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MEMORANDUM WITH REFERENCE TO THE AUTHORITY OF CONGRESS TO ENTER INTO A COMPACT WITH THE PEOPLE OF PUERTO RICO SO THAT THEY MIGHT ORGANIZE A GOVERNMENT PURSUANT TO A CONSTITUTION OF THEIR OWN ADOPTION

1. "Among the powers of the National Government-and hence, in the first instance, of Congress are certain ones that have sometimes been assigned to it on the score that they are powers inherent in a national government,' or 'inherent in sovereignty,' or simply from the necessity of the case."

Among "such powers are the power to acquire and govern territories ***”’ ("The Constitution and What It Means Today," by Edward S. Corwin, Princeton University Press, 1948, p. 68).

2. Paragraph 2 of section III of article IV of the Constitution of the United States "is the source to which has sometimes been traced the power of the United States to govern territories *** [T]his and the power to acquire territory are best ascribed simply to the sovereignty inherent in the national government as such; as is also the power to cede territory to another government, as for example, the Philippine Islands to the Philippine Republic" ("The Constitution and What It Means Today," by Edward S. Corwin, Princeton University Press, 1948, p. 141).

3. The United States acquired sovereignty over the island of Puerto Rico under the terms of an international treaty entered into in the exercise of the plenary sovereignty of the American people in the international field.

4. While the treatymaking power may acquire territory, its incorporation into the United States ordinarily waits upon action by Congress. Such incorporation may be affected either by admitting the territory into 'this Union' as new States or, less completely by extending the Constitution to it" ("The constitution and What It Means Today," by Edward S. Corwin, Princeton University Press, 1948, p. 141).

5. The Treaty of Paris of 1899 did not entail the incorporation of Puerto Rico into the Union. Neither has Puerto Rico been incorporated by congressional action, even though the citizens of Puerto Rico were, in 1917, with certain exceptions, vested with U.S. citizenship (Balzac v. People of Puerto Rico, 258 U.S. 298 (1922)).

6. The broad statement that the Federal Government can exercise no powers except those specifically enumerated in the Constitution, and such implied powers as are necessary and proper to carry into effect the enumerated powers, is categorically true only in respect of (the United States) internal affairs ***"

"As a result of the separation from Great Britain by the colonies acting as a unit, the powers of external sovereignty passed from the Crown not to the colonies severally, but to the colonies in their collective and corporate capacity as the United States of America * * *.

"[T]he investment of the Federal Government with the powers of external sovereignty did not depend upon the affirmative grants of the Constitution" (U.S. v. Curtis-Wright Export Corporation et al., 299 U.S. 315, 316, 318, (1936.)). 7. Since Puerto Rico has not been incorporated into the United States and continues to be unincorporated, its affairs are not internal affairs of the United States. The powers of the Congress concerning Puerto Rico need not be sought in the enumerated powers or the implied powers of the Federal Government. The constitutional basis of Congress' authority over Puerto Rico is supplied by the conception of it as the legislative organ of the plenary sovereignty of the American people; of the inherent powers of external sovereignty of the National Government.

Conclusions. From the above statements it follows that the Congress of the United States, in its capacity as the legislative organ of the sovereign Nation, and in use of the inherent powers of external sovereignty, was duly empowered to enter into a binding compact with the people of Puerto Rico, as well as to enable the people of Puerto Rico to enter such compact, for the purpose, "so that" the people of Puerto Rico might organize a government pursuant to a constitution of their own adoption and subject to such conditions, within such limitations and with such relationships with the Government of the United States, as may have been agreed to by both parties.

Submitted for comment to Prof. Edward S. Corwin by

JUNE 17, 1959.

A. FERNÓS-ISERN,

Resident Commissioner of Puerto Rico to the United States.

MEMORANDUM OF LAW-THE POWER OF THE CONGRESS TO ENTER INTO A COMPACT WITH THE PEOPLE OF PUERTO RICO; AND THE LEGAL STATUS OF THE COMPACT UNDER EXISTING LEGISLATION AND UNDER S. 2023 AND H.R. 5926

INTRODUCTION

This memorandum establishes that the Congress of the United States has the lawful power to enter into a compact with the people of a territory; that this compact may allocate governmental rights and powers relating to the territory between the people thereof and the Federal Government, including the termination or disposition by the Congress of all or some of its rights and powers with respect to the territory; and that such a compact is binding and, like other compacts or contracts, may be changed only by mutual agreement.

From this analysis it follows that Congress acted lawfully and within its constitutional and sovereign rights and powers in enacting Public Law 600, 81st Congress, and in entering into a compact with the people of Puerto Rico as described in that law.

This memorandum also analyzes Public Law 600 and the subsequent actions which completed the existing compact between the Congress and the people of Puerto Rico, and the basic provisions of S. 2023 and H.R. 5926, which are pending in the Congress. This analysis demonstrates that the existing compact and the pending bills are within the constitutional and sovereign rights and powers of the Congress, and that the existing governmental arrangement, as well as the arrangement which will continue if the pending bills become effective, constitutes a valid compact within the applicable legal principles.

Public Law 600, 81st Congress, approved July 3, 1950, was "adopted in the nature of a compact." "[F]ully recognizing the principle of government by consent," it offered the people of Puerto Rico an opportunity to accept or reject its terms: i.e., the governmental arrangement which it described. This arrangement proposed a compact by which the people of Puerto Rico might organize a government pursuant to a constitution of their own adoption, and upon adoption of this constitution and its approval by the Congress, the interrelationships of Puerto Rico and the Federal Government would be regulated by certain provisions of law which were specifically enumerated.

By Public Law 447, 82d Congress, enacted on July 3, 1952, the Congress approved the constitution adopted by the people of Puerto Rico, with a few conditions subsequently accepted by the constitutional convention. This joint resolution expressly referred to Public Law 600 in its entirety "as a compact with the people of Puerto Rico, to become operative upon its approval by the people of Puerto Rico."

As we shall discuss in the second point of this memorandum, the net result of these and collateral actions was to terminate an essentially "colonial" principle pursuant to which Puerto Rico had been governed, and to establish a democratic government in which the controlling principle was bilateralism and mutual agreement. We shall first demonstrate, however, that the Congress has the right and power to terminate its unilateral government of a territory and to substitute therefor a governmental arrangement in the form of a compact in which the rights and powers of the people and the Federal Union, respectively, are specifically allocated between them and are subject to modification only as agreed in the compact or by subsequent action of the parties.

I. THE POWER OF CONGRESS

A. The sources of Congress' power in the territories

The

(1) Congress' power with respect to territories derives from two sources. first source is article IV, section 3, clause 2, of the Constitution, which reads: "The Congress shall have power to dispose of and make all needful Rules and Regulations respecting the Territory or other Property belonging to the United States ***" The other source is Congress' inherent and implied powers as sovereign. Both sources of power have been relied upon by the Supreme Court to sustain Congress' power with respect to territories.

(2) The dual basis of Congress' power with respect to territories was established by Justice Marshall in the early case of American Insurance Co. v. Canter (26 U.S. (1 Pet.) 511, 542-543 (1828)). At issue was Florida's status in 1825, before its admission as a State. Florida had been acquired from Spain by cession in 1819. Congress had thereafter established a territorial government and territorial courts. Marshall first said that it "*** Continues to be a territory of the United States; governed by virtue of that clause in the Constitution which empow

ers Congress 'to make all needful rules and regulations, respecting the territory, or other property belonging to the United States.' He went on to suggest, however, that Congress was also acting to establish and maintain the government of the new territory as a consequence of sovereignty. The United States, he said, had the power under the Constitution of making war and entering into treaties. From this, the power to acquire territory, either by conquest or cession, was to be inferred. Once acquired, of course, the territory must be governed:

"Perhaps the power of governing a territory belonging to the United States, which has not, by becoming a State, acquiring the means of self-government, may result necessarily from the fact that it is not within the jurisdiction of any particular State, and is within the power and jurisdiction of the United States. The right to govern may be the inevitable Consequence of the right to acquire territory."

He went on to say, however, that "whichever may be the source whence the power is derived, the possession of it is unquestioned."

(3) Since American Insurance Co., the Court has often referred to article IV, section 3, clause 2, as the source of Congress' territorial powers. In Hooven & Allison Co. v. Evatt (324 U.S. 652, 673 (1945)), relating to the Philippines, the Court spoke of the power to acquire territory and "*** govern it through the exercise of the power of Congress conferred by section 3 of article IV of the Constitution 'to dispose of and make all needful rules and regulations respecting the Territory or other property belonging to the United States.'" See, also, District of Columbia v. John R. Thompson Co. (346 U.S. 100, 105-107 (1953)).

(4) On the other hand, the Court has on occasion emphasized the sovereign and inherent powers of the United States as the source of Congress' authority in the territories. In DeLima v. Bidwell, 182 U.S. 1, 196 (1901), which related to Puerto Rico, the Court said:

*** Indeed, it is scarcely too much to say that there has not been a session of Congress since the territory of Louisiana was purchased that that body has not enacted legislation based upon the assumed authority to govern and control the territories. It is an authority which arises, not necessarily from the territorial clause of the Constitution, but from the necessities of the case, and from the inability of the States to act upon the subject. Under this power Congress may deal with territory acquired by treaty; may administer its government as it does that of the District of Columbia; it may organize a local territorial government; it may admit it as a State upon an equality with other States; it may sell its public lands to individual citizens or may donate them as homesteads to actual settlers. In short, when once acquired by treaty, it belongs to the United States, and is subject to the disposition of Congress.'

In United States v. Kagama (118 U.S. 375, 380 (1886)), the Court said: ***But this power of Congress to organize Territorial governments, and make laws for their inhabitants, arises, not so much from the clause in the Constitution in regard to disposing of and making rules and regulations concerning the Territory and other property of the United States, as from the ownership of the country in which the Territories are, and the right of exclusive sovereignty which must exist in the National Government, and can be found nowhere else." See, also, United States v. Curtiss-Wright Export Corp. (299 U.S. 304, 318 (1936)). (5) As Marshall suggested in American Insurance Co. v. Canter, supra, however, the question of whether Congress exercises either_its_article IV powers or its powers implied from sovereignty, or both, is rarely determinative. Congress' powers in respect to the Territories are well established. For present purposes, they are the same regardless of source, as will be shown. As stated in First National Bank v. Yankton (101 U.S. 129, 132 (1880)), the Territorial power, including the power to amend acts of the Territoral legislature, which "continues until granted away," id. at 133, is "conceded":

"There have been some differences of opinion as to the particular clause of the Constitution from which the power comes, but that it exists has always been conceded."

B. Congress' power respecting the Territories includes the power to make effective contracts.

(1) Congress power, as sovereign, to make contracts.-Congress may make compacts in the exercise of its sovereign power respecting the Territories. For, just as the power to acquire and govern territory is a sovereign power, so too the power to commit and bind the United States by way of compact or agreement is equally an exercise of sovereign power.

(a) The general power to make binding compacts and agreements is a nccessary corollary of sovereignty. All sovereigns, including both the States and the

Nation, enjoy this power and exercise it on frequent occasions. The sovereign power estends to making binding contracts and agreements with other sovereigns. And its appropriate exercise includes the conditioning or relinquishing of an otherwise plenary right of government. All this was made clear in United States v. Bekins (304 U.S. 27, 51–52 (1936)):

"*** It is of the essence of sovereignty to be able to make contracts and giye consents bearing upon the exertion of governmental power. This is constantly illustrated in treaties and conventions in the international field by which governments yield their freedom of action in particular matters in order to gain the benefits which accrue from international accord. 1 Oppenheim, International Law, 4th ed. §§493, 494; 2 Hyde, International Law, §489; Perry v. United States, 294 U.S. 330, 353; Charles C. Steward Mach. Co. v. Davis, 301 U.S. 548, 597. The reservation to the States by the 10th amendment protected, and did not destroy, their right to make contracts and give consents where that action would not contravene the provisions of the Federal Constitution. The States with the consent of Congress may enter into compancts with each other and the provisions of such compacts may limit the agreeing States in the exercise of their respective powers. The State is free to make contracts with individuals and give consents upon which the other contracting party may rely with respect to a particular use of governmental authority ***"

b) The analysis in Perry v. United States (294 U.S. 330, 352, 353–354 (1935)), is most instructive for present purposes as demonstrating the capacity of the United States to bind itself by agreement in such a way as to condition the future exercise of power. The Court had before it in that case the joint resolution of Congress abrogating the gold clause in the bonds of the United States. It was contended that the bonds had originally been issued under Congress delegated, sovereign powers under article I, section 8, clause 2, and that the resolution, by the same token, had also been an act of sovereign power under the same clause; hence, in this analysis, the resolution was just as valid as the original bonds. The Court held, however, that Congress could exercise a delegated, sovereign power to effect a contract, that such a contract was binding and that it was thereafter beyond Congress' powers to revoke that contract, even by an attempted exercise of the identical power. The language of the Court is broad. It is equally applicable to each of Congress sovereign powers, including its powers respecting the Territories:

"When the United States, with constitutional authority, makes contracts, it has rights and incurs responsibilities similar to those of individuals who are parties to such instruments. There is no difference, said the Court in United States v. Bank of the Metropolis (15 Pet. 377, 390) except that the United States cannot be sued without its consent.

"The argument in favor of the joint resolution as applied to Government bonds, is in substance that the Government cannot by contract restrict the exercise of a sovereign power. But the right to make binding obligations is a competence attaching to sovereignty. In the United States, sovereignty resides in the people who act through the organs established by the Constitution * * * The Congress as the instrumentality of sovereignty is endowed with certain powers to be exerted on behalf of the people in the manner and with the effect the Constitution ordains. The Congress cannot invoke the sovereign power of the people to override their will as thus declared. The powers conferred upon the Congress are harmonious. The Constitution gives to the Congress the power to borrow money on the credit of the United States, an unqualified power, a power vital to the Government, upon which in an extremity its very life may depend. The binding quality of the promise of the United States is of the essence of the credit which is so pledged. Having this power to authorize the issue of definite obligations for the payment of money borrowed, the Congress has not been vested with authority to alter or destroy those obligations. The fact that the United States may not be sued without its consent is a matter of procedure which does not affect the legal and binding character of its contracts. While the Congress is under no duty to provide remedies through the courts, the contractual obligation still exists, and, despite infirmities of procedure, remains binding upon the conscience of the sovereign ***

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"We conclude that the joint resolution of June 5, 1933, insofar as it attempted to override the obligation created by the bond in suit, went beyond the congressional power." [Emphasis supplied.]

(c) That Congress is bound by such contracts made in the exercise of a sovereign power is shown by Union Pacific RR. Co. v. United States (99 U.S. 700, 719 (1870)):

"The United States are as much bound by their contracts as are individuals. If they repudiate their obligations, it is as much repudiation, with all the wrong and reproach that term implies, as it would be if the repudiator had been a State or a municipality or a citizen. No change can be made in the title created by the grant of the lands, or in the contract for the subsidy bonds, without the consent of the corporation. All this is indisputable."

(d) The power to make binding contracts may be, and has been, exercised pursuant to sovereign powers in a number of areas. It is exercised, for example, by the United States when it makes treaties and executive agreements with other nations. These treaties often bind the United States in respect to the future exercise of various powers, including its territorial powers. See Cincinnati Soap Co. v. United States (301 U.S. 308, 314 (1937)). Examples include the Treaty of Guadelupe Hidalgo, July 4, 1848, 9 Stat. 922, which provided as a matter of agreement between Mexico and the United States that the "Mexicans now established in territories previously belonging to Mexico, and which remain for the future within the limits of the United States *** shall be free to continue where they now reside," that they should become citizens and that their property "shall be inviolably respected," article VIII, and the Treaty of Paris, April 30, 1803, which provided, for example, for the admission of French vessels and their cargoes from France to the ports in the Louisiana Purchase in the same manner as the vessels of the United States.

The sovereign power to contract is also exercised on numerous occasions between the Federal Government and the States. For example, the Supreme Court has referred, as effective contracts between the States and the Federal Government, to the act of July 2, 1862 (12 Stat. 503, 7 U.S.C. secs. 300, et seq.), pursuant to which the United States contracted with States to grant them Federal lands on the explicit condition that the States, by legislation, would bind themselves in a variety of ways to use the lands for land-grant colleges (7 U.S.C. sec. 305); and to the act of August 30, 1890 (16 Stat. 419, 7 U.S.C. secs. 321, et se.), pursuant to which Congress appropriated funds to land-grant colleges under similar contractual conditions. Chas. C. Steward Machine Co. v. Davis (300 U.S. 548, 597-598 (1937)). These, however, are merely two of the older examples of legislation establishing contract terms between the United States and States.

It is therefore clear that Congress may enter into binding and effective contracts pursuant to the exercise of sovereign power.

(2) Congress' power to make contracts under article IV, section 3, clause 2, of the Constitution.-Congress may also make compacts and agreements in the exercise of its powers sourced in article IV, section 3, clause 2 of the Constitution. The clause provides that Congress may do two things in respect of the "territory or other property of the United States": (1) "dispose" of it, and (2) "make all needful rules and regulations" respecting it. When Congress legislates in respect of the territories-when, for example, it enacts an organic act in the traditional form establishing a territorial government exercising powers delegated by Congress-it is making "needful rules and regulations." But the making of needful rules does not exhaust Congress' power. It may also under the clause "dispose" of the territory and of its power over it.

The power to "dispose" of territory of the United States includes power to make contracts and agreements. The United States exercises this power to dispose by contract on numerous occasions, when it, for example, sells public lands on terms and conditions, when it leases those public lands, or when it sells or gives away other public property on specified terms.

Congress' power to contract as included within its power to "dispose" was made clear in the early case of United States v. Gratiot (39 U.S. (14 Pet.) 526, 537-538 (1840)). That case involved the power of the President pursuant to act of Congress to make valid leases of mineral rights on public lands. The Court held that the mines were within the territory and were the property of the United States and that Congress was, therefore, exercising its territorial powers. It was contended that Congress' power to dispose meant only the power to alienate completely. The Court said:

"Congress has the same power over it [the territory referred to in article IV, section 3, clause 2] as over any other property belonging to the United States; and this power is vested in Congress without limitation, and has been considered the foundation upon which the territorial governments rest ***. If such are the powers of Congress over the lands belonging to the United States, the words 'dispose of,' cannot receive the construction contended for at the bar-that they vest in Congress the power only to sell, and not to lease such lands. The disposal must be left to the discretion of Congress.'

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