Papers Relating to the Foreign Relations of the United States, 1918

File No. 812.512/2122

Mr. Harold Walker to the Counselor for the Department of State ( Polk)

Washington, July 20, 1918.

My Dear Mr. Polk: The expected crisis has come. The Mexican Government, in defiance of the American Government’s note of April 4 [2], 1918, has issued and published, in violation of a promise made to Garfield and Rhoades not to alter the status quo of negotiations during their absence, a reglamento or regulations of the decree of February 19.

So drastic is the reglamento that Garfield and Rhoades by cablegram, forwarded through your Department, recommend to the companies that they shut down operations.

The reglamento puts into effect more strongly than the decree does the confiscatory features of Article 27 of the Constitution.

We have been assured by your Department that the United States Government will not tolerate the confiscation of the legally acquired oil properties of its nationals in Mexico.

The annexed memorandum, however, shows the dilemma in which American oil producers in Mexico now find themselves.

We desire, of course, to exhaust our legal remedies in Mexico and have worked assiduously to this end. But the only legal remedy is the filing of an amparo in the Federal courts. An amparo cannot be filed unless an act violating constitutional guaranties has been consummated; and delivery of deeds and leases will be alleged as an acceptance of any subsequent executive act under the decree, waiving rights of appeal.

The annexed memorandum will give you the facts, and the queries which your fellow citizens, now engaged against great odds in supplying the American and British Navies with their fuel, believe your Department should answer before we take, or omit, positive action on the 31st of July this year.

If, as we believe and have no reason to doubt, the American Government will take effective action to protect its nationals in the enjoyment of their legal rights, and will move promptly to that end, we believe all American companies should combine in refusal to present the manifestations on July 31, which manifestations when presented will wipe out any ground for bringing suit and will give us only two months more enjoyment of our rights; but without your assurance that the Government will protect us in our rights, we are not justified in risking the executive acts of the Mexican Government which will surely follow such refusal.

I believe under the circumstances you will appreciate the justice of our request for an answer to the queries in annexed memorandum, the securing of which reply is the object of the writing of this communication.

Yours most sincerely,

H. Walker

[Enclosure]

Confiscation of oil properties in Mexico

MEMORANDUM

1. Mexican decrees and regulations thereof provide that all owners and lessees of oil lands must present certified copies of their deeds and leases to the Department of Industry on July 31.

2. In case of failure so to present deeds and leases, the lands in question shall be declared “free lands”, or open to filing of mining claims thereon by Mexican individuals, foreigners renouncing their citizenship, and Mexican corporations only.

3. Present owners and lessees, who do so file their deeds and leases, are granted for two months a preferential right ahead of the public to file mineral claims on the lands in question.

4. But by the Attorney General’s official interpretation of the Constitution, no foreign corporation may enjoy a mining concession (denouncement rights) in Mexico.

Therefore, whatever action they take on July 31, American companies owning and having oil lands in Mexico are by the action of law despoiled of their rights.

The only advantage in presenting deeds is the possibility of continuing the delivery of petroleum to the Allies for two months after July 31.

5. If the owners and lessees file their deeds and leases on July 31, even under protest, they comply with and accept the laws, and under Mexican procedure are deprived of their only legal remedy (amparo which lies only against the consummation of an administrative act in violation of constitutional guaranties).

If they file their documents of title, therefore, they can be said to have voluntarily estopped themselves from exhausting their remedies in the municipal courts of Mexico.

6. Quandary:

(a) If documents are not presented, the right of appeal to Mexican courts is saved, but meantime the properties are open to “denouncement” by third parties. Confiscation is complete.

(b) If documents are presented, the Mexican owners and lessees have two months in which to “denounce” petroleum claims on their own properties; but foreign companies have no such right, and further by the act of presentation of deeds and leases, lose their right to appeal against the illegal and confiscatory features of the decrees and regulations.

7. On April 4 [2], 1918, the American Government formally protested against the confiscation of legally acquired oil rights by the decree of February 19, stating it might be impelled to protect these rights of its nationals.

• Query 1. Will the State Department advise American companies enjoying petroleum rights in Mexico as to what step or steps to take in the premises?
• Query 2. If the companies refuse to present deeds and leases, will the Department assure them that their legally acquired rights as owners and lessees will be effectually protected?
• Query 3. Would the presentation of deeds and leases by American companies embarrass the Department in any action it may take in pursuance of the protest contained in the note of April 4 [2]?
• Query 4. Would the Department under the circumstances, (as delivery of documents is plainly to be made under duress) in its future handling of the case, accept the fact that if the companies have not exhausted their remedies such failure was compelled by necessity; or will the Department take the position that it can take no steps for the reason that the companies have not exhausted their remedies? If the Mexican Government alleges that the companies have failed to exhaust their remedies, as an answer to future protest or action, will the State Department take the stand that the companies were forced to waive their remedies, and that therefore exhaustion of remedies in the municipal courts is not essential to international action in this case?

Washington, July 19, 1918.