On 28 January 1860, Britain and Nicaragua concluded the
treaty of Managua, which transferred to Nicaragua the
suzerainty over the entire Caribbean coast from
Cabo Gracias a Dios to Greytown but granted autonomy to the Miskito in the more limited Mosquito Reserve (the area described above). King
George Augustus Fredric II accepted this change on condition that he should retain his local
authority, and receive a yearly
subvention of £1000 until 1870. On his death in 1865, Nicaragua refused to recognize his successor,
William Henry Clarence. The reserve nevertheless continued to be governed by an elected chief, aided by an administrative council, which met in Bluefields; and the Miskito denied that the suzerainty of Nicaragua connoted any right of interference with their internal affairs. The question was referred for arbitration to the Habsburg
emperor of Austria, whose award (published in 1880) upheld the contention of the Indians, and affirmed that the suzerainty of Nicaragua was limited by the Miskitos' right of
self-government. ==Annexation of the Mosquito Reserve==