DEAR MR. AMBASSADOR: Your note of November 6 reminded me that a respond has not yet been forthcoming to the memorandum which you left with me on the 23rd June last in relation to the administration or leasing of certain small islands on the North Bornean coast by the British North Borneo Company.

The matter has required much consideration and involved delay which I regret, and even at this late day I am not at all clear as to the most practical way to give effect to the desire of your Government by a formal agreement.

I apprehend that the difficulty in the way of a conventional delimitation of the boundary between the former possessions of Spain in the Sulu Archipelago, now belonging to the United States, and the North Bornean territories on or adjacent to the mainland of Borneo, may lie in the circumstance that the North Bornean domain is not an imperial possession of Great Britain, but is held by a British Chartered Company under grant of the native Sultans and under the protection of the Crown in virtue of such grant. If this be so, I can discern impediments to an international convention between our two countries for establishing a boundary line between their respective sovereignties—and I can equally see that objections might be raised to undertaking to fix that boundary by agreement between this Government and a chartered corporation having per se no national status.

Something of the same difficulty might arise in the case of the United States undertaking to lease the islands to a chartered company not having the standing of a government. The third condition of your memorandum illustrates this point, suggesting, as it does in effect, that such a lease should carry with it power to the company to grant titles and concessions binding upon the United States and to make valuable improvements, which would be an eventual charge upon this Government should the United States terminate the lease and reenter upon the property.