protocol which was made public, stating the mutual understanding of the parties as to the meaning of article 5 of the treaty. This understanding, as embodied in the protocol, was that Chile had the right under article 5 of the treaty to reduce the amount of the claims as she might deem proper. The immediate effect of this action upon the claimants whose rights were to be satisfied was to make them feel that they were in the power of the Chilean Government and that they might better take what was offered them than stand out for their rights. It was a prospect full of discouragement to those who had been waiting so long to have justice done them. It did not come to their knowledge or to the knowledge of the department until a comparatively recent date that there had been a further and prior unpublished agreement for a complete assumption of the claims by Chile.
Another consideration which should not be overlooked in the contingency of an inadequate offer of settlement on Chile’s part is the fact that while, as between Chile and Bolivia, the former is bound to pay whatever the latter owes to the claimants, the department does not understand that this obligation of Chile to Bolivia, if unsatisfied by Chile, will operate to release Bolivia from her obligation to the claimants with respect to the unpaid balance of the debt, if the amount accepted can not justly be regarded as a satisfaction of the entire claim. The latter view has already been brought to the attention of the Bolivian Government by the American minister at La Paz, and a copy of this instruction will also be sent to him for his information and guidance as to his future attitude toward the claim.
The phases of the case have been so various that much time has necessarily been consumed by the department in their examination—hence the delay in sending this instruction—and meanwhile [Page 143] the claimants have been patiently waiting for a conclusion to be reached. No attempt is made herein to review the claim from its many standpoints, but it is submitted that enough is set forth to appeal to the high sense of justice of Chile, and in this sense you are directed to lay the matter before the Chilean Government, and to leave with the minister of foreign affairs a copy of this instruction.
I am, etc.,