The general policy of the United States and of one or two other countries in the matter of contract claims has already been discussed, and it has been observed that in ordinary cases arising out of contract these countries have declined their diplomatic interposition, except in case of denial of justice-so that the clause renouncing diplomatic protection in these cases may be regarded as merely confirmatory of the general attitude assumed by these states.2 As a rule, the policy of the United States has been not to interfere with the right of a foreign government to prescribe the terms of concessions which it may grant to American citizens to carry on business within its territory, and after a concession in which a certain privilege is denied has been accepted, the United States will not demand the annulment of the provision. Unless the foreign state has perpetrated upon its citizen some gross violation of the rights of the concessionary, usually embraced in the category of a denial of justice, or confiscatory breach of the contract, the United States has declined its official interposition to Americans contracting with foreign governments or individuals, although good offices are generally extended."

4 R. G. D. I. P. (1897), 228. See also Ecuador, law of August 25, 1892, Art. 14, 84 St. Pap. 646; Venezuela, constitution, Art. 124, Rodriguez, I, 230-1; Colombia, law of November 26, 1888, Art. 15, 79 St. Pap. 167 et seq.

See letter of Secretary of State Bayard, to Mr. Straus, Minister to Turkey, June 28, 1888, For. Rel., 1888, pt. 2, p. 1599, Moore's Dig. VI, 296–7, with reference to a law of Turkey of January 10, 1888, Art. 5, providing that foreigners shall not be permitted to set up printing offices in Turkey unless by formal declaration they renounce the privileges and immunities of foreigners.

1 Italy, for example. For the policy of Italy see 4 R. G. D. I. P. (1897), 405-406, citing notes of Italian Minister of Foreign Affairs. Nevertheless, it may be doubted whether Italy considers this a general policy.

2 Although the United States has usually not declined to exercise good offices. See Moore's Dig. VI, 705 et seq.

Mr. Hay to Mr. Powell, Minister to Haiti, April 1, 1899, Moore's Dig. VI, 289.

4 Mr. F. W. Seward, Act'g Sec'y of State, to Mr. Logan, April 15, 1879, Moore's Dig. VI, 293; Statement of Mr. Hay, Sec'y of State, in the case of Salvador Commercial Company (U. S.) v. Salvador, Moore's Dig. VI, 731-732, For. Rel., 1902, pp. 839, 871; Mr. Olney, Sec'y of State, in claim of North and South American Construction Company v. Chile, Moore's Dig. VI, pp. 728-729, For. Rel., 1895, pt. 1, p. 83; Calvo, op. cit., VI, § 366, p. 351; McMurdo's case (U. S.) v. Portugal, Moore's Arb. 1865–1899, Moore's Dig. VI, 727–728, 297.

§ 373. Its Ineffectiveness in Preventing Interposition. Practice of the United States.

In some cases, however, interposition has been made dependent upon the absence of any renunciation on the part of the citizen of the privilege of appealing to his own government, and Secretary of State Fish in one case believed himself barred from interfering where such a stipulation had been entered into by the citizen.1 This attitude, however, is a distinct exception to the general practice of the Department of State. The position now uniformly assumed is perhaps best expressed in an instruction of Secretary of State Bayard in 1888:

"This government cannot admit that its citizens can, merely by making contracts with foreign powers, or by other methods not amounting to an act of expatriation or a deliberate abandonment of American citizenship, destroy their dependence upon it or its obligations to protect them in case of a denial of justice." 2

Mr. Gresham, Secretary of State, interpreted the clause of the Venezuelan constitution to the effect that

"in every contract of public interest there shall be inserted the clause 'that doubts and controversies which may arise regarding its meaning and execution shall be decided by the Venezuelan tribunals and according to the laws of the Republic, and in no case can such contracts be a cause for international claims""

to mean that the party claiming under the contract

"agrees to invoke for the protection of his rights only the authorities, judicial or otherwise, of the country where the contract is made. Until he has done this, and, unless having done this, justice is plainly denied him, he cannot invoke the diplomatic intervention of his own country for redress. But if his application to the authorities of the country where the contract is made results in the palpable denial of justice, or in a plainly unjust discrimination against the applicant as an American citizen, the clause above quoted would hardly be construed to prevent an appeal for diplomatic intervention if such intervention would otherwise be allowable under the rules of international law." 3

1 Mr. Fish, Sec'y of State, to Mr. Butler, Oct. 5, 1871, Moore's Dig. VI, 293.

2 Mr. Bayard, Sec'y of State, to Mr. Buck, Minister to Peru, Feb. 15, 1888, Moore's Dig. VI, 294; Mr. Bayard to Mr. Scott, Minister to Venezuela, June 23, 1887, Moore's Dig. VI, 294; Mr. Bayard to Mr. Hall, Minister to Central America, March 27, 1888, For. Rel., 1888, I, 137; Mr. Adee, Act'g Sec'y of State, to Mr. Partridge, Minister to Venezuela, July 26, 1893, For. Rel., 1893, pp. 734, 735.

3 Mr. Gresham, Sec'y of State, to Mr. Crawford, Sept. 4, 1893, Moore's Dig. VI, 299-300.

By the last clause Mr. Gresham probably meant that the exhaustion of local remedies and a denial of justice are conditions precedent to diplomatic intervention. With this reservation, therefore, that the citizen must not suffer a denial of justice, the Department of State has upheld the right of the citizen to stipulate for local courts as an appropriate forum for his disputes.

Where the contract stipulation has attempted to go further and completely oust the right of the government to intervene under all circumstances and to foreclose the citizen's right of appeal even in a case of denial of justice, the Department of State has denied the validity of such contractual renunciation. As Mr. Bayard stated:

"It is not competent to a citizen to divest himself of any part of his inherent right to protection or to impair the duty of his government to protect him;" 1

and furthermore that

"no agreement by a citizen to surrender the right to call on his Government for protection is valid either in international or municipal law." 2

§ 374. Executive Views as to the Renunciation of Protection or Indemnity.

The subtle measure adopted by Mexico in its railroad grants, by the terms of which officers and employees of its roads are declared amenable to the laws as Mexicans and are inhibited from pleading rights of alien protection met with a similar objection by Mr. Bayard. Such service in Mexico was deemed a contract, a condition of which was the surrender by the employees of their right to invoke diplomatic protection. While considering that alien employees became thereby "entitled to justice in Mexico in lieu of the broader claims to international justice," nevertheless, "in case of a denial of justice, the obligation of this government to protect [its citizens] remains unimpaired."

" 3

1 Mr. Bayard, Sec'y of State, to Mr. Straus, Minister to Turkey, June 28, 1888, For. Rel., 1888, v. 2, p. 1519. See also Mr. Wilson, Act'g Sec'y of State, to Mr. Hibben, Chargé, May 19, 1909, For. Rel., 1909, p. 222.

2 Mr. Bayard, Sec'y of State, to Mr. Hill, Feb. 16, 1887, For. Rel., 1887, p. 100.

3 Mr. Bayard, Sec'y of State, to Mr. Morgan, Minister to Mexico, May 26, 1885, Moore's Dig. VI, 294.

Where there have been confiscatory breaches of contract, it has been noted that the government has not considered itself hampered by its general policy of non-intervention in contract claims and both the Department and international commissions have in such cases relieved claimants from the obligation of their stipulation inhibiting them from invoking the diplomatic protection of their own government. It has already been observed that the government may prosecute a claim arising out of an injury to a citizen, notwithstanding the fact that the citizen renounces his right to an indemnity, the principle being explainable on the theory that the injury to the citizen gives rise to two independent causes of action, one of the state, the other of the citizen. Nevertheless, unless the offense is particularly flagrant or may be deemed a national affront, the individual's waiver of a right to indemnity weakens the moral, if not the legal, right of his government to demand reparation, and the government may well consider itself justified in desisting from pressing a claim waived by the individual who actually sustained injury, as Great Britain did in the Jencken claim against Spain. As will be noted presently, an international arbitral tribunal has regarded a private waiver of indemnity as a bar to an international claim.

In the Orinoco Steamship Company case, in considering the rights of the British stockholders, the British government took the view that its general international right of diplomatic interposition was not modified by the renunciatory clause contained in the concession of that company.2

The German government in a case which likewise arose in Venezuela did not consider itself bound by the renunciatory clause, taking the ground that the German government is not a party to these contracts. That government reserves the right to intervene diplomatically for the protection of its citizens whenever it considers it best to do so, "no matter what the terms of the contract, in this particular respect, are." 3

Although, added the English government, the fact that the company had contracted themselves out of every remedial recourse in case of dispute is an element to be taken into consideration when they subsequently appeal for the intervention of his Majesty's Government. Ralston, 90.

Position of the German government as stated by the German minister at Caracas to Mr. Loomis, the American minister, Moore's Dig. VI, 300.

§ 375. Decisions of International Tribunals on Effect of Contractual Renunciation.

International commissions have had frequent occasion to construe the effect on the right of the claimant to ask the intervention of his government and of the government to intervene in a case where there has been an express renunciation of the right. In the case of Jarr and Hurst,1 Palacio, the Mexican commissioner, speaking for the commission, held that the release of claimants from imprisonment on the understanding that no claim should be brought for the imprisonment, to which arrangement the American minister consented, operated as a bar to the claim.

For the most part, however, the occasions on which international commissions have had to construe the effect of a contractual renunciation of protection have involved the question of the validity of the Calvo clause, which, in contracts, generally reads:

"The doubts and controversies that may arise on account of this contract shall be decided by the competent tribunals of the Republic, in conformity with the laws, and shall not give rise to any international reclamation."

The clause is worded differently from time to time, sometimes stopping with the mere statement that the doubts shall be submitted to the local courts, with no further stipulation as to the renunciation of diplomatic protection. Sometimes such renunciation is added to the stipulation for exclusive jurisdiction of the local courts, with the proviso that cases of denial of justice are excepted. For the present purposes, all forms of the clause may be considered together, for in the cases that have arisen where the stipulation involved nothing further than exclusive submission to the local courts, the local remedies had not been exhausted.

Nor are the principles laid down seriously modified by the fact that the clause has not always been framed in identical language.

The decisions of various international commissions are by no means uniform. In the nineteen cases reported by Moore and Ralston, eight have upheld the clause as barring the right of the claimant to appear before an international commission without having fulfilled his obliga

1 Jarr and Hurst (U. S.) v. Mex., July 4, 1868, Moore's Arb. 2713.