the contract of August 13, 1888, and confirmed the original contracts except where they were contrary to the conditions named in that modification. The company renounced and declared null and void Article X of the contract of August 13, 1888, which gave exclusive navigation privileges on the river Escalante and the different parts of the Lake of Maracaibo. It was mutually stipulated that the concession was to be limited to the first section, which was to extend from Santa Barbara to Camino Real, a point one kilometre distant from La Vigia; the guaranty of seven per cent was to be reduced by the amount of the net benefits received by the company, these being composed of the net product of the receipts of every nature made by the exploitation of the railroad after deducting the general expenses of the company and of its management; the sums paid on account of said guaranty to be treated as advances only, to be returned as and when the benefits received by the company exceeded seven per cent on the guaranteed capital by applying one half of such excess in liquidation of said advances until all was reimbursed; that after said advances had been fully reimbursed the government was to continue to share in said benefits to the extent of twenty per cent thereof. There was added to the provision in regard to the resolution of all doubts and controversies by the Tribunals of the Republic, the further agreement that in no case were these doubts and controversies to give place to international claims.

It will be observed that by the modification of the original contract made August 13, 1888, the capital of the company, for the purpose of reckoning the guaranty, was estimated at Frs. 18,000,000.

Following this arrangement a French company was formed, September 28, 1888, taking the name of French Company of Venezuelan Railroads, with headquarters at Paris and its duration limited to ninety-nine years. The concessions obtained by the Duke of Morny were taken over by this company. . . . The building of the road was in progress from 1889 to 1892.

...

It is complained by the company that on April 16, 1891, the government, by the rule of the stronger, compelled in the agreement of that date, the provisions of which have already been stated, the introduction of the clause into the original contract that there was to be deducted from the amount of the guaranty the actual net profits of the company.

September 29, 1891, the first section was nearly completed and about ready for use, when there occurred a very serious inundation, causing a considerable delay and the expenditure of a large sum of money to reconstruct the parts destroyed. It was April 1, 1892, when the company considered the work of construction completed and demanded of the government its acceptance. But the State of Andes was then in revolt, while that of Zulia was loyal to the titular government. A portion of the railroad was in each State. To whom should it apply? Which was its government?

August 5, 1892, the company made publication in the local papers of the fact of the completion of the railroad and that it had begun business.

The company suffered badly from the insurrection, in requisitions from both sides, in the dispersions of its workmen, in the disappearance of its traffic, while the government in the midst of this intestine war paid neither requisitions, damages, nor guaranties. The line was repaired from the resources of the company, but it thereby exhausted its capital, and, November 1, 1892, judicial liquidation resulted. The creditors accepted the proposition made by the company to pay them pro rata and permitted it to continue its enterprise.

February 23, 1893, the engineer of the government examined the line and declared it to be well constructed and advised that by April 1, 1893, it would be in a situation to be accepted by the government. March 23, 1893, the decree of inauguration was published, and on May 10, 1893, the record was made of its definite acceptance by the Venezuelan government, dated back to April 1 of that year. As a matter of fact the line had been in operation since 1892, with receipts for that year aggregating Frs. 149, 241.21; for 1893 the receipts being Frs. 570,061.37; and in 1894 they were Frs. 458,525.24.

An earthquake in 1894 did great damage to the roadbed and to the bridges, which required large expenditures to restore. The receipts through its traffic were insufficient to meet these expenditures, and the national government, though repeatedly urged so to do, paid neither guaranties, nor indemnities, nor requisitions. At the general meeting of the shareholders of the company held June 30, 1894, its reports showed a claim against the Venezuelan government amounting to Frs. 2,205,000. In fact, the repairs which were required by the earthquake had been made only by the issue of bonds of the denomination of 500 francs drawing interest at six per cent to be reimbursed by the sums to be received from the respondent government. On June 20, 1895, the report to the general meeting of the shareholders showed a claim against this government of Frs. 5,820,785.47. In 1894 the company issued eight hundred of the bonds, and in 1895 it made a further issue of four hundred. In the month of December of this last-named year requisitions by the national government began again; the financial condition of the company became more strenuous. It sought diplomatic aid through its own government, but obtained no results. December 31, 1895, it claimed of the government of Venezuela as follows:

For guaranty to December 31, 1895.

Damage to the exploitation

Damage for recruiting its workmen
Requisitions

Damage resulting from the non-payment of the guaranty for the issue

of bonds.

Bs. 4,725,000.00

326,924.75 525,509.57

96,320.00

1,308,000.00

Bs. 7,051,751.32

The years 1892 to 1894, both inclusive, were involved more or less in the successful Crespo revolution. It was on February 20, 1894, that General Crespo became Constitutional President of the Republic for a term of four years. But it was not until the year 1895 that his authority was everywhere recognized, and up to that time there were occasional revolutionary outbreaks entailing large expense upon the government and lessening and interrupting its sources and means of revenue.

The answer of the national government to the repeated and urgent requests of the company for the recognition and payment of its credits was always a lack of funds, of which fact there could be no real denial. The respondent government had not, however, agreed to the sums demanded of it by the company.

By 1896, the financial condition of the national government had greatly improved, and in April of that year, together with Mr. Charles Weber, the duly constituted representative of the French Company of Venezuelan Railroads, it took up the claims of that company. Substantially the same figures were presented to the respondent government as have been here produced of

VOL. II-22

date December 31, 1895. The consideration and discussion of these affairs resulted in a formal convention made April 18, 1896, when was brought in first a rehearsal of the salient matters of the previous contracts and then the statement of the claim of the company against the respondent government.

In June, 1898, there was a new revolutionary movement affecting especially the States of Zulia and Andes. The general in charge of the Federal forces drafted the workmen; the director, Mr. Brun, was shot at Santa Barbara in the midst of a conflict, and died of his wounds; there were requisitions of material, of trains for the transfer of troops, of war material, etc. The passenger and freight service was paralyzed; the claims of the railroad received no attention from the government; there was no payment for the services and sacrifices required of and imposed upon the company, and its very existence was seriously threatened. It appealed to its own government, it rehearsed its wrongs and grievances, but it obtained no relief. Just as the exploitation began again to yield some income and the revenues of the national government began to quicken, the successful revolution of General Castro broke out. Requisitions were again in evidence, and more than ever before. Destruction was manifest on all sides; grave losses were caused to the boats; while the revolutions took from it its traffic the government made requisitions, and neither paid anything.

This successful revolution of General Castro, which began in the spring of 1899, brought serious disaster to the railroad in many ways. A letter of date October 12, 1899, to the French Minister of Foreign Affairs by Mr. Reynaud of the Administrative Board, vividly portrays the situation. Selections therefrom are quoted:

"The political and revolutionary crisis which exists in Venezuela has not diminished in intensity since the last communication which we had the honor of addressing to you August 23, last.

"Our property and all our possessions, our railroad material, and our boats have not ceased for several months to be arbitrarily seized or sequestered by the authorities, now said to be legal, now revolutionary. The future of the exploitation of our railroad and boats is grievously compromised in the source of its receipts.

"The harvests are destroyed, abandoned, or lost; the workmen are pursued and tracked in the forests; the owners and merchants in flight or ruin! "Finally our resources are exhausted.

"We have been obliged then to suspend our exploitation!"

It was two days anterior to the date of the above letter that Mr. Simon, general manager of the railroad, informed the citizen President of Zulia in writing that "because of force majeure" all operations of the steamers, and of the railroad from Santa Barbara to La Vigia, were suspended. In this communication the force majeure referred to is thus explained:

"1. All the resources which the company had, whether at Paris or at Maracaibo, have been completely exhausted in paying the expenses of this railroad and its steamer, Santa Barbara, during all of the revolutions, and then the Venezuelan government and the insurgents used these means of transfer until little by little they became masters of them.

"2. Since September 27, 1899, the revolutionists have again taken possession of the line, and, consequently, we can have no receipts except from our steamers, and of these the government is constantly taking possession.

"3. All our efforts with the national government at Caracas, as well as with the government of Zulia, to recover the large sums which they owed the company, have had no success, not even for the little sums of 300 and 144 Bs. which were to be paid October 3, 1899.

"4. In these conditions, if the company continued the exploitation it would be obliged to go into bankruptcy.

"5. It suspends its exploitations, without renouncing its rights, on that account, upon the concession of the railroad from Santa Barbara to La Vigia, until the special settlement takes place between the French company and the government."

A communication to the same effect was sent to the national government through its Minister of Public Works. In it Mr. Simon stated that the revolution had made it impossible for the railroad to receive any benefit during the months of June, July, and August. It was there stated that in September there was a suspension of hostilities and there were some receipts; but that the new revolution broke out September 27, since which time the traffic had ceased. The use of the steamer plying between Santa Barbara and Maracaibo had terminated because of the order of the customs officer forbidding its use and of the confirmation of the same by the President of the State.

The situation is there summarized by Mr. Simon as follows:

"1. It is not possible for the exploitation to gain any receipts, since the revolutionists are masters: and up to this day, October 10, there is not hope that the government can retake this city.

"2. The Venezuelan government cannot pay the company any of its debts nor even give it an account, nor make any promises for the future.

"3. The company has no longer any resources, having exhausted everything by which it may meet expenses of the line, while it has made no receipts because of the frequent revolutions.

"Considering that this state of affairs has caused it prejudices and enormous damages, and that if it continued its expenses it would be led into bankruptcy, the company sees itself, because of force majeure, obliged to suspend the exploitation of its line and its steamers until a settlement may be made with the national government of the United States of Venezuela, that the company does not abandon its right upon the concession of the said railroad from Santa Barbara to La Vigia.'

October 22, 1899, by communication of Mr. Simon to the company at Paris, it is learned that the archives and records of the company had been locked up in the safes and a detailed inventory had been given the consular agent of France at Maracaibo, that the entire personnel of the boats had been paid and discharged, and the copy of the notice to the public which had been given it through the newspapers was therein remitted. It is added that:

"The lack of income during more than four months, together with the revolutions and lack of payment by the government of its obligations to the company, are the reasons which lead the company to ask for a settlement with the national government before continuing anew the exploitation.

"It appears that since the 27th of September the railway is in the hands of the insurrectionists, and that until this date, October 12, there is no hope that the government may recover this place."

The government of France through its foreign office directed its consular agent at Maracaibo to safeguard the interest and properties of the railroad company during its suspension of activities.

December 2, 1899, there was an armed conflict on the shores of the Bay of Maracaibo between the forces of General Castro and those of General Hernandez. A steamer of the company, the San Carlos y Merida, was lying at anchor in the bay, and the armed forces were so situated toward one another that the steamer lay in their line of fire. As a result, the damage to the hull of the steamer was so serious that it sank during the afternoon of that day. These facts concerning the steamer are taken from the report of the French consular agent at Maracaibo in a communication made by him, of date December 30, 1899.

January 2, 1900, the appraisers, specially appointed for the purpose of estimating the damages suffered by the Santa Barbara while in the service of the national government, made their report, naming these damages at 10,000 Bs.

January 18, 1900, the French Company of Venezuelan Railroads addressed the Minister of Foreign Affairs of France, and referred to its communication of the previous month to the same official, and asserted a claim. . . .

February 3, 1900, the railroad company addressed itself to the President of the Republic of Venezuela, informing him of the grave disasters which had overtaken the company, and declaring that any considerable delay in the settlement of the sums due it from the national government might prove fatal.

January 18, 1901, the French Company of Venezuelan Railroads, having received no payment from the respondent government and no encouragement that payment would be made, came to believe that its efforts were forever compromised; and it then presented to the French Minister of Foreign Affairs a claim for Frs. 18,000,000, the ensemble of the losses which the action of the respondent government was held to have brought upon it. To this was added the service of the boats which had been destroyed or injured and a part of the material of the dredging-machine which had been stolen, making a total of 483,900 francs, deduction having been made of 11,100 Bs., that sum being the price for which the Santa Barbara and the launch had been sold. This claim was brought to the attention of the Consul General of Venezuela at Paris, whose response was that the new President up to that time had been able to concern himself only with matters political and martial.

In behalf of the company there is also presented by Counsellor Decraigne, in his very able and valuable brief, the claim that it was ruined at the hands of the respondent government; that this ruin was practically consummated by what he is pleased to denominate the culpable removal of the guaranty. He insists that the exchange made between the company and the government was without any equivalent, and was brought about only by such pressure that it was invalid and should be declared a nullity. He also asserts that it should be declared a nullity by default of execution, since the respondent government has not paid the arrears of the titles which it has given the French company in exchange for its guaranty. The respondent government, as the essential part of that exchange, was to furnish titles bearing five per cent interest, the titles having no other value than their interest-bearing qualities. The interest not being paid, the titles were without value; hence there was in fact no consideration for the surrender of the guaranty by the company; and the respondent government having thus failed to perform that which was essential in the contract for the surrender of the guaranty, the company has a right to demand the rescission of that portion of the Convention of 1896. He includes in the right of rescission a claim for damages in behalf of the company, which is in the