The Chilean Chargé to the Secretary of State.

[Translation.]
No. 122.]

Sir: I have the honor to inform your excellency that I have received instructions from my Government to transmit to your excellency a copy of a note which the minister of foreign relations of Chile addressed to Minister Hicks on April 9 of this year regarding the claim of Alsop & Co.

The honorable Mr. Hicks, in acknowledging the receipt of that communication, stated that it appears to him to be a document of much force and that he does not doubt it will receive your kind and careful attention.

The Government of Chile, on its part, being convinced of the justice of its cause and of the lofty and upright judgment of the State Department of the United States, is particularly desirous that his excellency the Secretary of State should become acquainted with this communication, which examines and analyzes the claim which the firm of Alsop & Co. presented some years ago.

It is also my duty to inform your excellency, in pursuance to instructions received, that this legation is only authorized to furnish to the State Department, if your excellency should deem desirable, antecedents and information regarding this case, the negotiations regarding which have been and are still being conducted in Santiago.

While inclosing to your excellency herewith the note to which I referred, I have the honor to renew to your excellency the assurance of my most distinguished consideration.

A. Yoacham.
[Inclosure—Translation.]

The Minister for Foreigh Affairs to Minister Hicks.

No. 636.]

Mr. Minister: Toward the end of July of last year the chargé d’affaires ad interim of the United States Legation held an interview with me and placed in my hands a note dated June 27, in which he stated that the State Department had given him urgent instructions to resume negotiations with the Chilean Government and commend to its well known sentiment of justice a case which has been pending for many years and the circumstances of which have appealed forcibly to the mind of his Government, just as it has enlisted great sympathy and interest on the part of the Chilean Government, namely, the Alsop claim.

He afterwards transmitted a copy of the instructions received by the legation from the State Department in regard to this matter.

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In these instructions it is stated that “the object of this communication is to set forth to the Chilean Government certain pertinent facts which are believed to be decisive, and to obtain from it, in consideration of good faith and justice, the best offer of a settlement that suggests itself to Chile as just and right.”

These instructions end with the declaration that “the department does not understand that this obligation of Chile toward Bolivia, in case it is not satisfied by Chile, shall have the effect of relieving Bolivia from her obligation toward the claimants with regard to the settlement of the debt (which is still unmade), provided the amount accepted can not be regarded as a settlement of the entire claim.”

Accompanying the note of the chargé d’affaires was an account and itemized statement of the Alsop claim, as it was presented before the tribunal at Washington in 1900, the total amount of the claim being $2,565,246.15 in money of the United States.

During the course of the aforesaid interview, and being hardly acquainted with the subject, I had the honor to state to the chargé d’affaires that, in compliance with the obligations contracted in the treaty of peace with Bolivia, the Chilean Government was willing to pay the amount which belonged to Alsop & Co. according to Article V; that this sum would be paid by means of the bonds issued especially for this purpose, to which would be added the amount of the coupons due, which would be paid in gold; that the payment would be made in consideration of the total cancellation of the debt; and I added that, for the time being, this sum was being retained by an order of the court issued at the request of the daughter of Bolivia’s original creditor, Mr. Lopez Gama.

The chargé d’affaires told me that he desired to communicate this reply immediately, and I offered to visé the cablegram which he would send to the State Department communicating the reply. I did this. The cablegram, dated August 1, 1907, reads as follows:

The ministry of foreign relations authorizes the following information: Chile maintains that her obligation with regard to the claim of Alsop & Co. is limited by Article V of the treaty with Bolivia, and offers 568,192.57 pesos Chilean gold, but the payment will be made only on condition that the claimant acknowledge the payment of the claim in full, so that the debt of Bolivia as well as that of Chile will be canceled. This sum is being retained in the Government treasury by judicial order pending a settlement of the contending claims between the parties.

On November 2 your excellency saw fit to come to the ministry of foreign relations and inform me by instructions from your Government that the amount offered in settlement of the Alsop claim could not be accepted.

You also call attention to this in a note of the same date, in which you furthermore pointed to the circumstances that your legation had received no answer to the note of Mr. Janes of June 27, with the exception of an impersonal acknowledgment of receipt.

On the 9th and 12th of November your excellency came to the ministry of foreign relations to renew your recommendation in favor of the Alsop heirs and to ask certain information as to the manner in which Chile was willing to satisfy them.

In the last of these conferences I had the honor to state that, taking into account the proceeds of the coupons accrued on the bonds from December 10, 1905, up to the same day of the present year, the total amount available for this purpose on the latter date would be 589,870.30 pesos of 18 pence each in bonds and in gold.

I also furnished your excellency with a copy of the document and decree relating to the judicial retention which had been ordered.

On November 19 your excellency sent to the department another communication which appeared to be intended for an acknowledgment of receipt of the copies delivered, but which did not enter into any other consideration in regard to which I took the liberty to ask you to hold another interview.

This interview took place on the 23d. In it I expressed to your excellency the keen regret which I had felt at your last note, which could not be received without explanations, among other reasons because it appeared to change the character of the intervention of the United States Government in behalf of the Alsop heirs, which had hitherto been in the nature of a mere exercise of good offices, and seemed to desire to convert it into a diplomatic claim, although it was clearly set forth in a note of this department that the intervention had only been accepted in the former form; and besides, because it is not permissible for a foreign representative to suggest the administrative procedure through which the department shall put a case submitted to its examination, and much less is it permissible that he shall suggest the course to be followed in a lawsuit pending before the courts.

I added, still in the most kindly and conciliatory terms, that it was incomprehensible why the Alsop heirs were so anxious to have the distraint removed which had been placed by the court on the bonds intended for them, while at the very same time they had refused to accept them in payment of their claim, and I observed that their complaint against the attitude assumed by the Chilean Government with respect to the action begun by Mrs. Juana Lopez Gama was very unjust, when precisely that which [Page 148] the representative of the Government before the courts is the incompetency of ordinary justice to take cognizance of the complaint.

Your excellency saw fit to assure me that your insinuations, which were made in the best intention—viz, that of facilitating the settlement of the Alsop question—were directed solely toward this end, but that if any of these considerations were considered out of the way or objectionable, you had no objection to withdrawing them, and you offered to make a statement to this effect in a new note.

Your excellency then sent to this department your note of November 25, the courtesy of which I can not help acknowledging on this occasion and thanking you for it.

The undersigned, acting on the assumption that the steps taken by the United States Government in behalf of Alsop were merely in the nature of an exercise of good offices, thought that the oral reply given to Mr. Janes satisfied the petition contained in his note of June 27, but the incidents which have occurred subsequently, and which I have just pointed out, make it advisable, on the contrary, to adopt the course of explaining to your excellency in full the opinion which this department entertains of the question.

I have had to acquaint myself thoroughly with the whole history of the case and with the numerous ramifications which characterize and complicate it. Your excellency will permit me to summarize them herein below as briefly as possible.

In 1875 Mr. Pedro Lopez Gama, a creditor of the Bolivian Government by virtue of contracts made with him for the exploitation and exportation of the guano existing on the coast of said Republic, transferred his rights to the business firm of Alsop & Co., of Valparaiso.

This firm was a civil corporation in commendam, organized and registered in the said city in 1870, having three active members of North American nationality, two of them residing in Valparaiso and the other in the United States, and seven silent partners, who are also citizens of the United States residing in this country.

The war of the Pacific came on, and the regions in Peru and Bolivia in which was situated the property whose product constituted the security for this loan (claim) having been occupied by the Chilean arms, the liquidators of Alsop & Co. thought that Chile was responsible to them for its settlement. For this purpose they went before the court of arbitration which sat at Washington in 1894, and which, by virtue of the convention between Chile and North America of August 7, 1892, was to decide all claims made by the citizens of the two countries against the Government of the other. This court declared that it could not pass on this claim owing to lack of time.

During the following year, 1895, my Government arranged the treaty of peace with Bolivia, which was not ratified. In article 2 of this treaty Chile undertook the obligation to satisfy some of the debts which encumbered the Bolivian coast region, among them being included “the debt due Mr. Pedro Lopez Gama, represented at present by the firm of Alsop & Co., of Valparaiso.” It was afterwards agreed that these claims or debts should form the subject of a special settlement and be specified in detail in a supplementary protocol.

Before submitting this treaty to the approval of the National Congress my Government decided to inquire of the representative of Alsop & Co. under what conditions he would be willing to cancel the claim. For this purpose it sent the necessary instructions to its minister at Washington, stating to him that the approval of the treaty would be hastened if the aforesaid firm would reduce its demands to proportions which would be acceptable.

The Chilean minister held several interviews with the representative of the claim, after which he communicated to this department that Alsop & Co. demanded in settlement only the payment of the principal due, which amounted to $360,000 American gold. My Government declined this proposition.

By virtue of the agreement of May 24, 1897, a second court of arbitration convened at Washington in 1900 for the purpose of considering the claims which the first court had not reached. The Alsop claim was presented to this court.

The agent of Chile alleged the incompetency of the court to consider the claim, by reason of the fact that the partnership of Alsop & Co. was a Chilean corporation (legal entity), because it had its domicile at Valparaiso and was recorded on the commercial registers of that city. The court rendered its award on February 8, 1901.

It is appropriate to transcribe here the considerations and the decision of this award.

In the Spanish version signed by the arbitrators we read:

Considering: That Alsop & Co. is a society, “en comandita simple”, duly organized, incorporated, and registered under the law of Chile, with all the formalities of said law and domiciled in Chile; that a society “en comandita simple” (exactly the same as a society anonima) constitutes a juridical person distinct from the partners considered individually; that in accordance with the principles of the civil law, as they are applied to commercial societies, such societies continue to exist during liquidation; that Alsop & Co. being a Chilean society, is a citizen or Chile; therefore, in accordance with article 1 of the convention of 1892, this commission has no jurisdiction over this claim.

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And further on it is added:

Therefore the case is dismissed, without prejudice, however, to any rights which the claimant, or claimants, or Alsop & Co., or its liquidator may have, either through diplomatic intervention or before the Government of Chile, or the courts of Chile. Nor are the merits of this claim impaired in any way by virtue of this decision. According to the brief of the honorable agent of Chile, it is declared that this claim is comprised among the obligations which the Chilean Government agrees to pay on account of Bolivia. The Chilean Government has always considered it and still does consider it as an obligation on the part of Bolivia toward the claimant; and in order to induce the Bolivian Government to sign the permanent treaty of peace which has been under negotiation for many years, the Government of Chile promises to satisfy this and other claims as a part of the payment or consideration which it offers to Bolivia in exchange for the signature of the treaty. This has always been the attitude of the Chilean Government and is its attitude at present, and if Bolivia signs the treaty, the claim of Alsop & Co., as well as the other claims mentioned, will be paid promptly in accordance with the treaty agreements, as a relief to Bolivia from the obligations which that Government has contracted and for the account of Bolivia.

“Consequently,” concludes the award, “the claimant is referred to the protection of the Chilean Government, whose statements are thus expressed, and the case is rejected.”

This was not the only case in which the court of arbitration declared that the firm of Alsop & Co. was of Chilean nationality.

Based on this same consideration, it also rejected claim No. 26, presented by this firm in conjunction with claim No. 31 of Grant-Walker, both being claims in which damages were demanded from the Chilean Government on account of the capture of the North American vessel Sportsman (by a Chilean war vessel in July, 1857).

The award of the Washington tribunal, which involves the good faith of our respective Governments, contains, in summarized form, the following explicit declarations:

1.
The firm of Alsop & Co. is a Chilean person, whatever be the nationality of the individuals composing it, and therefore it could not appear against the Chilean Government as a citizen of the United States.
2.
This decision does not deprive Alsop & Co. of the right to assert their claims against the Government which is under obligation to satisfy them.
3.
The tribunal takes note of the declaration made by the Chilean agent to the effect that, although his Government considers that the claim of Alsop & Co. ought to be paid by Bolivia, Chile offers to settle it by means of the sum which is specified in the treaty of peace with that country as a compensation for the cessions of territory which Bolivia is to make to Chile.
4.
In consequence of the foregoing declaration, the claimant can only be protected diplomatically by the Government of Chile.

And this latter declaration is expressly corroborated in the note which the Chilean minister to the United States addressed to the department under my charge on February 25,1901, which note is all the more authoritative because this minister, together with the minister of Switzerland at Washington, formed the majority of the tribunal which rendered the award.

On the other hand, as regards that part which refers to diplomatic protection, the aforesaid declaration is in perfect accord with the practice uniformly followed in this respect by the Department of State, according to which practice a corporation has, for these purposes, the nationality of the country in which it is constituted. (See Moore, A Digest of International Law, Washington, 1906, vol. vi, par. 984, p. 641 and par. 985, p. 646; see also pars. 982 and 983.)

The mere statement of the foregoing facts will enable your excellency’s enlightened mind to appreciate the extent to which my Government deferred to the firm of Alsop & Co. If it did not permit this firm to appear against it as a North American creditor, it nevertheless promised, in exchange, to give due attention to its claim on signing the treaty of peace.

And, being desirous of settling this matter with facility as well as out of special deference to the United States, where the members of this Chilean firm resided, it gladly accepted the good offices of your excellency’s Government.

In acting thus it cherished the hope that your Government would help to persuade the claimants that it was best for them to moderate their demands with regard to the amount of the debt, thus insuring a settlement which it had not been possible for them to obtain from the Government of Bolivia.

Hence this department, in reply to the various propositions made by your honorable predecessors, made offers of payment which it deemed adequate and just, but which were not accepted, and it reiterated in every case its previous promise to take duly and liberally into account the Alsop claim upon signing the treaty of peace.

The treaty was signed on October 20, 1904, and in Article V it was stipulated that Chile should devote the sum of 2,000,000 pesos gold of 18d. each to the settlement of some of Bolivia’s debts specified in said article. Among them was the “debt acknowledged in favor of Mr. Pedro Lopez Gama, represented by Messrs. Alsop & Co., who had acquired the rights of the former.”

In a document duly recorded on November 15, of the same year, it was set forth that, in accordance with the spirit of said treaty and with the facts which had given rise to it, the Government of Chile reserved full liberty “to examine, classify, and settle the claims enumerated in Article V,” and also that, outside of these obligations, the said Government did not undertake the settlement of any other claim against the Bolivian Government, whatever might be its nature and origin.

[Page 150]

My Government, which thus fulfilled its promise, thought it suitable, before submitting this compact to the approval of the National Congress, to induce all the creditors enumerated in Article V, to accept, in payment of their claims, the amount which belonged to them by virtue of said article. And in order to secure this acceptance on the part of Alsop & Co., my Government instructed its minister at Washington to have a talk with their representative.

While this negotiation was still pending, this department was surprised by a note from the United States minister under date of February 2, 1905, in which, in connection with the ratification of the treaty of peace by the Bolivian Congress, he asked the department to fulfill the promise which it had previously made to give special and even generous consideration to the Alsop claim.

This note was answered on March 21 of the same year, your excellency’s distinguished predecessor being reminded that, through the medium of the Chilean Legation in Washington, propositions had been made to the interested parties in said claim which it was hoped would lead to an early settlement.

Shortly before, on February 11, 1905, a suit was begun in Santiago by the guardian of a demented daughter of Mr. Pedro Lopez Gama against all the members of the firm of Alsop & Co., praying that the transfer be declared null and void which the said Gama had made in 1875 to this firm of the claim against the Bolivian Government.

In the complaint instituting suit it was requested that the bonds intended for the settlement of this claim be retained in possession of the Treasury Department at the order of the court.

In regard to this suit the chargé d’affaires of the United States sent a communication to my department on August 12, 1905, asking information on several points connected with the aforesaid distraint.

In this note he remarked that the acceptance of the bonds on the part of his Government “did not constitute per se a waiver of its right to continue interposing its good offices before the Chilean Government in behalf of Alsop & Co.”

This department, in its reply of September 4 following, stated to the chargé d’affaires that it would make it a point to ask the Treasury Department for the data referred to in the said note in order to transmit them in due course.

At the same time, in order to obviate any doubts as to the scope and nature of these negotiations (and this is a point to which my Government ascribes special importance), it deemed it necessary to observe to the chargé d’affaires that, in view of the fact that the court of arbitration at Washington had declared Alsop & Co. to be a Chilean corporation, it could not assign any other character to the steps taken by said legation in this matter than that of a “simple conciliatory exercise of good offices” (injerencia), undertaken for the purpose of bringing about the agreement which was sought in order to terminate the matter within the limitation of Article V of the treaty of peace.

Besides stating the form in which it accepted the action being taken in behalf of this claim by the United States legation, the aforesaid note of this department declared that it was only out of consideration toward your excellency’s Government that the Chilean Government condescended to include the claim of Alsop & Co. among those to the settlement of which it had devoted a sum within the restricted limitations set forth in the treaty of October 20, 1904, with the Bolivian Government.

This was, Mr. Minister, the status of these negotiations when the chargé d’affaires ad interim of your excellency’s legation presented to me his communication of June 27 of last year.

In this note he confined himself, as I mentioned above, to commending the matter to this Government and to transmitting the instructions which his Government had sent him in regard to the Alsop case, in which instructions the principal points in the history of the case are set forth as well as the negotiations which have taken place in regard to it between the Chilean and United States Governments.

The origin, progress, and nature of the negotiations of your excellency’s Government in behalf of Alsop & Co. being thus set forth in their fundamental outlines, it behooves me now to mention the extent to which my Government has fulfilled its purpose to attend to the claim of this commercial firm in a satisfactory manner.

Chile was under no obligation to take upon herself the payment of this claim, even in part, since it is a principle of international law, supported by numerous diplomatic precedents that, in cases of annexations or cessions of territory there does not pass as of right to the cessionary or annexing nation any debt of the other nation, and that, in order that any debt may thus pass, it is necessary that it shall have been expressly acknowledged by stipulation, which is frequently done out of obvious considerations of equity.

And in the present case the good will of my Government becomes more than manifest if we take into consideration that the Alsop claim had been the object of litigations and compromises on the part of the Bolivian Government, because its settlement rendered it susceptible of very well-founded criticism.

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However, the liberality of my Government in assuming the settlement of this claim by paying a considerable part of it was not duly appreciated by the representative of this firm, who, not being satisfied with the amount assigned to him in the treaty of peace, claimed, as the Chilean minister at Washington saw fit to express it on more than one occasion, that by reason of the fact that this debt was secured by property situated in the territory acquired by Chile in virtue of this same treaty, my Government was under obligation to pay it in its entirety.

Your excellency will realize how inadmissible such an argument is if you consider the fact that the security for the Alsop claim is, like that of many creditors of the Bolivian Government, not a civil law mortgage, but simply a financial guaranty given by the nation for the purpose of insuring the fulfillment of a contract.

I think it would be a waste of time to stop and explain to your excellency the almost unanimous opinion of publicists with regard to the significance or purport of this class of guaranties. They agree that they can neither exist nor be enforced except as long as the nation which gave them exercises its sovereignty over the territory in which the property is situated which constitutes the guaranty or security, the latter losing all its value when the territory passes over to the sovereignty of another nation.

I do deem it opportune, however, to call your excellency’s attention to certain important diplomatic precedents in connection with this subject, in which my Government was a directly interested party.

The creditors of Peru whose claims were secured by guano deposits which passed over to the possession of Chile after the War of the Pacific have fully discussed the nature of this subject before foreign courts.

In the decision of the supreme court of England of April 18, 1877, in the suit of Twycross v. Dreyfus; in the decision rendered by the court of appeals of Paris on June 25 of the same year in the case of Domis and associates v. Dreyfus & Co.; and in the decision rendered in the court of appeals of Brussels on the 4th of August following, it was declared that the plaintiffs were not in reality mortgage creditors as they claimed to be, and that the guaranty which they set up was nothing more than a personal obligation on the part of the Peruvian Government, without any importance from an international standpoint.

On the other hand, the Franco-Chilean court of arbitration, which sat at Lusanne for the purpose of distributing 50 per cent of the net proceeds from the sale of a million tons of guano among the creditors of Peru whose claims were secured by this product, declared Chile to be entirely in the right as regards the value and purport which it ascribed to this guaranty. In consideration D, No. 2, of this award of July 5, 1901, rendered at Rapperswyl, is declared that the existence of the real right which the creditors of Peru claimed to be guaranteed by the guano “is not upheld by the doctrine or the practice of international law, and that this contention is based on an inaccurate juridical understanding of the relations existing between the borrowing nation and the private parties who take the loan.”

Furthermore, in No. 3 of consideration D it is declared “that it is proven that at the time of the Chilean occupation the guano deposits of Peru were not encumbered by any real right (lien) in favor of the creditors of the latter nation.”

If the doctrine above set forth was substantiated with regard to claims which were secured in so special and absolute a manner by guano and saltpeter deposits situated in Peruvian territory, with how much more reason should this doctrine be applied to the guaranties given by the Bolivian Government in favor of Alsop & Co. which did not possess these characteristics.

But this is not the only thing. These guaranties were all the less worthy of consideration on the part of the Chilean Government for the reason that the greater part of them had been given in the form of security on property situated in Chilean territory which my country regained from Bolivia during the War of the Pacific (Caracoles mines), while the remaining security was on property three-fourths of the proceeds of which went to Bolivia by virtue of the truce agreement (right to certain revenues of the Arica customhouse in which Bolivia had an interest), the remainder being devoted to the maintenance of the customs service itself.

Therefore, one of these securities of the Alsop claim was given by Bolivia on territory which was really Chilean, while Bolivia has had almost the entire usufruct of the other since 1884.

I will take up another point.

I believe it my duty to rectify the idea expressed by the State Department in the instructions sent to the chargé d’affaires of your excellency’s legation and transmitted in your aforementioned note of June 27, when it states that your Government is convinced that the Chilean Government ought to pay the claim of Alsop & Co. in full because it so promised the Bolivian Government in the confidential communications exchanged between the plenipotentiary of the latter country and the Chilean minister of foreign relations on October 21, 1904.

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This department trusts that your excellency’s Government will not attach great weight to this circumstance, since the confidential character of those communications render it impossible to ascertain their authenticity and to estimate to what extent they reflected the real thought of both Governments.

But even supposing that these confidential communications were authoritative, they have not the significance which your excellency’s Government has ascribed to them.

In his communication of October 21, 1904, the Bolivian plenipotentiary stated to our minister of foreign relations that the purport which his Government assigned to Article V of the treaty of peace was “that it had been agreed that the Chilean Government shall finally settle all the claims mentioned in that article, so that Bolivia shall have no further responsibility, it being the duty of the Chilean Government to meet every subsequent claim presented by private means or through diplomatic action, considering itself responsible for every obligation bond, or document, of Bolivia at all times, the Chilean Government undertaking to pay them all in their entirety.”

And to his question as to whether this was also the purport which the Chilean Government ascribed to this article, our minister of foreign relations did not answer by assenting plainly and frankly—that is to say, by repeating the words of the Bolivian minister, as is customary when there is a fall concordance of ideas—but in a distinct form, declaring that in his opinion “the obligation which Chile contracts by Article V of the aforesaid treaty comprises that of adjusting directly with the two groups of creditors, recognized by Bolivia, the final settlement of each of the claims mentioned in said article, relieving Bolivia of all further responsibility.

“Consequently,” he adds, “it is understood that Chile, assuming and acquiring all the obligations and rights which may be incumbent upon or due Bolivia in connection with these claims, will satisfy any demand or claim which may be presented by your excellency’s Government on behalf of any of the parties interested in said claims.”

There is a radical difference between these two communications: Our minister did not declare that Chile obligated herself to pay in full all the claims mentioned in Article V, as the Bolivian plenipotentiary expresses it, but to adjust directly with the creditors the final settlement of each one of its claims, thus relieving Bolivia of all further responsibility.

It is not the same thing to obligate oneself to satisfy a claim in full as to obligate oneself to arrange its final settlement, since the latter can be secured not only by means of full payment but also by means of a compromise or similar agreement. And this latter was what the Chilean Government really did.

Before ratifying the treaty of peace, it endeavored to bring about, and it succeeded in bringing about, that all the creditors enumerated in Article V, with the sole exception of Mr. Juan Garday and Alsop & Co., should accept the sums allowed them by the treaty and that they sign the full acquittance.

If it did not wait until the creditors mentioned also signed this agreement, the reason was, as far as the former was concerned, that his claim was very small, and as regards the latter, because it was confident that the negotiations begun for the purpose would result favorably, inasmuch as there was no reason to expect that this Chilean firm would refuse to accept a reduction which the other creditors had no objection to accepting.

The purport of the note in question could be no other than what I have had the honor to state and to maintain the contrary; that is, as one is led to infer from the communication of the chargé d’affaires of the United States, that its meaning is that the Chilean Government acknowledges its obligation to pay in full the claims enumerated in Article V of the treaty—this would be tantamount to supposing that the minister of foreign relations who signed it had exceeded his powers by substantially altering, in confidential communications unknown to the National Congress, one of the fundamental articles of a treaty concluded with all the formalities prescribed by the constitution of the nation and by the law of nations.

Such a supposition would amount to a charge against one of my honorable predecessors, which it can not be presumed that your excellency intended to make.

At all events your excellency will agree with me that agreements contracted in an irregular manner and contrary to the clear and explicit stipulations of a treaty are null and void.

Therefore the natural and lawful purport of the confidential communications of my honorable predecessor can only be interpreted to mean that my Government will satisfy the claims mentioned in Article V of the treaty with Bolivia, but of course only to the extent of the sum therein specified.

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Finally I have no reason for expressing my opinion as to the authenticity of the aforesaid communication, since they do not modify the line of conduct imposed on this Government by the text of the treaty, but I must confirm to your excellency the declaration which I previously made to the chargé d’affaires, to wit, that Chile has made no payment to any of the creditors contemplated in the treaty of peace with Bolivia, nor can she make such payment in future to any other creditor otherwise than in consideration of the total conciliation of the claim.

I consider that the foregoing considerations will leave in your excellency’s mind the impression that the liberality with which my Government has thus far sought to treat the claim of Alsop & Co. does not permit it to assign thereto any larger sum than that to which it has been restricted by the treaty of peace.

Therefore I have the honor to repeat to your excellency that my Government is ready to pay, in bonds, and in consideration of the total cancellation of the claim, the sum of 524,332.81 pesos gold of 18 pence each as principal, and 78,649.92 pesos in gold coin at 18 pence each as interest on coupons due thereon (including the coming coupons which will be due June 10). The bonds earn 5 per cent interest and have an accumulative sinking fund of 1 per cent per annum.

I am sure that upon mature reflection it will appear advisable to the heirs of Alsop & Co. to accept this proposition.

By accepting it they would not only be enabled to obtain the immediate payment of their claims which has been pending so long, but they would be exempted from having it revised and liquidated, as the Chilean Government is authorized to do by virtue of one of the supplementary acts of the treaty of peace, which privilege, if strictly exercised, might result in a considerable reduction of the claim.

Then again they would also escape the effect of the action which the heirs of Pedro Lopez Gama have instituted against them, and as the result of which the bonds intended for the payment of the claim are being retained.

But, although my Government shows what might be called an excessive anxiety to settle this matter promptly and liberally it can not leave unnoticed the fact that your excellency’s legation reserved the right, notably in its communications of June 27 and November 25 of last year, to collect from Bolivia the part of the claim of Alsop & Co. which is not paid by Chile.

Although this case can not happen since Chile is resolved to make no payment whatever unless full settlement of the claim is acknowledged, I trust that your excellency’s Government will not take this stand, since it would be in open contradiction to the award of the tribunal at Washington which declared Alsop & Co. to be a Chilean corporation entitled to diplomatic protection on the part of the Chilean Government only. However, if such an eventuality should occur, for reasons which I can not foresee, this ministry would deem it its duty to communicate in due time with the Bolivian Government, declining all responsibility for any payments which the latter might make in behalf of the aforesaid firm.

My Government does not expect, either, that the United States Government would interpose a diplomatic claim in favor of Alsop & Co. in case the settlement which I have had the honor to propose is refused by the interested parties.

Such a course would not only be contrary to the decision of the aforementioned arbitral award, but it would be in opposition to clearly established doctrines of international law.

It is, in fact, a principle recognized the world over that when a foreigner has rights to assert or damages to claim against a nation, he must appeal to the judicial or administrative authorities of the latter and the nation to which he belongs can not afford him diplomatic protection until after all the legal remedies are exhausted, and then only in very well warranted cases, notably in case of a denial of justice.

The United States has itself recognized the validity of this principle, as it could not help doing, in many instances, sometimes as claimant and sometimes as the party against whom the claim was presented; and it has advised its representatives, in cases of this nature, to respect the laws and authorities of the country in which the event occurs. (Moore, op. cit., Vol. VI, par. 971, pp. 609, 610; pars. 986 and 987, pp. 651–677; and par. 995, p. 708.)

However, if, in spite of all these reasons, the heirs of the Chilean firm of Alsop & Co. should reject the proposed settlement, and if your excellency’s Government in the intention for procuring for them more favorable conditions should decide to turn the good offices which it has hitherto been exercising in their behalf into a diplomatic claim, my Government declares beforehand to your excellency that it could not receive such a claim, and at the same time it declares to your excellency that, in case such an event should occur, it has resolved in advance to invite your excellency’s Government at once to submit the case to arbitration. My Government is very certain that the justice of its contention can not help being recognized by this procedure [Page 154] and it is also certain that this will prevent controversies originating from purely pecuniary questions from disturbing the harmony which we wish always to prevail in the relations between our countries.

I avail myself of the opportunity to reiterate to your excellency the assurances of my most distinguished consideration.

F. Puga Borne.