The Pious Fund of the Californias (The United States of America v. The United Mexican States)

The Pious Fund of the Californias was a fund established in the 17th and 18th centuries to promote the Catholic religion in California, then in the territory of Spanish-administered Mexico.  In 1842, after Mexico had achieved independence, the Fund passed into the the treasury of the Mexican Republic, and the decision was made to assign to the California Catholic missions an amount equal to 6% interest on revenue from the sale of the Fund's properties.  In 1846, war broke out between the U.S.A. and Mexico, which ended with the peace treaty signed at Guadalupe Hidalgo on February 2, 1848.  Under the Guadalupe Hidalgo Treaty, the upper portion of California was transferred from Mexico to the U.S.A.  

 

In 1868, the U.S.A. and Mexico established an international tribunal to adjudicate claims brought by nationals of one State against the other State.  Under this treaty, two Roman Catholic bishops claimed for the Catholic Church the annual interest upon the Pious Fund, which was alleged to have accrued from the date of the Guadalupe Hidalgo Treaty.

 

On November 11, 1875, an arbitrator awarded the Bishops 6% annual interest on one half of the capital of the Pious Fund, to be paid from the date of the Guadalupe Hidalgo treaty, or 21 years.  The award was amended by a decision of October 24, 1876.  Mexico made the first two annual payments in 1875 and 1876, but stopped from the date of the amended award. The U.S.A. claimed the remaining installments of the interest payments on behalf of the Catholic Bishops. Mexico no longer considered itself bound to pay.

 

The question submitted to arbitration in 1902 was whether Mexico was bound by the decision of the arbitrator issued in 1875/76, and if so, how much it would have to pay.

 

Mexico objected to the claim, arguing that this was a private dispute which should be resolved according to rules of positive law, since the U.S.A. was not a party to the case but merely represented the interests of two of its nationals.  The Tribunal did not agree and found that the dispute was one between the U.S.A. and Mexico, which could only be decided on the basis of international treaties and the principles of international law.

 

The Tribunal found that the principle of res judicata applies to arbitral awards and not only to judgments of tribunals created by the State.  It ruled that accordingly, the 1875/76 decision was within the governing principle of res judicata and the annuities that had accrued were owed to the U.S.A. Mexico was obliged to extinguish the accued debt and to continue paying the annuity in perpetuity.  The Tribunal found that the question of the method of payment of future annuities had not been decided, and therefore with the exception of those annuities which, according to the earlier award, had to be paid in gold dollars, Mexico was entitled to satisfy its future obligations by paying in silver.