Foreign Relations of the United States: Diplomatic Papers, 1943, The American Republics, Volume VI

412.11 Oil/179

Memorandum by the Legal Adviser (Hackworth)¹

[Washington,] July 31, 1943.

On July 24, 1943 the Mexican Ambassador left with the Secretary a Memorandum dealing with the two difficulties (discussed below) which have tended to prevent a final settlement of the claims arising out of the expropriation of petroleum properties in Mexico in which certain American companies were interested.

Claims of the Mexican Government and Others Against the Companies.

In the joint report evaluating the companies’ claims at approximately $24,000,000, Messrs. Cooke and Zevada recommended (a) that the Mexican Government and the companies reciprocally release each other of all pending claims, except certain alleged claims of the Government against the companies and (b) that the companies remain responsible for private claims then pending against them in the Mexican courts.

Attempts made by the Department to obtain information regarding the probable total amount of such claims have proven futile. It and the companies have been apprehensive that such claims might be determined by Mexican judicial or administrative authorities to be valid in amounts possibly equaling or exceeding the $24,000,000 which Cooke and Zevada found to be due the companies. However, the Mexican Government has finally expressed its willingness (a) to regard as cancelled the alleged claims of the Government against the companies and (b) to relieve the companies of responsibility with respect to any private claims against them which may be determined as valid claims by the Mexican courts. It is not willing to assume responsibility for private claims against the companies which may be prosecuted in American courts.

Titania and Mercedes Properties.

The above-mentioned proposal of the Mexican Government is conditioned on our agreement that there be included in the $24,000,000 settlement the claims of the Titania and Mercedes Companies (subsidiaries of Standard Oil of New Jersey) whose properties have been evaluated by Messrs. Cooke and Zevada and included in their total appraisal. Subsequently, the Supreme Court of Mexico held that the properties of those Companies had not been expropriated and at the request of Standard the Department has been endeavoring to induce the Mexican Government to return these extensive but undeveloped properties to the Companies, thus giving effect to the decision of the Mexican Supreme Court. However, shortly prior to the receipt of the recent Mexican note, in which it is insisted that the properties be included in the general settlement, an official of Standard indicated orally to an official of the Department that the Company was apparently willing to forego its claim to those properties if such action on its part would tend to facilitate a final settlement of the claims arising out of the expropriations.

At a conference attended by Messrs. Hackworth, Duggan,² McGurk of RA,³ and English of Le,⁴ there appeared to be unanimous agreement that the proposals of the Mexican Government are probably the best that can be expected and that they should be accepted, thus effecting a final settlement of the claims growing out of the expropriations of 1938. It is their belief that most, and possibly all, of the companies will go along with the settlement made on the proposed basis. It is also believed that a settlement of these claims will greatly facilitate negotiations in relation to the general question of future development of oil production in Mexico.

If you agree that a settlement may be made along the lines indicated the matter will be discussed informally with officials of Standard Oil Company of New Jersey, owners of the Titania and Mercedes Companies, prior to the drafting of an acceptance of the proposals made in the Mexican note.

[For text of agreement between the United States and Mexico regarding payment for expropriated petroleum properties, effected by exchange of notes signed at Washington, September 25 and 29, 1943, and for joint report, see Department of State Executive Agreement Series No. 419, or 58 Stat. (pt. 2) 1408.]

1. Addressed to the Under Secretary of State (Welles) and to the Secretary of State. Mr. Welles made the notation: “I agree. S. W.”
2. Laurence Duggan, Adviser on Political Relations.
3. Joseph F. McGurk, Assistant Chief of the Division of the American Republics.
4. Benedict M. English, Assistant to the Legal Adviser.