THE controversy between the United States and Mexico concerning the rights of American citizens to oil properties in Mexico acquired prior to May 1, 1917 (the date the new Constitution became operative), began with the representations made by the Department of State regarding the Carranza decree of September 19, 1914. There had been some earlier decrees that were the subject of comment by the United States, notably those issued in 1914 by General Candido Aguilar, as Governor and Military Commandant of Vera Cruz, and that issued by Carranza on June 24, 1914, (amending the petroleum tax law of Madero of June 24, 1912), but action by the Department of State was more by way of enquiry than representation.

The decree of September 19 stipulated, in order that the Government might "know exactly the true wealth of the country and so may rationally and equitably distribute the taxes on the taxpayers," that all property owners and industries should present on a prescribed form, a detailed, signed statement of all their properties, with the value thereof. This valuation was to be made with "the understanding that the Government shall have the right, in case of expropriation for the sake of the public service, to pay to the interested parties as indemnity the value which is definitely fixed in the tax list." Those failing to furnish the list within the time fixed were to be subject to a fine of "five percent of the value of the property they keep secret."

Six months later, the American Vice Consul at Tampico reported that enforcement of the decree was contemplated and that oil men were unable to appraise accurately the value of their unproved land "which was purchased years ago for insignificant amounts, on which taxes have been paid in proportion to the agricultural value up to the present time," and which "may be valueless or worth millions of dollars." Upon the receipt of this information, Secretary Bryan, on March 5, 1915, instructed the Vice Consul that "if authorities attempt enforce decree mentioned, immediately inform Department and strongly protest on grounds confiscatory provisions, apparent injustice oil companies and lack sufficient notice."

From that date to October 30, 1926, -- a period of eleven and a half years -- the Government of the United States has made representations to Mexico. At one time -- August, 1918, -- these became so urgent that Mexico understood them to constitute an actual threat of war or intervention.

THE HISTORICAL BACKGROUND OF THE CONTROVERSY

In 1783 Charles III of Spain issued a mining code (Reales Ordinanzas) for New Spain, including Mexico. In the light of the earlier Spanish mining laws applicable to Spain and the Indias, it would appear that this law reserved title to mineral substances (including gas and petroleum) in the Sovereign, who, for the exploitation thereof, might grant, in private lands or otherwise, such rights as the Sovereign pleasure willed. The rights so granted might, it seems, be changed or abolished. The two important provisions of this Code were: "The mines are the property of my royal crown, as well by their nature and origin as by their reunion" as declared in the law of 1559; and "without separating them from my royal patrimony I grant them to my subjects in property and possession."

This law drew, as to all minerals, the same sharp distinction between rights to the surface and rights to minerals under the surface that is now found in the law of the United States governing the exploitation of deposits of coal, phosphate, sodium, oil, oil shale, and gas in lands valuable for such minerals and forming part of our public domain.

These Reales Ordinanzas remained in force in Mexico until 1884, when the Mexican National Congress passed the first mining code enacted after the achievement of independence. This Code was interpreted by some as divesting the Sovereign (the nation) of its title to gas and petroleum on privately owned lands, and as lodging such title in the private owners of the soil.

The statute of 1884 (with some amendments, the principal one in 1887) remained in force until 1892, when a second general mining code was enacted by the Mexican Congress. This new law was open to the construction that it repealed the Code of 1884, and replaced in the Sovereign (the nation) the title it had under the law of 1783. In this view the nationals of Mexico (and aliens so far as permitted) were again authorized to acquire mining rights in gas and oil deposits in accordance with the principles operative prior to 1884. It has been said that certain provisions of a law of 1901 gave support to such a construction.

The Code of 1892 remained in force until 1909, when a third mining law was enacted which substantially returned (as to gas and petroleum) to the language of the law of 1884.

The Code of 1909, with some modifications, principally by means of Revolutionary decrees, was still on the statute books when the Constitution of 1917 came into force. This seems framed to re-invest the nation with all the sovereign rights and powers possessed by it prior to 1884. The Carranza decrees and the laws and regulations enacted subsequent to May 1, 1917, were drawn to implement this construction of the Constitution.

Subsequently to 1884, and, as it seems, in considerable part subsequently to 1909, large petroleum holdings in Mexico were acquired by American citizens (individuals and corporations), either directly or by stockownership in Mexican or other foreign corporations. The contention of such American interests as to their properties acquired prior to May 1, 1917, has been, in rough, that where they were the owners of the surface, they had the same rights to the oil thereunder that the owner of a fee simple in the United States would have; and that where they held "leaseholds" from native owners, then, since such owners had that same "fee simple" ownership, such "leaseholds" carried with them, for the term thereof, the full "fee simple" rights of the owners.

The United States Government made its representations in substantial accord with the views of the American oil interests on these questions.

The Mexican position, which seems never to have been succinctly or categorically stated, may be summarized in the form in which it finally developed somewhat as follows: The nation never intended to vest and never did vest, by any of its laws, ownership of gas and petroleum in the surface owners; the utmost effect of its laws was to give the owners of the surface the exclusive right to exploit their properties for oil; therefore, no surface owner had an actual ownership of gas and petroleum under his soil, unless and until some act was done by him looking to the exploitation of such materials; and, since the surface owners who had performed no such acts thus had no actual ownership in the gas and petroleum underlying their properties, the Mexican Government might, in accordance with its "juridical traditions" (as Lic. Gonzalez Roa put it in 1923 at the Bucareli Conference) change the rules under which the mining title to such substances might be obtained by such surface owners or their lessees.

The Mexican people adopted a new Constitution, and the Mexican Government thereafter issued decrees, enacted laws, and promulgated regulations, for the development and control of the petroleum industry in conformity with their conception of their sovereign rights.

These differences of view gave rise to discussions between the United States and Mexico, which may be grouped into three periods.

THE PRE-CONSTITUTIONAL PERIOD:

1914 TO MAY 1, 1917

During this period representations were made regarding and against decrees which provided for the reporting of properties for taxation purposes and which the United States characterized as confiscatory; against a ruling that drilling permits would only be granted to companies agreeing to obey a law not yet framed and of the purport of which the companies had no knowledge; against a rumored "nationalization of petroleum," which the United States also characterized as confiscatory; and against the requirement of a Calvo Clause (an undertaking by the one making it not to invoke the diplomatic protection of his government) in titles, contracts, and concessions, for individuals, stockholders, and companies. Representations were also made against certain provisions of the Constitution of 1917, but not those particular ones which later were involved in the controversy between the two countries regarding petroleum properties; and against a proposed bill providing for a concession for oil exploitation with a period of preference for the present owners to obtain such a concession.

None of the matters complained of appear to have been carried to the point where American property was actually taken (except by way of taxation); and all seem, in effect, merged in the difficulties which arose during the next periods.

THE FIRST PERIOD AFTER THE CONSTITUTION:

MAY 1, 1917 TO DECEMBER 20, 1925

During this period representations were made by the United States concerning and against the "nationalization" of petroleum by the Mexican constitution and decrees, on the ground that the same were confiscatory; against the reported refusal to grant drilling permits (the Mexican Government asked for concrete cases of injury resulting from any action by it in this respect); against the Carranza decrees of February 19, May 18, July 8, July 31, August 8, and August 12, 1918, which provided inter alia for the payment of taxes regarded as onerous, and for the forfeiture of all rights in and to petroleum inlands not "manifested" (registered) as provided in the decrees; and against the approval by Congress of the foregoing Carranza decrees. Representations were also made against the collection of royalties and other taxes from American companies; against the refusal to permit continued exploitation of lands because of non-manifestation; against the stopping of oil exploitation actually under way; against the "denouncement" by other parties of American properties which had not been "manifested" as required by the Carranza decrees; and against the requirement that to obtain drilling permits, companies must agree to obey a law not yet framed and of the purpose of which they had no knowledge.

When the proposed legislation of 1925 was introduced into the Mexican Congress, the Secretary of State called attention, by an Aide Memoire, to the provisions which would prove objectionable if enacted into law; and the correspondence which followed this initial communication discussed the distinction drawn between "tagged" and "untagged" lands -- "tagged" lands being those as to which some "positive act" (an actual act looking to the exploitation of oil) had been performed prior to May 1, 1917, and "untagged" lands being those as to which no such act had been performed prior to that date.

Certain broad questions which arose during this second period require special consideration.

Not a little criticism has been aimed at certain words -- dominio, dominio directo and propiedad -- used in the Constitution of 1917. It appears to have been assumed that they are used as terms of art (words expressing a limited and precise legal or juristic concept); however, an examination seems to show the opposite. For example, the word dominio is used with at least two meanings in Article 27 of the Constitution -- as describing that title or interest which the nation grants to individuals to constitute private property (propiedad privada), and as describing that title or interest in property which the nation reserves always in itself and which is declared to be "inalienable and imprescriptible." Further, it appears that dominio directo is used in the same article with at least three meanings -- the title or interest which the nation reserves in mineral substances; the title or interest which aliens may not, but which Mexicans by implication may, acquire over lands and waters within a prescribed zone along frontiers and coasts; and the title or interest which the nation has in churches and auxiliary buildings already built, though of "temples" hereafter erected for public worship the nation has propiedad. Moreover, propiedad has been used in the Article with at least four meanings, -- the ultimate interest or ownership which the nation has in all property; the title or interest which the nation grants to private individuals; the sovereign right in territorial waters and in waters generally; and the title or interest (already mentioned) which the nation has in "temples" hereafter constructed for public worship.

It would appear from the foregoing that criticism founded upon the theory that these Constitutional expressions were in fact used as terms of art, might go wide of the mark. The meaning of Article 27 of the Constitution must be gathered from a consideration of the article as a whole.

Two provisions of the Constitution have been pointed to as embodying principles which, if applied, would violate the rights enjoyed by foreign oil interests in Mexico. The first is that found in the opening paragraph of Article 27, which declares:

"The ownership (propiedad) of lands and waters comprised within the limits of the national territory originally pertains to the nation, which has had and has the right to transmit the dominion (dominio) thereof to private parties constituting private property (propiedad privada)."

Certainly there has been no doubt since the time of Coke, that, as Kent puts it,

"It is a fundamental principle in the English law, derived from the maxims of the feudal tenures, that the king was the original proprietor or lord paramount of all the land in the kingdom and the true and only source of title. In this country we have accepted the same principle, and applied it to our republican governments; and it is a settled and fundamental doctrine with us, that all valid individual title to land within the United States is derived from the grant of our local governments, or from that of the United States, or from the Crown, or royal chartered governments established here prior to the Revolution."

Kent calls attention to the Constitution of the State of New York (1846), which affirmed,

"The people of this State, in their right of sovereignty, are deemed to possess the original and ultimate property in and to all lands within the jurisdiction of the State; and all lands the title to which shall fail, from a defect of heirs, shall revert or escheat to the people."

Both in the Philippine Islands and in Porto Rico, since their acquisition by the United States, laws have been adopted which appear specifically to incorporate the same doctrine.

In view of these principles of American law there would appear to be no well-founded objection to be urged against this provision of the Mexican Constitution.

Another provision of that Constitution to which objection has been made in connection with the oil controversy, is that found in the fourth paragraph of Article 27 which declares that to the nation belongs (corresponde) the dominio directo over all mineral substances including petroleum.

Again, it has been good law, certainly since the time of Coke, that as to the soil and all its contents "a subject hath not properly directum, yet he hath utile dominium," or as Blackstone paraphrases it, "he hath dominium utile, but not dominium directum," the latter being vested in the Sovereign. The decisions of the Courts in the United States are in accord with this principle, which would appear in essence to be not essentially dissimilar from the principle embodied in the Mexican Constitution.

A second matter arising during this second period that deserves special consideration is the famous "Texas Case," decided on April 30, 1921. In this case the Mexican Supreme Court declared that the Constitution of 1917 was not retroactive as to oil rights acquired prior to its coming into operation. The precise question in the case was whether or not land which had been leased by the owner for oil exploitation purposes prior to May 1, 1917, was open to denouncement by other parties under the Carranza decree of August 8, 1918. The court held the land could not be so denounced, because the owners had the right, under the 1909 statute, to explore and exploit the land for oil, and that they had the power to transfer such rights "in the exercise of this faculty, as they did . . . . by means of the contract contained in the deed of April 28, 1917, in which it appears that the grantors fixed and received a price higher than would have been paid them for the surface of the land because it was not sought to cultivate such surface or to build upon it, but to look for oil and exploit the same if found. So that the rights granted to the owners of the land by Article 2 of the said law of November 25, 1909, were converted into positive acts, and we therefore are treating of vested rights acquired by the lessee from the date of the oil contract.

A third matter falling within this second period and to be specially noted was the Bucareli Conference. The purpose of this Conference -- as afterwards declared by the United States -- was to find a basis upon which recognition might be accorded to the Mexican Government. The American Commissioners to this Conference were Messrs. Charles Beecher Warren and John Barton Payne. In the course of this Conference the Mexican Commissioners developed with some fullness their theory of subsurface rights and the doctrine of "positive acts." Those "positive acts," which, if performed prior to May 1, 1917, with reference to any given area of land, would give to the owner of that land or his lessee an "acquired right" to the oil in the subsurface, they described as,

" . . . some positive act which would manifest the intention of the owner of the surface or of the persons entitled to exercise his rights to the oil under the surface to make use of or obtain the oil under the surface; such as drilling, leasing, entering into any contract relative to the subsoil, making investments of capital in lands for the purpose of obtaining the oil in the subsoil, carrying out works of exploitation and exploration of the subsoil and in cases where from the contract relative to the subsoil it appears that the grantors fixed and received a price higher than would have been paid for the surface of the land because it was purchased for the purpose of looking for oil and exploiting same if found; and, in general, performing or doing any other positive act, or manifesting an intention of a character similar to those heretofore described."

The lands as to which any of these acts had been performed prior to May 1, 1917, became, in the vernacular of oil men, "tagged" lands; lands as to which no such "act" had been performed were called "untagged" lands.

Shortly after the Bucareli Conference closed on August 15, 1923, recognition was accorded the Obregon Government, and from then until October of 1925 little was said by the two Governments about the rights of American Oil operators in Mexico. However, during the fall of 1925 the introduction into the Mexican Congress of an Alien Land Law bill and a Petroleum Law bill, brought from the Secretary of State the Aide Memoire to which reference has already been made. This initiated a correspondence that did not end till November 1926. The discussion was almost wholly legal in its character and, while it was at times conducted with earnestness and spirit, it seems never to have actually threatened the peaceful relations of the two countries.

THE PERIOD FROM DECEMBER 1925 TO NOVEMBER 1926.

The two articles of the Petroleum Law (promulgated December 31, 1925) to which the most serious objection was made by the United States were articles 14 and 15. They seemed to provide, as to "tagged" lands, for the granting of a new right in the form of a concession for fifty years, instead of confirming in perpetuity rights already "vested;" and they narrowed, as it was apprehended, the definition of "positive acts" given by the Mexican Commissioners during the Bucareli Conference.

The provisions of the Petroleum Regulations (promulgated April 8, 1926) to which particular objection attached were Articles 147-159, and Transitory Articles 2, 3, 4 and 6. These articles, being regulatory of the objectionable articles of the law, were likewise unsatisfactory and for the same reasons.

The particular matters which crystallized out of the diplomatic controversy during this period were as follows:

1. Those provisions of the Petroleum Law and Regulations which seemed to provide for the granting of a new right for 50 years, instead of confirming an acquired right in perpetuity.

2. The possible legal inability of American companies to secure confirmatory concessions for lands lying within prohibited zones.

3. The curtailment of the "positive acts" as defined by the Mexican Commissioners at the Bucareli Conference on August 2, 1923.

4. The requirement of a Calvo Clause from American citizens (individuals and corporations).

5. The operation, as a "positive act," of the "manifesting" of lands under Circular 11 of January 15, 1915, thus "tagging" such lands.

6. The exact character of the rights and titles possessed by aliens (individuals and corporations) holding interests in lands -- "fee or leasehold" -- which were acquired prior to May 1, 1917, both when the lands are "tagged" and when they are "untagged."

The correspondence closed with Secretary Kellogg's statement in his note of October 30, 1926, that the United States

"expects the Mexican Government not to take any action under the laws in question and the regulations issued in pursuance thereto, which would operate, either directly or indirectly, to deprive American citizens of the full ownership, use and enjoyment of their said property and property rights."

To this the Mexican Government, through Minister Saenz, replied under date of November 17, 1926:

"My Government expects on its part that that of Your Excellency will indicate the concrete cases in which recognized principles of international law may have been violated or may be violated in disregard of legitimate interests of American citizens since in such cases it will be disposed to repair such violations."

This was the state of the controversy when Ambassador Morrow presented his credentials on October 29, 1927.

THE AMBASSADORSHIP OF MR. MORROW

On November 17, 1927, the entire matter assumed a new aspect through a decision by the Supreme Court of Mexico of a case involving the question whether the Department of Industry might properly cancel drilling permits for "tagged" lands because the owner had failed to apply for a fifty-year concession within the year prescribed by Article 15 of the Petroleum Law. The Court, affirming the opinion of the lower Court, held that such drilling permits could not be so cancelled.

The ratio decidendi of the opinion seems to be that the company, being the owner of "tagged" lands, possessed oil rights, not mere expectancies; that rights could not be subjected to restriction in part nor loss in part; that confirmation for fifty years was a restriction upon, and a loss of, the rights possessed by the Company which were without limitation of time; that "it is evident that said application could not have been made by the complainant without curtailment of something which belongs to its estate;" wherefore, "it is indisputable that the protested ruling violates in this respect the guarantees afforded the complainant by Articles 14, 16 and 27 of the Federal Constitution." The Court during the course of its opinion categorically stated that a confirmation of rights "does not modify them, but . . . recognizes them;" it is a "recognition of acquired rights."

Thus the Supreme Court of Mexico laid down basic principles in harmony with the declarations made by it in the "Texas Case" in 1921.

It may at this point be observed that the constitutional position of the Federal Supreme Court under the Mexican system of Government appears to be essentially different from the constitutional position of our Supreme Court under our system. With us a decision by the Supreme Court of the United States that a law or part of a law is unconstitutional renders the same null, void, and of no effect. This seems not to be the effect of such a decision under the Mexican system. Under that system a decision apparently has no effect whatever upon the law itself, which remains operative upon the statute books until changed by the legislature; and so long as it is upon the statute books, the Executive is bound to enforce it irrespective of the opinions expressed about it by the Supreme Court. Therefore, it seems, the Executive may apply the principle announced in a decision of the Supreme Court only in that case in which the decision is rendered.

A provision of the Amparo law provides that if the Supreme Court makes the same interpretation of the law in five successive cases, that interpretation must be followed by the lower courts, until the Supreme Court modifies its view or reverses itself, or until the legislature changes the law. This seems to be the full meaning of the jurisprudencia of which not a little has been said. The Executive appears to be still bound to enforce the law as it stands on the statute books, except as to the cases actually decided.

President Calles on December 26, 1927, sent a message to Congress in which he pointed out that the Supreme Court had held the Petroleum Law unconstitutional in certain parts, and he recommended that the Petroleum Law be amended to conform to the Supreme Court decision. In the course of his message he declared (seemingly in strict accord with the Constitutional principle governing the force and effect of a decision by the Supreme Court) that the Federal Executive "finds it impossible after the decision of the Supreme Court, to carry forward the uniform application of the said law; in view of which it should, insofar as it is able, secure an immediate solution to the conflict existing between a law in force, and the interpretation of its anti-constitutionality;" and he asked for the amendment so that "the effects of the decision . . . should benefit not only those included within its scope, but also those who complied with Articles 14 and 15 of the law . . . for if such were not the case an unequal juridical and material status would be produced -- one in addition unjust . . . ."

On December 27, 1926, a Committee of the Chamber of Deputies reported favorably the bill of President Calles with some amendments, and stated in part,

" . . . the confirmation of a right is its express recognition in all its extent and with such conditions as are inherent therein, so that no restriction can be established in regard to length of term or conditions (imposed) upon the right which is being confirmed, for any restriction in these respects implies a modification of the right confirmed and a retroactive application of the law."

On January 3, 1928, President Calles approved a bill which amended Articles 14 and 15 of the Petroleum Law by providing that pre-constitutional rights should be confirmed without cost by the issuance (not the granting) of confirmatory concessions "without limitation of time."

Thus the Executive and Congress, responsive to the ruling of the Supreme Court, has made it clear that no new right is to be granted for a limited time by the concessions provided for in the Law, but that such concessions are to issue as a confirmation of "acquired rights" ("vested rights") and "without limitation of time."

This disposes of the controversy between the two Governments on these two points, insofar as the provisions of the Law can do so.

The task remained for the Mexican authorities to readjust the Petroleum Regulations in harmony with the law.

As already pointed out, one of the matters causing anxiety among the oil companies was whether or not an alien company could apply for and secure a confirmatory concession on its "preconstitution " properties without forfeiting its rights, particularly where the properties lay within the prohibited zones -- "a strip of 100 kilometers along the borders and 50 along the coasts." Apparently the Attorney General of Mexico had on December 3, 1917, given an opinion that under the Constitution (Article 27, Fraction 1, Paragraph 7) alien companies could in no event acquire "lands, waters, and their appurtenances in the Republic."

Accordingly, on January 9, 1928, Mr. H. N. Branch, representing the Huasteca Petroleum Company, enquired of the Secretary of Industry, Commerce and Labor, Sr. Morones, "whether an application for confirmatory concession by a foreign company involves surrender of any rights held prior to May 1, 1917." On the same day, January 9, 1928, Minister Morones replied, after quoting that part of the Report of the Committee of the Chamber of Deputies quoted above, that " . . . this Department believes that the petition for confirmatory concession on the part of a national or foreign company does not imply the renunciation of rights acquired before May 1, 1917, such confirmatory concession operating as the recognition of rights which will continue in force subject only to police regulations." This exchange of letters would seem to meet the doubt which had arisen as to whether American companies might apply for confirmatory concessions without forfeiting any of their rights.

Early in February a Committee of the oil companies (American and foreign) submitted to the Ministry of Industry, Commerce and Labor, a draft of proposed amendments to the Petroleum Regulations. Conferences followed, and the proposals were taken under consideration by the Ministry, but they were not found to be satisfactory.

So soon as this fact was learned, informal conferences were undertaken between Ambassador Morrow and his representatives, on the one side, and Minister Morones and his representatives, on the other side, with a view to framing amendments to the Petroleum Regulations that would place them in harmony with the amended Law.

There ensued several weeks of negotiations, which were characterized by the utmost friendliness on both sides, and during all of which Ambassador Morrow kept in the closest touch with the local representatives of the leading American oil companies. At the end of these negotiations the Mexican authorities framed amendments to the Petroleum Regulations which in the opinion of Ambassador Morrow and the local representatives of the leading American oil companies did harmonize the Regulations with the Law and did eliminate the substantial objections made to the old Regulations. The amended regulations were signed by President Calles on March 27, 1928, and promulgated the following day.

Since a doubt had existed as to whether the provisions of the old Regulations relating to "positive acts" (Articles 152 and 153) were as broad as the definition given by the Mexican Commissioners on August 2, 1923, at the Bucareli Conference, the Mexican Government incorporated in the amended regulations (Article 152) the exact language used by the Mexican Commissioners. This was in accord with the statements made by Minister Saenz in his note to Secretary Kellogg of January 26, 1926, and reaffirmed in his note of October 7, 1926. This disposes of the doubt regarding the equivalency of the declaration of the Commissioners and of the provisions of the Regulations on this point.

In order that the oil companies might know just what sort of concession they might expect in case they made application under the amended law and regulations, a draft concession is attached to the amended Regulations which is to be followed "except where the circumstances attending any particular application require the addition of special provisions." This draft contains no Calvo Clause, and in place thereof a clause provides that any attempt to transfer the concession to an alien or to a foreign government shall be null and of no effect. This provision is less harsh than those provisions of certain American statutes that any attempt by one alien to transfer land to another alien who has not capacity to take, shall forfeit such land to the State.

The question whether or not the "manifesting" of lands under Circular 11 of January 15, 1915, constituted a "positive act" remains where the formal correspondence left it. It was first specifically raised by Secretary Kellogg's note of July 31, 1926, the next to the last note written by him during the controversy. In his answering note of October 7, 1926, Minister Saenz did not seriously contest the position of Secretary Kellogg, and calling attention to the declarations of the Mexican Commissioners at the Bucareli Conference, he affirmed "that what the Supreme Court and the Mexican Commissioners consider as an act disclosing the intention [a 'positive act'] is the investment of money or effort intended to obtain petroleum." As a matter of the normal evidencing of a fact, it would seem that a formal, bona fide declaration that property had been acquired and was held for the purpose of oil exploitation, would constitute all but conclusive evidence of the "investment of money or effort intended to obtain petroleum." The incorporation in the Regulations of the exact definition of "positive acts" given by the Mexican Commissioners offers a reasonable promise that no difficulty will be experienced in this matter.

We come now to the question of titles. The decision of the Supreme Court, the formal declarations of President Calles, the Report of the Committee of the Chamber of Deputies, the express provisions of the amendments to the Petroleum Law, the formal assurances of the Ministry of Industry, Commerce and Labor, the language of the amended Petroleum Regulations, the draft form of confirmatory concession appended to the Regulations, -- all these agree that whatever rights the holders of "tagged" lands had on May 1, 1917, they still have; they are entitled to them and they hold them, as the Supreme Court affirmed, without restriction or loss. The confirmatory concession which is issuing declares "there are confirmed . . . the rights to effect works of petroleum exploration and exploitation " in the properties designated; the confirmation "operates as a recognition of rights acquired which shall continue in force, legal possession of which it confers administratively;" and "this confirmatory concession is not subject to forfeiture, and only obligates the concessionaire to comply with all regulations covering police and safety in the works."

Thus the law, the regulations, and the form of confirmatory concession attached to the regulations appear substantially and satisfactorily to cover the various matters which have been in dispute between the two Governments for more than thirteen years. The confirmatory documents to be issued by the Mexican Government will be a recognition of old acquired rights which continue without change, not the grant of new rights; these confirmations are without limitation of time, instead of for fifty years. The documents will contain no Calvo clause; they will be issued to American individuals and corporations who held rights prior to May 1, 1927, the Mexican Government taking the view that the inhibitory provisions of the Constitution as affecting the acquisition of properties by alien corporations do not apply to such corporations with respect to their properties acquired prior to May 1, 1917. As to the "tagging" of the lands, the exact language of the Bucareli Conference has been incorporated in the regulations, so that the contentions of the United States on this point have been fully met.

Ambassador Morrow made a statement on the foregoing situation, on March 28, 1928, the day on which the Regulations were promulgated. His opening paragraph reads:

"These Regulations when taken with the Supreme Court decision handed down November 17, 1927, the legislation passed by the Mexican Congress on December 26, 1927, and promulgated on January 10, 1928, and the letter of Minister Morones issued on January 9, 1928, evidence the determination by the judicial, the executive, the legislative, and the administrative departments of the Mexican Government to recognize all rights held by foreigners in oil properties prior to the adoption of the 1917 Constitution."

On the same day, the Department of State issued a statement which said:

"The Petroleum Regulations just promulgated by President Calles constitute executive action which completes the process beginning with the decision made by the judicial branch of the Mexican Government on November 17, 1927, and followed by the enactment of the new Petroleum Law by the legislative branch on December 26th last. Together, these steps, voluntarily taken by the Mexican Government, would appear to bring to a practical conclusion discussions which began ten years ago with reference to the effect of the Mexican Constitution and laws upon foreign oil companies. The Department feels, as does Ambassador Morrow, that such questions, if any, as may hereafter arise can be settled through the due operation of the Mexican administrative departments and the Mexican courts."

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  • J. REUBEN CLARK, JR., formerly Solicitor of the Department of State, recently one of Ambassador Morrow's legal advisers in negotiations with the Mexican Government
  • More By J. Reuben Clark Jr.