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decree of the 9th of April, 1885, made the subject of a public auction, held at Madrid and also at Manila. At that auction Mr. Edmund Sikes Hett was the only bidder, and by a royal order of the 21st of January, 1887, he was declared the concessionaire authorized to build the road. Afterwards Mr. Hett duly assigned his rights to the company mentioned by you, and that company, an English corporation, proceeded to construct the road and now owns it, and prefers a claim against the United States, or whom it may concern, to be paid certain sums of money in accordance with the terms of the concession.
The royal decree tirst referred to, dated the 9th of April, 1885, was as follows:
"ART. 1. The Government will assist the construction of the railway from Manila to Dagupan, guaranteeing an interest of 8 per cent per annum on the capital which is spent on the works, reserving to itself the right to recoup itself the two-thirds part of the amounts which for this purpose it way pay from the local funds belonging to the provinces which the aforesaid line crosses, in accordance with the practices established for other public works in the Philippine Islands.
"ART. 2. The subvention with which the concessionaire shall be assisted shall be paid over every three months, handing over at the end of every term the amount which belongs to the section or sections working during the three months for guaranteed interest.
“The quantity which shall be paid every three months as subvention shall be determined by discounting from the amount which represents the guaranteed interest corresponding to the section or sections in working, 50 per cent of the gross products of the aforesaid working.
"When the 50 percent of the gross products of the working exceed the amount which represents the guaranteed interest the excess shall be divided equally between the concessionaire and the treasury.
“ART. 3. The maximum capital which shall receive the interest of 8 per cent per annum and which shall serve as a type for the auction for the concession of the line, is fixed in 4,961, 473.65 pesos."
The amount of capital appears to have been increased to the extent of about a million pesos. It appears that the pesos in question were held by the courts of Spain to be payable in the Philippine Islands, and that they were therefore Philippine pesos, the value of which is a matter of importance in the disposition of this claim as regarded by me.
As was likewise usual in such cases, a schedule of special conditions was published in advance of the auction, giving details of the work to be done by the concessionaire, the point at which the road was to start, referring to royal orders and decrees to which the whole business was to be conformed, specifying the stations and the kinds or classes of stations, the amount and character of rolling stock, providing for the establishment of an electric telegraph line and the use of it by the concessionaire and by the Government, and many other details, expressed in 33 articles. This schedule of special conditions was dated the same 9th of April, 1885. Among the articles were the following:
“4. The Government shall aid the construction of the line by guaranteeing 8 per cent annual interest on the capital employed therein.
* * The sum which the treasury of the Philippine Islands is to pay quarterly as subvention shall be fixed by deducting from the sum representing the guaranteed interest corresponding to the section or sections in working 50 per cent of the gross proceeds of such working.
“18. The electric telegraph of the line shall be established for the service of the same, but the concessionaire shall be bound to place as many as four wires for the telegraph of the State, immediately the government of the islands shall so require him, there being for his account the establishment and maintenance, and for account of the State the service of the official and private correspondence. The Government and the concessionaire may, however, agree that the functionaries of the former shall carry on the telegraphic service of the railway.
“The concessionaire shall furnish the locale necessary for the telegraph station of the Government at the railway stations where it may be thought proper to have them, the establishment of such stations and their maintenance and service being for account of the State.
“He shall also furnish the locales necessary for the inspections of the Government.
“19. He shall also provide in the trains determined upon, the locale corresponding to the services of mails, the carriage whereof shall have to be always gratis, as also the carriage of the correspondence in all other trains.
"The transports of the State, both civil and military, and those of prisoners or persons for trial, shall be effected for a moiety of the tariff prices.
“ 22. The concessionaire shall be subject to the tariff of maximum prices of toll and transport, which tariff may be revised and amended by the Government, in accordance with what is expressed in article 32 of the royal decree aforesaid of August 6, 1875.
23. The concession is granted for ninety-nine years, according to these conditions and to the tariffs approved, and subject to all that is provided by the said royal decree of August 6, 1875.
"27. Upon the expiration of the term of the concession, the State shall acquire the line with its rolling stock and all its dependencies, entering into full ownership thereof, and in the full enjoyment of the right of working it.”
It is apparent that this contract was recognized as one of utility to the Government of Spain, and one of benefit to the provinces in the island of Luzon, through which the road was to pass. Ultimately, as we may infer from the royal decree of April 9, 1885, those provinces were to bear two-thirds of the expense of the guaranty. The whole guaranty was to be paid from the Philippine treasury; but I do not understand that to mean that it was to be paid wholly from money's belonging to the local funds of the Philippines, but ultimately, to the extent of one-third, from the royal or peninsular funds in the Philippine treasury, or at all events as in part a subsidy recognized by the general policy of Spain as chargeable to herself.
All of the colonial laws and regulations of Spain concerning public works, railroads, and the police of railroads in the Philippines are not before me; and I have examined principally those concerning Cuba and Porto Rico, which are chiefly an extension to the colonies of the ones in force
in the peninsula. I have examined also divers concessions concerning railroads, cables, etc., in Cuba and the Philippines. The same procedure seems to have been pursued in the Philippines as elsewhere. I therefore quote, as throwing light upon the present concession, the following article of the law of railroads for Spain, Cuba, and Porto Rico, extended to Cuba in 1883 and promulgated in Porto Rico in 1888:
“ART. 13. The provinces and towns directly interested in the construction of a line of general service, shall contribute with the State to the subsidy granted, in the proportion and manner prescribed by the law referred to in Article II (i. e., the special law granting the concession)."
In article 50 of the regulations for executing that law, we read:
“If the aid consists of the delivery of a sum in specie or bonds and stocks, it shall be paid to the company in the form and time stipulated, always on a certificate of the engineers of the State charged with the inspection. The payment of the subsidies in these cases shall be made to the company by the Government directly, and the Government in its turn shall be paid by the province and the town the part of the subsidy devolving upon them, as determined by the law.
(Thus far the regulation is identical with that of 1877 for Spain, extended to Cuba in 1883.) If the subsidy consists of the exemption of customs duties, the formalities determined in the existing provisions or those provided in the future by the proper law or regulations shall be complied with. If the subsidy consists in the guaranty of interest, there shall be paid semi-annually to the company by the public treasurer of the island, the difference between the net earnings, after deducting what is provided for in the special clauses of the concession, and the said interest. When, during four consecutive periods of six months, the net earnings of the operation shall equal or exceed the interest guaranteed, the right to such interest shall cease; but the treasury may continue to collect half of the excess on the said interest, until it shall have been repaid for the advances made, if it has been so stipulated in the special clauses of the concession."
The contract of concession has not been fully executed, but was, in some respects, to remain executory for eightyseven years.
It was a contract between the Spanish Government and the railroad company. The promises were made by the one to the other. I am of opinion that an identical contract between the United States and the company was not created by the ratifications of the treaty of Paris, and does not exist.
We need not inquire whether the contract would now survive had the Philippine government or the provincial deputations, regarded as autonomous or even as merely part of the Royal Government, made it, and had the benefits of it been wholly received by the provinces or archipelago. For the contract was made by Spain, and partly for her own benefit. It was the indivisible personal contract of Spain and of the concessionaire.
It seems to be the consensus of opinion among authorities on International law, that, upon the separation of part of a country from the sovereignty over it, debts created for the benefit of the departing portion of the country go with it as charges upon its government. (Hall's International Law (Ith ed.), p. 98; Rivier, Droit des Gens, tome 1, pp. 70, 72; Calyo, Le Droit Inter., t. 1, sec. 101; t. +, sec. 2487; Phillimore's Inter. Law (2d ed.), vol. 1, pt. 2, secs. 136, 137; The Tarquin, Moore on Arbitration, vol. 5, p. 4617; Lawrence's Wheaton's Inter. Law, pp. 53, 5+; Wharton's International Law Digest, sec. 5; Anglo-Saxon Review, June, 1899, Mr. Reed's article concerning the Philippine debt, etc.; Dana's Wheaton's Inter. Law, sec. 30, note; Glenn's International Law, sec. 28; Field's International Code, secs. 24, 26; Gardner's Institutes of Inter. Law, p. 52; Senate Doc. 62, Fifty-fifth Congress, third session, pt. 1, p. 500.)
Various bases are given for an obligation of a locality and its new government. The chief one is that a benefit goes with its attached burden. Another is the legal right of the original sovereign to bind the locality to pay any debt, even if not for local benefit. (Bluntschli, Droit International, sec. 59.) A third is the possession by the new government of the funds or revenues out of which the debt was to be