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and sovereignty of the Eepublic of Nicaragua, on the following conditions:

1. The Eepublic of Costa Eica shall retain for its citizens the freedom of navigation up and down the Eiver San Juan from its mouth to the mouth of the Serapiqui river, with liberty to enter and quit the port of San Juan or Greytown with their vessels, and to store their cargoes in that port.

2. The Eepublics of Nicaragua and of Costa Eica Bhall allow the territorial disputes between them (if the same cannot be amicably adjusted between themselves) to be settled by the arbitration of Great Britain and the United States of America, who, in any doubtful point, shall be able to call for the decision of a third party.

3. All band fide grants that have been made by the Government of Mosquitia of lands heretofore possessed by the said Indians, and lying beyond the limits of the prescribed territory, shall be confirmed.

4. The Eepublic of Nicaragua shall constitute and declare the port of Greytown or San Juan a free port, and the city a free city (though under the sovereign authority of the Eepublic), whose inhabitants shall enjoy the following rights and immunities:

(a.) The right to govern themselves by means of their own municipal government, to be administered by legislative, executive, and judicial officers of their own election, according to their own regulations.

(6.) Trial by jury in their own courts.

(c.) Perfect freedom of religious belief and of worship, public and private.

(d.) Exemption from all duties of Customs, and from all taxation on real estate or other property, except such duties and taxes as may be imposed by their own municipality and may be collected for the city treasury, to be used and applied for the benefit of the said city.

(e.) Exemption from military service, except for the defence of the city, and within the bounds of the same.

V. The Eepublic of Nicaragua shall enter into positive Treaty stipulations with each of the two Governments of Great Britain and of the United States of America, that it will make the grant of freedom to the city of Greytown or San Juan subject to the condition that the municipality of the said city shall, as soon as organized, pass laws and ordinances levying, by tax or duty on imports, some reasonable sum, to be paid half-yearly, to the Mosquito Indians, by way of annuity for a limited period, as an indemnity and compensation for their interest in the territory recognized and declared by the first clause of Article IV to be within the limits and sovereignty of the Eepublic of Nicaragua.

VI. Her Britannic Majesty and the Republic of Nicaragua shall, within months after the exchange of the ratifications of the Treaty to be concluded between them in virtue of the present arrangements, appoint each a Commissioner for the purpose of designating and marking out the inland boundary separating the territory to be set apart for the Mosquito Indians, as described in. Article II of the present Treaty, from the rest of the territory of the Eepublic.

They shall also appoint, within the same period, each a Commissioner, for the purpose of deciding upon the bona fides of all grants of land mentioned in section 3 of Article IV of the Treaty as having been made by the Mosquito Indians of lands heretofore possessed by them, and lying beyond the limits of the territory described in Article II.

They shall further appoint within the same period each a Commissioner, for the purpose of determining the amount, the period of duration, and the time, place, and mode of payment of the annuity to be paid to the Mosquito Indians according to the stipulations of Article V of the present Treaty.

Her Britannic Majesty and the Republic of Nicaragua shall be at liberty either to name the same person to fulfil the duties of Commissioner for all three or for any two of the purposes above described, or to name a separate and distinct person to be Commissioner for each purpose, as they may see fit.

VII. The Commissioners mentioned in the preceding Article shall meet at such place or places as shall be hereafter fixed, at the earliest convenient period after they shall have been respectively named, and shall, before proceeding to any business, make and subscribe a solemn declaration that they will impartially and carefully examine and decide, to the best of their judgment, and according to justice and equity, without fear, favour, or affection to their own country, upon all the matters referred to them for their decision; and such declaration shall be entered on the record of their proceedings.

The Commissioners shall then, and before proceeding to any other business, name some third person to act as arbitrator or umpire in any case or cases in which they may themselves differ in opinion. Each pair of Commissioners shall separately name the person so to act as their arbitrator or umpire. The person or persons so to be chosen shall, before proceeding to act, make and subscribe a solemn declaration, in a form similar to that which shall already have been made and subscribed by the Commissioners, which declaration shall also be entered on the record of the proceedings. In the event of the death, absence, or incapacity of such person or persons, or of his or their omitting, or declining, or ceasing to act as such arbitrator or umpire, another person or other persons shall be named as aforesaid to act in his or their place or stead, and shall make and subscribe such declaration as aforesaid.

Her Britannic Majesty and the Republic of Nicaragua shall engage to consider the decision of the two Commissioners conjointly, or of the arbitrator or umpire, as the case may be, as final and conclusive on the matters to be respectively referred to their decision, and forthwith to give full effect to the same.

VIII. The Commissioners and the arbitrators or umpires shall keep accurate records and correct minutes or notes of all their proceedings, with the dates thereof, and shall appoint and employ such clerk or clerks or other persons as they shall find necessary to assist them in the transaction of the business which may come before them.

The salaries of the Commissioners shall be paid by their respective Governments. The contingent expenses of the Commissioners, including the salary of the arbitrators or umpires, and of the clerk or clerks, shall be defrayed in equal moieties by the two Governments.

IX. Her Majesty the Queen of the United Kingdom of Great Britain and Ireland and the United States of America bind themselves, in case tho Republics of Nicaragua and of Costa Rica, or either of them, should refuse to accept the arrangements contained in the preceding Articles, not to propose nor consent to any other arrangements more favourable to the refusing party or parties.

X. The present Treaty shall be ratified by Her Britannic Majesty and by the President of the United States of America, by and with the-advice and consent of the Senate thereof; and the ratifications shall be exchanged at , as soon as possible within the space of months.

In witness whereof, &c.

Separate Articles.

Art. I. Whereas the arrangements set forth in the Treaty of this date are provided as an adequate substitute for the protection heretofore extended by Great Britain to the Mosquito Indians, and, whereas, one or the other, or both, of the Contracting Parties may find in the condition of their political relations with the Republic of Nicaragua, obstacles to prevent an immediate execution of the said arrangements; now, therefore, it is agreed and understood as follows:

1. That any delay in carrying out the said arrangements, arising from the circumstances or relations of the Republic of Nicaragua, shall in no respect impair the validity or force of the Treaty as between the Contracting Parties; but the same shall remain obligatory upon, and to be executed by, them as early a3 may be practicable.

2. That whichever of the two Contracting Parties may soonest find itself in such political relations with the Republic of Nicaragua as enable it so to do, shall first propose singly to that Republic the arrangements contained in this Treaty, and shall obtain by means of a separate Treaty its assent to those arrangements; the other Contracting Party engaging, and reserving to itself the right also to conclude with the said Republic, at the earliest fitting moment, a Treaty containing the said arrangements.

II. And, whereas the relations of amity between the Contracting Parties, and the neutrality of any and every communication by land or railway across the Isthmus which connects North and South. America, and to which communication by canal or railway their protection has been or shall be extended, may be further assured by some definite arrangement on two other questions which have come into discussion; now it is mutually agreed and understood:

1. That Her Britannic Majesty's Settlement called the Belize or British Honduras, on the shores of the Bay of Honduras, bounded on the north by the Mexican province of Yucatan, and on the south by the River Sarstoon, was not and is not embraced in the Treaty entered into between the Contracting Parties on the 19th day of April, 1850, and that the limits of the said Belize, on the west, as they existed on the said 19th of April, 1850, shall, if possible, be settled and fixed by Treaty between Her Britannic Majesty and the Eepublic of Guatemala, within two years from the exchange of the ratifications of this instrument; which said boundaries and limits shall not at any time hereafter be extended;

2. That the islands and their inhabitants, of Ruatan, Bonaca, Utila, Barbaretta, Helena, and Morat, situated in the Bay of Honduras, and known as the Bay Islands, having been, by a Convention bearing date the 27th day of August, 1856, between Her Britannic Majesty and the Republic of Honduras constituted and declared a free territory under the sovereignty of the said Republic of Honduras, the two Contracting Parties do hereby mutually engage to recognize and respect in all future time the independence and rights of the said free territory, as a part of the republic of Honduras.

III. The present Separate Articles shall have the same force and validity as if they had been inserted, word for word, in the Treaty between Her Britannic Majesty and the United States of America, signed this day. They shall be ratified by Her Britannic Majesty and by the President of The United States, by and with the advice and consent of the Senate thereof, and the ratifications shall be exchanged at the same time as those of the Treaty.

In witness whereof the respective Plenipotentiaries have signed the present Separate Articles, and have affixed thereto the seal of their arms.

No. 2.—Extract of Despatch respecting Draft Articles of Treaty, Central America.(Communicated to the Earl of Clarendon by Mr. Dallas, October 13, 1856.)

Seasons for the proposed Modification of Boundary in the Eeservation for the Mosquitos.

The United States are only concerned indirectly in this and the other questions involved, which deeply regard the States which constituted the Eepublic of Central America.

In this relation, the proposed Treaty is to be tendered by tho present Contracting Parties to the Republics of Costa Bica and Nicaragua, as being what these Eepublics ought to adopt, and is to be urged upon them for acceptance by the Parties. It must, of course, contain no conditions which the President cannot cordially recommend to each of those Eepublics. In other words, the stipulations must be such, in the President's view of them, as would be just and fair towards those Eepublics. Their interest is quite as much to be respected as that of The United States or of Great Britain. He cannot, as a friend, request or desire them to do anything which he would not himself do in their place.

Begarding the subject from this point of view, the President asks your attention to the limits of the country set apart for the Mosquitos.

On a rough calculation the reservation proposed is found to consist of about 14,000 square miles, or more than 5,500,000 acres, which seems to the President much more than is requisite for 2,000 or, at most, 3,000 Indians, whose numbers have been for years constantly decreasing.

No objection is made to the Western line; but the extension north is deemed very exceptionable, and may seriously embarrass the acceptance of the arrangement by Nicaragua. It carries the Mosquito reservation up to the south bank of the large Eiver Segovia and to the line of Honduras. No sufficient reason exists for according so extensive a territory to this handful of Indians. But the more serious objection is that Nicaragua would thus be deprived of the safe use of the largest river of the Eepublic, and of the control of her frontier on the side of Honduras.

It is proposed to substitute either the line of the Brachma or that of the Prinzapulca, as the northern boundary instead of the Wanx or Segovia. The Mosquitos will then have possession of a country enormous relatively to their numbers, actual or possible.

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