812.6363/4123
Memorandum of Conversation, by the Chief of the Division of the American Republics (Duggan)
| Participants: | Mr. W. S. Farish, Standard Oil Company of New Jersey. |
| Major T. R. Armstrong, Standard Oil Company of New Jersey. | |
| Mr. Donald Richberg, Standard Oil Company of New Jersey. | |
| The Secretary; the Under Secretary; the Counselor; Mr. Berle;7 Mr. Hackworth;8 Mr. Duggan. |
The Secretary greeted the representatives of the company and informed them that he desired to discuss a matter with them in the greatest secrecy. He stated that if any information leaked to the [Page 753] press it might make more difficult the adjustment of the petroleum controversy.
The Secretary then stated that as a result of a continual exchange of notes between the Department and the Mexican Government as to the ways and means by which the Mexican Government would honor the obligation it recognized to compensate the owners of the expropriated petroleum property, the Mexican Government had communicated to the Department through the Mexican Ambassador a plan in broad outlines.
Mr. Berle summarized the principal features of the memorandum, touching upon the listing of the properties expropriated, the principles of valuation and method of valuation suggested, the plan for the properties to be held in a trusteeship, the proposed technical board and sales agency, and the cash payment out of the proceeds from the sale of oil since the expropriation.
The Secretary stated that he would give a copy of this memorandum to Mr. Farish and would appreciate his study. Mr. Farish inquired whether the Secretary desired that the Standard Oil Company communicate with the other companies whose properties had been expropriated or not. He indicated that to give any sort of a reply that represented a consensus of views it would be necessary to communicate with the other companies. The Secretary stated that he would have no objection to the other companies being informed of the proposal, and that he would rely upon Mr. Farish to [im]press upon [them] the necessity of maintaining the proposal in the strictest confidence.
Mr. Farish then stated that he would like to say a few general words regarding the Standard Oil Company. His company is a world trade enterprise, doing more than one-half of its business in foreign trade. During the last fifteen years it has substantially increased its foreign investments and today has investments in practically every country of the world. The expansion of the company’s operations followed upon advice and counsel of the Conservation Board some fifteen years ago. In these foreign countries the company endeavors in all ways to observe the local laws. In Italy and Germany, for instance, the governments have imposed considerable restrictions upon the operations of the local Standard Oil subsidiaries. The parent company endeavors to do what it can to help these subsidiaries to live up to their obligations. The parent company does not expect any assistance from the United States in connection with the observance of local law on the part of the companies; it does, however, expect protection from the United States Government in case the property of the company abroad is affected illegally and outside of the recognized principles of international law. When Japan stated that it was going to take over the petroleum companies, [Page 754] the State Department was very helpful in securing immediate payment.9 The Department gave similar assistance in connection with the expropriation of petroleum companies in Manchoukuo. The Department also gave assistance in connection with the expropriation of the company’s properties in Spain. These properties were paid for with relative promptness, although payment was really forthcoming only after the French Government had informed the Spanish Government that it must pay quickly.
Mr. Farish stated that time and again in many parts of the world there had arisen sentiment for expropriation of the company’s properties and in some cases, as above indicated, governments had actually expropriated the company’s properties. So far, with the exception of the properties of the company taken by the Soviet Union, payment has been made for expropriated properties in accordance with the generally accepted principles of international law. The company attaches importance to the expropriation of its properties in Mexico not because of the purely Mexican aspect of the matter but because of its effect on other countries. Therefore, in considering any proposal advanced for compensation by the Mexican Government, the company must view it from the standpoint of its other foreign investments. If the company accepts some arrangement which in effect is based upon some compromise of the principles of international law, the company then considers that it is lost since a precedent will have been established. Other countries will follow suit and the company will not be able in these cases to stand on the ground that if its properties are expropriated they should be paid for at the time of taking in cash.
The Secretary stated that the Department likewise had these considerations in mind and was doing all that it could day and night to attempt to uphold the principles of an orderly world society. The Department would continue to be active along that line. Nevertheless under existing conditions, the Secretary stated that he saw little possibility of the properties being returned unless the United States was to take military action.
Mr. Farish stated that the company did not ask for any aggressive action against Mexico and was entirely opposed to that line of conduct. The company has turned a deaf ear to the many persons who have endeavored to enlist the company’s interest and financial support in revolutions, et cetera, in Mexico.
Mr. Farish then covered once again about the same ground that he covered in his first statement. What worries his company, he said, is what will happen in other countries if the company compromises [Page 755] now on the principle of international law that payment should be made at the time that title passes.
The Secretary then inquired if the Mexican Government were to make more of what might be considered a reasonable offer on an equitable basis for compensation, what would the attitude of the company be. He elaborated upon this, indicating that what he had in mind was a truly international trusteeship.
Mr. Farish asked in reply whether that arrangement would give protection to the other Standard Oil companies abroad.
The Secretary replied that with international relations in their present state of chaos there was no way to prevent, except by force, unstable governments from taking property. He then proposed two alternatives—either negotiating some agreement with the Mexican Government or letting things go with the hope that in some future time it might be possible to adjust them satisfactorily.
Mr. Farish stated that, while he could not undertake to speak for the company, it was his own tentative opinion that the company would prefer to let things go than to accept a proposal which compromised the doctrine of compensation.
It was agreed that when the companies desired to confer further with the Department regarding the memorandum submitted by the Mexican Government, they would notify the Department and a further meeting would be arranged.
- Adolf A. Berle, Jr., Assistant Secretary of State.↩
- Green H. Hackworth, Legal Adviser.↩
- For correspondence regarding representations on establishment of oil monopolies in Japan and Manchuria, see Foreign Relations, 1937, vol. iv, pp. 723 ff. Earlier correspondence on this subject is printed in Foreign Relations volumes for the years 1933 to 1936, inclusive.↩