der shall be the net earnings, from which not less than 80 per cent shall be divided among the stockholders. It is understood that ten years after the completion of the canal the company shall never divide among the shareholders, by direct or indirect dividends, issue of stock, or in any other way, more than 15 per cent annually, or in that proportion, for canal dues collected; and when it shall be found that the charges yield a larger profit the dues shall be reduced to the basis of 15 per cent per annum.

ARTICLE 47. The present concession shall lapse

First. For failure of the company to comply with any of the conditions of articles 7, 42, and 43.

Second. If the service of the canal after completion should be interrupted for six months, except in fortuitous cases or cases of "force majeure."

The termination of the contract having been declared for any of these causes, the public lands conceded by this contract shall be restored to the Republic, in whatever condition they may be found, without indemnity.

Those lands which the company shall have sold with the formalities prescribed by law shall be excepted, provided always that such sales shall not have been made within the six months previous to the date upon which the company becomes lawfully subject to the penalty herein established.

ARTICLE 48. At the expiration of the ninety-nine years herein stipulated, or in the event of the lapse of the contract mentioned in the foregoing article, the Republic shall enter into possession in perpetuity of that part of the canal, its warehouses, stations, and other establishments used for the administration of the canal, found in the territory of the nation. The work found in the waters over which the Republic has cosovereignty shall belong to it in joint domain; and in regard to that part of the canal and its waters over which Costa Rica has not eminent domain, but the right of use and free navigation after ninety-nine years or in case of termination, the Republic shall retain the right of use and free navigation thereof in perpetuity. For all which the Republic shall not be bound to pay any indemnity to the company.

The vessels of the company, their supplies of coal and other materials, mechanic shops, floating and reserved capital are excepted from these conditions, as are also at the expiration of the ninety-nine years the lands which the State ceded by this contract, excepting those upon which the works mentioned in the first part of this article have been established, which shall become the property of the State, together with their dependencies, as necessary for the service of the canal and as an integrant part of the same.

But in the capacity of lessee the company shall have the right, at the expiration of the period of ninety-nine years, to the full enjoyment of and free use and control of the canal and of the part within the territory of Costa Rica, enjoying equally the privileges and advantages of this concession during a second period of ninety-nine years, conditional with the payment to the Government of Costa Rica of 64 of 1 per cent of the net annual earnings of the canal, in addition to the dividends accruing from its shares of the capital stock.

The company shall have the right at its discretion to fix the dues (or tolls) referred to in article 39 of this concession in such a manner that the stockholders, after deducting the payment of 314 per cent, shall still receive 10 per cent annually upon all the capital.

At the expiration of the second term of ninety-nine years the Gov

ernment shall enter into the perpetual possession of the canal and of other property referred to in the first part of this article, and in addition all that was excluded from delivery in said first part, with the exception of the lots of land ceded to the association by the present contract and the reserved capital and sinking fund.

Failure to fulfill any of the conditions of the lease shall terminate it, and the State shall enter into possession of the canal, or of that part which belongs to it because of its being in Costa Rican territory,* and of the other works belonging to the canal as stipulated in the foregoing paragraph.

ARTICLE 49. Any disagreement which may arise between the Republic and the company as to the interpretation of the present stipulations shall be submitted to a board of arbitrators to be composed of four persons, two to be named by the State and two by the company.

These arbitrators shall be designated by each of the parties within four months from the day upon which one of the said parties shall have made known to the other in writing the disagreement on the point under discussion.

If one of the parties should allow the period mentioned to pass by it shall be held that the opinion or claim of the other has been accepted. The majority of the arbitral votes shall decide definitely and without appeal. In case of a tie, the arbitrators, by mutual agreement, shall name a fifth, who shall decide. If unable to agree in naming a fifth, they shall draw by lot from the names of the diplomatic representatives accredited to Costa Rica, and the first drawn shall exercise the functions of the fifth arbitrator; he shall adopt the opinion of one or the other side, and whatever he decides shall be final and without recourse of any kind.

In default of the fifth arbitrator, the second one drawn shall exercise these functions, and so successively until a decision shall have been reached.

Before the commencement of the work of opening the canal the Government, jointly with the company, shall adopt rules by which the arbitrators shall be governed in whatever relates to their proceedings.

Questions between the company and individuals residing in Costa Rica shall be decided by the ordinary courts, and in conformity with the laws of the Republic. In matters of those who do not reside in Costa Rica the rules of international law private shall be adhered to. ARTICLE 50. This contract, when approved by the President of the Republic, shall be submitted to the supreme legislative power for its ratification if deemed desirable. In case of its rejection the Nicaragua Canal Association shall be released of its obligations herein contracted. The ratification or rejection shall be given within one hundred and twenty days from this date.

In faith whereof the undersigned sign four copies of the present contract, two for each party, at San Jose, Costa Rica, July 31, 1888.

P. PEREZ ZELEDON.
A. G. MENOCAL.

This contract was approved the same day by the President of Costa Rica, and was ratified by the Costa Rican Congress on the 9th of August, 1888.

*Or at points where Costa Rica has joint rights.

APPENDIX 2.

THE NICARAGUA CANAL.

STATEMENTS BEFORE THE SELECT COMMITTEE ON THE CONSTRUCTION OF THE NICARAGUA CANAL. UNITED STATES SENATE, JUNE 15, 16, AND 17, 1898,

By the members of the Nicaragua Canal Commission, Admiral JOHN G. WALKER, Prof. LEWIS M. HAUPT, and Gen. PETER C. HAINS;

The committee having under consideration the bill (S. 4539) to amend the act entitled "An act to incorporate the Maritime Canal Company of Nicaragua," approved February 20, 1889, and to aid in the construc tion of the Nicaragua Canal.

WEDNESDAY, June 15, 1898.

The committee met at 10.30 o'clock a. m.

STATEMENT OF ADMIRAL JOHN G. WALKER.

The CHAIRMAN (Senator Morgan). You are the president of the commission to reexamine the surveys of the Nicaraguan Canal. What is the strength of the party you have in the field now?

Admiral WALKER. About 250 men, all told.

Senator MORGAN. How many engineers?

Admiral WALKER. Probably 80.

Senator MORGAN. Is it a competent party of engineers?

Admiral WALKER. Oh, yes; very.

Senator MORGAN. Are they still in the field?

Admiral WALKER. Still in the field.

Senator MORGAN. The commissioners have returned to the United States?

Admiral WALKER. Yes, sir.

Senator MORGAN. Have the commissioners made a personal exploration that is satisfactory to them as to the general conditions of the canal?

S. Rep. 1265-6*

81

Admiral WALKER. Yes, sir; we went down there the 1st of December; we came back about the 1st of April. In the interval we passed most of our time in Nicaragua; we went to Costa Rica for a short trip, and to Panama to look over that canal. With that exception, and we made it all in one trip, we were in Nicaragua all the time. We went over the entire line from Greytown to Brito, and examined everything as far as it was possible. We camped out in the woods and lived in camp for a considerable time.

Senator MORGAN. How were you received by the Nicaraguan Government?

Admiral WALKER. Very pleasantly, indeed.

Senator MORGAN. Did you gather from the President of that Government that they were really friendly to the canal and anxious for its construction?

Admiral WALKER. Very friendly, very anxious it should be completed, and very desirous that the United States Government should take hold of it and insure its completion.

Senator MORGAN. Any jealousy toward the United States Government having control of the canal?

Admiral WALKER. Not the slightest that I saw.

Senator MORGAN. If you please, just give in your own way a statement of what you did, what examinations you made, including the harbors at each end of the proposed canal.

Admiral WALKER. After the commission was organized we took the matter up, had an office in New York, examined carefully the records of the canal company, got all the information possible from their records and from the people who had been employed by them, and when we went to Nicaragua we went very thoroughly equipped. Senator MORGAN. Did you also examine the report of the Ludlow commission?

Admiral WALKER. Yes, sir; examined that carefully, and all reports of surveys and examinations made heretofore.

Senator MORGAN. Including Lull's?

Admiral WALKER. Yes, sir; we went over all the literature of the subject. We were a good while getting ready to go. There were various difficulties that interfered with our starting. That time was utilized in making a study of the whole subject and equipping ourselves for the work, so that when we finally went down we took 104 people, I think, in the party, and we were thoroughly equipped with surveying instruments and with arrangements for determining the rainfall, the evaporation, the flow of streams and everything connected with the hydrography of the country. We took ten complete boring outfits for finding out what we had under us.

Senator MORGAN. Any geologist?

Admiral WALKER. We took a geologist belonging to the Geological Survey, a very competent man, and a hydrographer, also from the Geological Survey, a very competent man, too. The latter was put in charge of everything pertaining to waterfall and evaporation and the flow of streams, which work has to be carefully done in order to determine what amount of water we have to take care of. The geologist was put in charge not only of the general geological work of the expedition, but of all the boring parties.

Senator MORGAN. Who took charge of the examination of the harbors?

Admiral WALKER. That was taken up by the commission itself, ex

cepting so far as it would be covered by surveying and boring parties. We had a careful survey made, both at Greytown and in its vicinity, and at Brito and its vicinity, on the west side. They were made by parties which I got from the Navy Department. That Department sent us a ship to each point with complete surveying outfit. On the Brito side, where the Ludlow board reported rock in the location for the harbor, we had it thoroughly bored, and found there was no rock there to get us in difficulty. Of course, on the Greytown side, the east side, it is all an alluvial deposit. There is no rock there; it is all sand; all volcanic sand.

Senator MORGAN. Has the report of the survey of the harbor or roadstead at Brito or Greytown been made?

Admiral WALKER. It has not. The survey on the Greytown side has been completed, but it has not been sent here. The survey on the Brito side has been completed, and the boring at Brito has been completed, but I have not had a final report. I have only had one report, a progress report, showing the condition at the time the report was made.

Senator MORGAN. Are those vessels still there?

Admiral WALKER. No, sir.

Senator MORGAN. Come home?

Admiral WALKER. Yes, sir; both gone home. The one on the west side to San Francisco and the one on the east side is with the blockading squadron off Havana.

Senator MORGAN. When do you expect the final report?

Admiral WALKER. It ought to be received at any time, but I can not say just when, because communication gives us a great deal of trouble; the mails are irregular and uncertain.

Senator MORGAN. Do you know the general tenor of those reports? Admiral WALKER. I know the hydrographic survey at Brito shows no particular change from the surveys of years ago, and the borings show there is nothing in the way of making a harbor-au artificial harbor scooped out of a mangrove swamp. Nothing turned up in the survey of Greytown that we did not expect. The location changes there, because there is a good deal of movement of sand in that neighborhood.

Senator MORGAN. Do you think there is any substantial or practical difficulty in reestablishing a harbor at Greytown?

Admiral WALKER. I think it is a perfectly feasible thing to do. It is easy enough to make a harbor, but the entrance will have to be taken care of after it is made, just as at Port Said and Sandy Hook, and at Galveston, and the Passes of the Mississippi River. There will have to be a dredge maintained there to keep the entrance deep enough.

Senator MORGAN. Did you come to any conclusion as to whether the San Juan River could be diverted, where it enters the bay, to prevent filling from that source?

Admiral WALKER. I think it can not. The sand is brought down from the Costa Rican Mountains and goes to the sea mainly through the Colorado River mouth, but it is carried along the shore by the action of the waves, not by the river.

Senator MORGAN. In consequence of the trade winds?

Admiral WALKER. Yes, sir. The trade winds strike the beach at an angle, and the light sand is kept constantly in motion and carried to the northward and westward all the time.