The Minister of Foreign Affairs to Minister Dawson.
Mr. Minister: Your note of September 17, 1909, has been received at this office. In it you state that, in compliance with instructions received, you must again call the attention of the Government of Chile to the claim of Alsop & Co., and that you hope that this Government, [Page 179] animated by a spirit of sincere justice, will accept one of the two propositions that you present, in the name of your Government, in order to put an end to this claim which is a disturbing factor in the good relations between the two Governments.
To justify these propositions, in compliance with instructions from the Department of State, you state the facts and rights which, in the estimation of your Government, support the claim of Alsop & Co. and establish the obligation of the Government of Chile to settle it as soon as possible.
My honorable predecessor, the Hon. Federico Puga Borne, sent a note, dated March 9, 1908, to your predecessor, the Hon. John Hicks, in which he set out the antecedents and cited different cases and diplomatic precedents which justified the attitude of the Government of Chile in denying her responsibility in the Alsop claim in the terms in which your Government presented it. And because a legal claim and one merely pecuniary was in no way a hindrance to the good and friendly relations that my country had cultivated with yours and sincerely desired to continue cultivating, Señor Puga Borne, in the above-mentioned note of March 9, proposed that, on account of the different views of the two Governments, the solution of the Alsop claim should be submitted to arbitration.
It is indeed gratifying to this department to know that your Government has accepted the proposition to have the question decided by arbitration.
Since this Government is striving to maintain the traditional cordial relations that have always existed between Chile and the United States, I should inform you, in answer to your note of September 17, that in the opinion of the undersigned, the best manner of proving that the discussion about the Alsop claim can be settled by arbitration, is to review rapidly the estimation that our Governments have of the said claim, according to the note of this ministry of March 9, 1908, and the notes of your legation of June 27, 1907,1 and September 17,2 of this year.
I do not believe it necessary, at present, to discuss the antecedents of the claim of Alsop & Co., since this point is very widely known and does not in any way directly affect the controversy that has arisen.
On the contrary, I judge that there is manifest interest in explaining the reasons that your Government sets up for supporting, through diplomatic channels, a credit of private parties against Bolivia, and for claiming that our country is obliged to pay it, for these are the fundamental points from which the difference arises between the two Governments.
Your Government maintains that the representatives of the firm of Alsop & Co. are citizens of the United States, and consequently have a right to the diplomatic protection of that country.
The Department of State believes that the time has come to offer this protection, basing it on the fact that the Government of Chile, on taking possession of the territory of Bolivia, injured, by the application of the Chilean law in that region, the guarantees that the Government of Bolivia had given in favor of the credit [Page 180] of Alsop & Co. This firm, you state, took measures before the Government and courts of Chile in order to save its rights, and since they did not receive satisfaction appealed to the department, which after examining the affair, declared that the proceeding of the Government and courts of Chile was contrary to the principles of international law and amounted to confiscation of property.
According to your Government, the obligation of my country to cancel entirely the credit of Alsop & Co., has a double foundation. On the one hand, the fact that the guarantees which the Government of Bolivia had given by the agreement of December 26, 1876, to insure the said credit, became vain, because the property on which they were given came into possession of Chile as a result of the war with Bolivia, and your Government believes that in conformity to the general principles of international law our country should respect those guarantees; and on the other hand, the fact that the Government of Chile has recognized on repeated occasions the obligation that it has to pay this sum, principally in the projects of protocols concluded between Chile and Bolivia, in repeated promises made by my country to your Government that this credit would be duly dealt with, and in the declaration of the agent of the Chilean Government before the Second Arbitral Commission in Washington in 1900 to consider the claims that citizens of each country might have against the Government of the other.
From all these antecedents your excellency concludes that the Government of the United States can not understand the motive of my Government in refusing to pay the entire sum of the credit of Alsop & Co. This department views the claim in a different light altogether.
A short time ago, and, as your excellency remembers, by the Chilean-North American Convention of August 7, 1892, an arbitral tribunal was formed in Washington. The liquidators of Alsop & Co. appeared before that tribunal, asking that it declare that the Government of Chile was obliged to cancel entirely the amount of the credit. The arbitral commission declared that for lack of time it could not decide upon the claim. By the convention of May 24, 1897, it was agreed to form a second arbitral tribunal for the purpose of settling the claims left over from the first. The liquidators of Alsop & Co. again presented themselves. The agent for Chile maintained that the tribunal could not settle the claim since it was not a United States firm but a Chilean entity (persona juridica chilena), because it had been formed and was domiciled in Valparaiso and was registered in that city.
The tribunal, by its decision of February 8, 1901, declared that the firm of Alsop & Co. was a Chilean commercial partnership and that the claimants had a right to the diplomatic protection of the Government of Chile. And not only in this case did the arbitral commission declare that the firm of Alsop & Co. had the nationality of our country. The claim No. 26 presented by the said firm, together with No. 31, were rejected for the same reason.
The observations on this point contained in the note of the department dated March 9, 1908, excuse me from entering into fuller details. You will only allow me to insist that the declaration contained in the decision of the arbitral tribunal of Washington is in perfect accord with the practice followed by the Department of State, by virtue of [Page 181] which a society has, for the purpose of diplomatic protection, the nationality of the country in which it was formed. (See Moore, A Digest of International Law, Washington, 1906, Vol. VI, sec. 984, p. 641, and sec. 985, p. 646; see also pars. 982 and 983.)
Consequently, there is no doubt that, after the decision of the tribunal of Washington, the credit of Alsop & Co. can not be taken up diplomatically against the Government of Chile. The interested parties should present, in a friendly manner, the rights they believe themselves to have against our country, or bring them before the Chilean judicial authorities. This is the form of procedure established by international law and the one recognized by the Government of the United States in various cases, sometimes in pressing claims and sometimes in meeting them, where it has recommended its agents, in treating the facts of this kind, to respect the laws and authority of the respective countries. (See Moore, work cited, Vol. VI, sec. 912, pp. 248–249; sec. 971/pp. 909–910; sees. 986 and 987, pp. 651–677; see also sec. 995, p. 705.). Only in case where a claim is, without justifiable reasons, not attended to, or of denial of justice, can the Government of the country to which the interested parties belong make a claim through diplomatic channels.
The Government of Bolivia regards in the same light as my own the futility of the protection alleged by the Government of the United States. The last memorial presented to the Congress of Bolivia in 1908 by the minister of foreign affairs, Don Claudio Pinilla, on pages 16 and those following, says as follows:
In fact the Government of Bolivia agrees with that of Chile in considering that the foreign office of the United States has not the right, according to the principles of international law, to support diplomatically the creditors, Messrs. Alsop & Co., for the following reasons:
- 1.
- Because the sum destined to the payment of the said credit was retained by a judicial order by reason of the suit to nullify the contract instituted against Messrs. Alsop & Co. before Chilean courts, by an heiress of Señor Pedro Lopez Gama, it not being practicable in this case to proceed diplomatically, disturbing the jurisdictional laws of a country and in prejudice of private rights.
- 2.
- Because the firm of Alsop & Co. constitutes a moral Chilean personality, as the decision of the Chilean-American Arbitral Tribunal convened in Washington in the year 1900 states, which in one of the considerations of its decision says:
“That Alsop & Co. is a society en commandita simple duly formed, incorporated and registered in accordance with the law of Chile and with all the formalities of the said law and domiciled in Chile.
“Consequently, the social firm of Alsop & Co. being a juridical Chilean personality, quite distinct from the personality of its members, is subject to the laws of Chile, the Government of the United States of America not being able to lend it its support in virtue of the fact that the individuals who compose this society are its citizens, since it can not destroy the juridical character which Messrs. Alsop & Co. hold under the laws of Chile.”
The President of Bolivia, in his turn, in the message delivered to the National Congress of 1908, expressed himself as follows:
As regards the rest, signed as has been the protocol which looks to the adjustment of the form of the payment of the guaranties of our inland railroads, the frontier having been marked and the adjustment concluded for the exchange of some territories whose native proprietors desired to continue in the jurisdiction of Bolivia, there only remains that the honorable Congress should give its approval to these acts in order that the treaty of peace shall be fulfilled in all its parts, including the cancellation of the credits therein enumerated, since such credits have already been paid as appears from the acquittances existing in the archives of our State department, with the exception of that of Alsop, which, because it is a Chilean firm, can not move except within and in conformity with the laws of Chile nor receive other diplomatic protection than that which belongs to the department of foreign relations of that country, as in conformity with the rules and principles of international law the arbitral tribunal [Page 182] declared in its decision of February 8, 1901. Said credit will be canceled when its representatives desire to receive the funds deposited for its payment and lately attached by judicial order because of a suit instituted against Alsop by an heir of Lopez Gama.
Notwithstanding the incontrovertible force of the aforesaid antecedents, your excellency’s Government considers that the decision of the tribunal of Washington does not prevent it from affording diplomatic protection to the firm of Alsop & Co.
Before supposing that the Government of your excellency does not show a disposition to respect this decision, I put myself in the position of admitting that it does not attribute to it the interpretation which my Government and that of Bolivia give to it, but a different one. In such an event this disaccord which is merely of a juridical character can be satisfactorily solved by arbitration.
Putting ourselves under the merely hypothetical supposition that the decision of the tribunal of Washington should not be of any force, I am sorry to point out to your excellency that it would not be possible for this Government to admit the reasons alleged by that of your excellency for diplomatically supporting the aforesaid claim.
The allegations of your excellency are related with those relative to the obligation which, according to the Government at Washington, my country is under to cancel the entire credit of Alsop & Co. I shall examine them jointly.
One of these reasons is that the Government of Chile having occupied, at first temporarily, and afterwards having definitely acquired the territory in which the property constituting the said guarantee was situated, is, because of that, responsible for the said credit just as was the Government of Bolivia.
These securities, according to the agreement of December 26, 1876, between the claimant and the Bolivian Government, were of two classes: A part of the receipts of the Arica customhouse which Bolivia received by virtue of the agreement signed by Peru, and a certain percentage of the proceeds of some silver mines belonging to Bolivia and situated on the coast.
The guarantees in question have in no way the character of actual right (derecho real); by them the only act done was to assign the proceeds of certain property to the payment of the credit.
In the note from this department to your legation, dated March 9, 1908, it is stated that not only the opinion of public men, but principally in the decisions of national and international tribunals guarantees like those given in favor of Alsop & Co. do not partake of such a mortgage character as to cause them to be respected by the annexing State and have no international importance.
Your excellency will allow me to state here the principal judicial decisions which I have just alluded to.
In the decision pronounced on April 18, 1877, by the supreme court of justice of England, in the suit of Twycross v. Dreyfus, it is declared that it is impossible to consider seriously as a mortgage or security that which the Government of Peru agreed to, on giving as a guarantee her deposits of guano.
In the decision that the court of appeals of Paris passed on the case of Domis and Associates v. Dreyfus Bros. & Co., June 25, 1877, the following reason is found:
Considering that in spite of the expressions, frequently employed, of agreement, pledge, assignment, general and special mortgage, it appears that the Government [Page 183] of Peru has done no more than to pledge in a general manner, as an ordinary debtor, to the service of each one of its loans, the receipts and rights that it designated itself, without excluding those of any other nature that might belong to it.
The court of cassation, August 24, 1878, declared the appeal made against that judgment inadmissible. (Sirey, year 1878, I, pp. 345 and following.)
The court of appeals of Brussels, in a judgment rendered August 4, 1877, expressed itself as follows:
Considering that the obligations contracted by the Government of Peru, according to Article VI of the general undertaking, in which, after indicating all its receipts, it declares under the pledge of the national honor, that it pledges the net proceeds arising out of the sale of guano, are evidently nothing else than pledges of honor as the supreme court of England decided on April 18, 1877.
The Franco-Chilean Arbitral Tribunal that sat at Lausanne in conformity to the Chilean decree of February 9, 1882, and Articles IV and VI of the Pact of Ancon, and whose task was to distribute 50 per cent of the net proceeds of the sale of a million tons of guano among the creditors of Peru, whose credits and titles were sustained by the guano, decided that our country was entirely right with respect to the force and scope that she attributed to that guarantee. Resolution D No. 2 of the decision of July 5, 1901, rendered at Rapper-schwyl, declares that the existence of the right that the creditors of Peru pretend to have guaranteed by the guano “is not confirmed by doctrine nor practice of international law; and said pretension is supported by an inexact juridical appreciation of the relations existing between the State debtor and the parties taking the loan.” And further on it adds that in the text of the general obligation of the loan of 1870 “the term mortgage often repeated is manifestly employed in an improper manner, in the general meaning of promise or guarantee;” and that “the pretended mortgage of the holders of titles of 1870 only consisted in the obligation acquired by the Government to affect the proceeds of the exportation of guano to the canceling of the debt.” And in No. 3 of the same resolution D it declares “that it remains established that, at the time of the Chilean occupation, the guano fields of Peru were not burdened with any real right in favor of the creditors of the State.” Finally, in the same number and resolution it also made evident that the French Government, in a note directed to the Chilean minister at Paris, March 12, 1881, took the same view as Chile with respect to said material.
Your excellency’s Government, in a recent case of great international importance, has applied the same doctrine as that contained in the judicial decisions that I have just cited. In the conference held in Paris in 1898 to settle the conditions of peace between the United States and Spain, the commissioners of your Government refused to accept the responsibility for any part of the Spanish debt in Cuba or Porto Rico, although it might have the character of a mortgage. (See Moore, op. cit., Vol. I, sec. 97, pp. 351–385.)
That is not all. The assurances constituted by the Government of Bolivia in favor of the credit of Alsop & Co. are so much less worthy of the consideration of the Government of my country, since the greater part of them had been constituted on property situated in Chilean territory that my country recovered from Bolivia in the Pacific war (Caracoles mines) and the rest from property three-fourths of the proceeds of which went to Bolivia in virtue of the truce covenant [Page 184] (the right to certain receipts of the Arica customhouse, in which Bolivia had an interest), the other fourth part being destined to the maintenance of the service in the same customhouse. So that of the guarantees of the credit of Alsop & Co. one was granted by Bolivia in territory that was really Chilean, and the other has been enjoyed almost entirely by the former country since the year 1884.
With these antecedents given it is easy to prove that Chile does not affect any responsibility for the guarantees which the Government of Bolivia granted in favor of the credit of Alsop & Co.
Again, Mr. Minister, we are facing questions of pure law concerning which the appreciations of the two Governments are contradictory, which controversy can be ended by the decision of an impartial authority who may decide whether the theory sustained by your Government or that defended by my country is the one that comes nearest the doctrine and practice commonly admitted by international law.
This department believes that the second reason expressed by your excellency to maintain that my country is obliged to pay the entire credit of Alsop & Co. has no more judicial force than the former. I shall pass on to it.
In the note of the 17th your excellency states that the Government of Chile, in the draft treaties of peace with Bolivia and other acts of this Government, has manifested itself disposed to cancel the credit of Alsop & Co. I am glad to recognize the effectiveness of that assertion, adding that my Government proceeding in this form, did it, not because it recognized that it was obliged to pay that credit, but through special deference to the Government of your excellency, and on the account of Bolivia.
In spite of this, Chile, making use of her privileges, resisted tenaciously before the arbitral tribunal in Washington the appearance of the Alsop firm against her as a North American creditor, by that she did not cease to be always ready to take into consideration this credit which did not bind her. The creditors and your Government had manifested special interest that Chile should take charge of it, including it among the creditors that she was disposed to pay on the account of Bolivia, up to a certain amount, and as a part of the idemnization that she would give to that country for the grants of territory.
My Government, then, has never offered to pay this credit in full, but has always limited itself to the propositions it considered most fit. Thus it is explained because, in the different projects of treaties of peace with Bolivia, the credit of Alsop & Co. has always appeared with different sums. Chile had no motive for assigning invariably in these projects a fixed quantity; the only thing that she has admitted was that she would consider this credit among those that she had taken in charge, within certain limits, in her arrangements with Bolivia.
In the treaty of peace of 1904 the Government of Chile destined the sum of ₱2,000,000 gold at 18d. to pay therewith, pro rata, the credits indicated in said treaty among which that of Alsop & Co. was included.
There is no reason whatever why this credit should be privileged with respect to the others, and should be paid entirely or by a sum greater than that which corresponds to it in the pro rata distribution.
The same should be said of the different promises or offers made by my Government to yours for settling this claim. For that purpose, my country, without giving weight to the decision of the arbitral tribunal of 1901, has gladly accepted the good offices of your excellency’s [Page 185] Government to come to an agreement with Alsop & Co.; but she has always protested that your Government, not recognizing the weight of that decision, has always protected this Chilean firm through diplomatic channels. In the estimation of my Government all the questions that have come up between the two Governments concerning this case have never been more than friendly efforts.
The efforts made by my Government on various occasions to cancel the credit of Alsop. in the way in which it has always intended to do it, have never been to pay it entirely, but to cancel it with a smaller sum or with that which was indicated in the treaty of peace with Bolivia. Your Government has never accepted these offers. Consequently, these different unilateral propositions can not have the character of contractual obligations that your excellency attributes to them. It is impossible, then, to consider offers, constantly refused, as a source of obligation of civil or international character.
The declaration which the agent of Chile made before the arbitral tribunal at Washington to oppose the nationality of Alsop & Co. and to which your Government, with reason, gives so much importance is conclusive in the sense which I have indicated.
That declaration is of the following tenor, according to the decision of the tribunal:
It is declared that this claim (that of Alsop & Co.) is among the liabilities which the Government of Chile engaged to pay for the account of Bolivia. The Government of Chile has always considered it, and still condsiders it, an obligation on the part of Bolivia toward the claimant, and in order to induce the Government of Bolivia to sign the definite treaty of peace which has been negotiated for many years the Government of Chile promises to settle this and other claims as a part of the payment or consideration which it offers to Bolivia as a recompense for the signing of the treaty. This has always been the position of the Government of Chile 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 according to the treaty engagement as a relief to Bolivia from the liabilities which that Government has incurred, and for the account of Bolivia.
Chile has not disregarded, much less eluded, her promise to the Government at Washington to contemplate justly, in the treaty of Peace with Bolivia, the credit of Alsop & Co.; on the contrary, she as honored her word, and since that treaty was signed has informed your excellency’s Government that she has at the disposition of the claimants the amount belonging to them according to said treaty.
I esteem, Mr. Minister, that for brevity’s sake I should omit other reasons that this department has for not being able to accept the assertions of your Government that the Government of Chile is personally obliged to cancel the entire credit of Alsop & Co. In this respect I refer to the cited note of March 9 of the past year.
Permit me, also, honorable sir, to correct a mistake contained in your note relating that this Government has offered the Government at Washington, on various occasions, without ever sending them, documents that justify the attitude it has assumed in this affair. These documents do not refer, as a passage of the note of your excellency seems to indicate, to any proof that the credit of Alsop & Co. is not effective, but to demonstrate, as is indicated in another passage of the same note, that our Government is not juridically nor conventionally obliged to pay the whole of the said credit.
All the documents to which this department’s note of March [April] 9, 1908, and the present one refer are documents which amply justify the position, not only that my Government has not such [Page 186] judicial nor conventional obligation, but also that it has been considerate in vain of your Government and just in vain to the claimants, being ready to pay immediately the sum which, by the Chilean-Bolivian treaty of peace of 1904, belonged to the credit of Alsop & Co., and that the other creditors whose credits have been settled by that treaty have gladly accepted their share, in spite of having equal or better right than the firm of Alsop & Co.
This department has always believed that those antecedents would convince the Government at Washington of the rectitude of our proceedings, and as your excellency so truthfully says, that Government, understanding things, would not insist on pressing the claim.
I sincerely hope, Mr. Minister, that with this note I have convinced the just and impartial mind of the Department of State of the justice of our cause and the sincerity with which we defend it.
In any case it appears undeniably evident that there is a difference of opinion between the two Governments as to the judicial rights in this case, a difference that is not political, not of vital interest, and in which the national honor is not at stake, and, consequently, may be satisfactorily settled by arbitration, as my honorable predecessor, Señor Puga Borne, proposed to your legation.
The arbitration should be broad and thorough, corresponding to the loyalty and good faith with which both parties support their convictions; consequently, all questions that divide us on the subject should be effectively solved.
To that effect, allow me to submit to your excellency’s consideration the following project of protocol, which, in essence, agrees with the one which your excellency sent to this department in your note of September 17 of the present year.1
I take, etc.,