File No. 812.512/1935
The Ambassador in Mexico (
Fletcher) to
the Secretary of State
No. 890
Mexico,
April 3, 1918.
Sir: In continuation of my No. 815 of
March 1 last, and in compliance with the Department’s telegraphic
instructions Nos. 895, March 19, and 915, March 26,1 I have the honor to enclose
a copy of my note No. 290 of April 2, 1918, embodying the views of
the Department and the formal protest of the Government of the
United States against the violation or infringement of legitimately
acquired American private property rights involved in the
enforcement of the petroleum decree of the 19th of February
last.
I called upon the Minister for Foreign Affairs on Monday morning, to
inform him, as directed by your telegraphic instruction 895, of the
instructions which I had received with regard to this decree, and I
reminded him that he had informed me in a previous interview that it
was possible that some modifications might be made in the said
decree. He answered that a circular had been or was being prepared,
which would clarify certain features of the decree, but would make
no modifications in substance, and that it was the Government’s
intention to put the decree into effect. Therefore, as reported in
my telegram 925 of April l,1 and as instructed by the Department, I addressed
to him the formal protest enclosed.
In this connection, I enclose a copy and translation of the circular
issued by the Department of Industry, Commerce, and Labor, dated
[Page 713]
March 11, 1918, clarifying
Article 14 of the decree of February 19 last, to which reference was
made in my telegram No. 890 of March 21, the Department’s 936, April
1, and my 925, April 1.
I have [etc.]
[Enclosure 1]
The American Ambassador (
Fletcher) to the Mexican Secretary of State for Foreign
Affairs (
Aguilar)
No. 290
Mexico,
April 2, 1918.
Excellency: The decree of the 19th of
February, 1918, which was published in the Diario Oficial on the 27th of February last,
establishing a tax on oil lands and on oil contracts executed
prior to the first of May 1917, etc., has been brought to the
attention of my Government, and I am under instructions to state
to your excellency that my Government has given most careful
consideration to the effect which this decree, if carried into
operation, will have upon American interests and property rights
in Mexico.
The said decree provides for the imposition of certain taxes on
the surface of oil lands, as well as on the rents, royalties,
and production derived from the exploitation thereof. It is
noted also that among the provisions for the collection of such
taxes is one requiring that payment in kind shall be delivered
to the Mexican Government at the storage stations of the
operators. Articles 4, 13, 14 of the said decree seem to
indicate an intention to separate the ownership of the surface
from that of the mineral deposits of the subsurface, and to
allow the owners of the surface a mere preference in so far as
concerns the right to work the subsoil deposits upon compliance
with certain conditions which are specified. While the United
States Government is not disposed to request for its citizens
exemption from the payment of their ordinary and just share of
the burdens of taxation so long as the tax is uniform and not
discriminatory in its operation, and can fairly be considered a
tax and not a confiscation or unfair imposition, and while the
United States Government is not inclined to interpose in behalf
of its citizens in case of expropriation of private property for
sound reasons of public welfare, and upon just compensation and
by legal proceedings before tribunals, allowing fair and equal
opportunity to be heard and giving due consideration to American
rights, nevertheless, the United States can not acquiesce in any
procedure ostensibly or nominally in the form of taxation or the
exercise of eminent domain, but really resulting in confiscation
of private property and arbitrary deprivation of vested
rights.
Your excellency will understand that this is not an assertion of
any new principle of international law, but merely a reiteration
of those recognized principles which my Government is convinced
form the basis of international respect and good neighborhood.
The seizure or spoliation of property at the mere will of the
sovereign and without due legal process fairly and equitably
administered, has always been regarded as a denial of justice
and as affording internationally a basis of interposition.
My Government is not in a position to state definitely that the
operation of the aforementioned decree will, in effect, amount
to confiscation of American interests. Nevertheless, it is
deemed important that the Government of the United States should
state at this time the real apprehension which it entertains as
to the possible effect of this decree upon the vested rights of
American citizens in oil properties in Mexico. The amount of
taxes to be levied by this decree are in themselves a very great
burden on the oil industry, and if they are not confiscatory in
effect—and as to this my Government reserves opinion—they at
least indicate a trend in that direction. It is represented to
the State Department that the taxation borne by the oil fields
of Mexico very greatly exceeds that imposed on the industry
anywhere else in the world. Moreover, it would be possible under
the terms of the decree, in view of the fact that the Mexican
Government has not storage facilities for the taxes or royalties
required to be paid in kind, by storing the same in the tanks of
the operators, to monopolize such storage facilities to the
point of the practical confiscation thereof until emptied by
order of the Mexican Government or by the forced sale of the
stored petroleum to the operators at extravagant rates.
It is, however, to the principle involved in the apparent attempt
at separation of surface and subsurface rights under this
decree, that my Government desires to direct special attention.
It would appear that the decree in question is an effort to put
into effect, as to petroleum lands, paragraph 4 of Article 27 of
the Constitution of May 1, 1917, by severing at one stroke the
ownership of the
[Page 714]
petroleum deposits from the ownership of the surface,
notwithstanding that the Constitution provides that “private
property shall not be expropriated except by reason of public
utility and by means of indemnification.” So far as my
Government is aware, no provision has been made by your
excellency’s Government for just compensation for such arbitrary
divestment of rights nor for the establishment of any tribunal
invested with the functions of determining justly and fairly
what indemnification is due to American interests. Moreover,
there appears not the slightest indication that the separation
of mineral rights from surface rights is a matter of public
utility upon which the right of expropriation depends, according
to the terms of the Constitution itself. In the absence of the
establishment of any procedure looking to the prevention of
spoliation of American citizens and in the absence of any
assurance, were such procedure established, that it would not
uphold in defiance of international law and justice the
arbitrary confiscations of Mexican authorities, it becomes the
function of the Government of the United States most earnestly
and respectfully to call the attention of the Mexican Government
to the necessity which may arise to impel it to protect the
property of its citizens in Mexico divested or injuriously
affected by the decree above cited.
The investments of American citizens in the oil properties in
Mexico have been made in reliance upon good faith and justice of
the Mexican Government and Mexican laws, and my Government can
not believe that the enlightened Government of a neighboring
Republic at peace and at a stage in its progress when the
development of its resources so greatly depends on its
maintaining good faith with investors and operators, whom it has
virtually invited to spend their wealth and energy within its
borders, will disregard its clear and just obligations toward
them.
Acting under instructions, I have the honor to request your
excellency to be good enough to lay before his excellency the
President of Mexico, this formal and solemn protest of the
Government of the United States, against the violation or
infringement of legitimately acquired American private property
rights involved in the enforcement of the said decree.
Accept [etc.]
[File copy not signed]
[Enclosure 2—Translation]
Circular No. 5 of March 11, 1918, relative to
the taw on petroleum lands and petroleum,
contracts1
In order that parties interested may give due compliance to the
provisions of Article 14 of the decree issued on the 19th ultimo
by the Constitutional President of the United Mexican States,
relative to the tax established on petroleum lands and on
petroleum contracts having for their object the lease of lots
for the exploitation of petroleum and other hydrocarbons which
may exist in the subsoil, this Department makes known to the
companies and persons interested in the petroleum industry that
the declarations they are obliged to present within the period
and under the conditions indicated in Article 14 of the said
decree, shall be made in triplicate, on unstamped paper, and
shall contain the following information:
general data
- 1.
- Name of the company or person;
- 2.
- Residence; city, street, and number;
- 3.
- Present board of directors;
- 4.
- Representative or person empowered to transact business
with the Department of Industry, Commerce, and Labor.
properties owned
- 5.
- Location, giving name, number of the lot, hacienda, municipality, canton or
district, and State;
- 6.
- Date of acquisition;
- 7.
- Area;
- 8.
- Seller;
- 9.
- Price of purchase;
- 10.
- Plan or description of boundaries, indicating the names of
surrounding lands and of their owners.
lands under lease
- 11.
- Location, giving name, number of lot, hacienda, municipality, canton or district, and
State;
- 12.
- Area;
- 13.
- Plans or description of boundaries, indicating the names
of surrounding lands and of their owners;
- 14.
- Owner, of land;
- 15.
- Date on which the owner of the surface made the
lease;
- 16.
- Date on which the declarant made the contract;
- 17.
- Length of contract;
- 18.
- Rental, dominion, and other conditions.
The companies or persons, either the present exploiters or the
last concessionaires of the right to exploit the subsoil of the
leased lands, who should not present their declarations within
the period indicated in Article 14 of the decree to which the
circular refers, shall not be allowed to perform any work
thereon, and shall be caused to suspend such work as they may
have been doing on the lots covering which they may not submit
declarations; this without prejudice to the imposition of the
penalties stipulated by the said decree.
Constitution and Reforms.
Mexico, March 11,
1918.
Secretary,
A. J. Pani
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