The District Court dismissed the complaint for lack of subject matter jurisdiction and for failure to state a claim upon which relief could be granted, together with an executive suggestion of immunity filed by the United States on behalf of the other two Governments. See the 1975 Digest, pp. 345-346. The Court agreed with the Government that plaintiffs' suit was an unconsented suit against the United States and, further, presented only nonjusticiable, political questions.

The U.S. Court of Appeals for the District of Columbia affirmed the decision in a per curiam opinion of December 3, 1976, C.A.D.C. No. 76, 1139. Appellants in a class action on behalf of 2,623 U.S. citizens and five corporations whose property in Czechoslovakia had been nationalized without compensation by the Czechoslovakian Government following World War II and whose awards had been certified by the Foreign Claims Settlement Commission, sought a declaratory judgment establishing their entitlement to certain assets in which Czechoslovakia had an interest. The Court of Appeals granted the Government's motion for expedition of the appeal, reciting diplomatic reasons.

The opinion of the Appeals Court stated, in part:

We are satisfied that the question presented by appellants is clearly one that must be addressed to the political branch of the government, and that is where relief must be sought. Questions in which foreign governments are interested are typically nonjusticiable in domestic courts of the United States unless first agreements have been reached or statutes passed, and second, these are of such a nature as to confer rights on private persons that are contemplated for judicial enforcement.

Plaintiff-appellants complain that unless the courts grant relief they are without remedy. Perhaps we can do no better than refer to some observations in Nielsen v. Secretary of Treasury, 137 U.S. App. D.C. 345, 424 F.2d 833 (1970). There we rejected a much stronger claim for relief, that pressed by Cuban refugees complaining that blocking regulations had the effect of depriving them of assets in the United States in which they had beneficial (derivative) rights. The Court recognized that men live in a shorter run than governments, and international arrangements are often agonizingly protracted. Yet they are part of the path of the law, and often its best hope.

In a footnote, the Court quoted the following observation from Nielsen, supra:

An important, if not the dominant, star for guiding national actions and reactions is the desire to build future areas of settlement and good will between nations to replace present areas of tension.

... [The] prospect or at least possibility of international settlement and agreement cannot be dismissed by the courts as a nullity, or declared an inadmissible or unavailable aspect of America's foreign policy program.

We also are aware that men live in a shorter run than the government, and that what may be considered only a temporary freeze by a government may be a permanent denial to the individual whose life comes to an end while the government ponders its course.

While international affairs may move at a pace of bewildering rapidity, often negotiation is conducted with persistence and patience at snail's pace. Negotiation may be deferred while relationships are left to simmer without stirring, in order to strengthen any possible threads of international accord or reconciliation.

The United States and Spain exchanged notes on January 24, 1976, in connection with the signature that day of the U.S.-Spain Treaty of Friendship and Cooperation (TIAS 8360; 27 UST; entered into force September 21, 1976), which contained U.S. assurances to Spain on settlement of damage claims which might result from nuclear incidents involving a U.S. nuclear powered warship reactor. The assurances were based on Public Law 93-513 (88 Stat. 1610; 42 U.S.C. 2211), approved December 6, 1974. The U.S. note gave the following additional assurances:

While the foregoing law applies only to claims arising from nuclear incidents involving the nuclear reactor of a United States nuclear powered warship, the Government of the United States of America gives its further assurances that it will endeavor, should the need arise, to seek legislative authority to settle in a similar manner claims for bodily injury, death or damages to or loss of real or personal property proven to have resulted from a nuclear incident involving any other United States nuclear component giving rise to such claims within Spanish territory.

Additionally, I am pleased to note that in any situation described above, the Spanish Government could use the provisions of Article XXVII of the Agreement in Implementation and that the United States would be prepared to waive the provisions of Article XXV of that Agreement.

The exchange of notes on nuclear damage claims was among those included in the Senate resolution of advice and consent to the U.S.-Spain Treaty of Friendship and Cooperation and in the President's ratification thereof. The Agreement on Implementation referred to in the U.S. note quoted above was signed at Madrid on Jan. 31, 1976 (TIAS 8361; 27 UST; entered into force Sept. 21, 1976).

On June 1, 1976, President Ford issued Executive Order 11918, entitled "Compensation for Damages Involving Nuclear Reactors of United States Warships," for the purpose of providing for prompt, adequate, and effective compensation in certain nuclear incidents. The text of the Executive order follows:

By virtue of the authority vested in me by the joint resolution approved December 6, 1974 (Public Law 93-513, 88 Stat. 1610, 42

U.S.C. 2211), and by section 301 of Title 3 of the United States Code, and as President of the United States of America, in order that prompt, adequate and effective compensation will be provided in the unlikely event of injury or damage resulting from a nuclear incident involving the nuclear reactor of a United States warship, it is hereby ordered as follows:

Section 1. (a) With respect to the administrative settlement of claims or judgments for bodily injury, death, or damage to or loss of real or personal property proven to have resulted from a nuclear incident involving the nuclear reactor of a United States warship, the Secretary of Defense is designated and empowered to authorize, in accord with Public Law 93-513, the payment, under such terms and conditions as he may direct, of such claims and judgments from contingency funds available to the Department of Defense.

(b) The Secretary of Defense shall, when he considers such action appropriate, certify claims or judgments described in subsection (a) and transmit to the Director of the Office of Management and Budget his recommendation with respect to appropriation by the Congress of such additional sums as may be necessary.

Sec. 2. The provisions of section 1 shall not be deemed to replace, alter, or diminish, the statutory and other functions vested in the Attorney General, or the head of any other agency, with respect to litigation against the United States and judgments and compromise settlements arising therefrom.

Sec. 3. The functions herein delegated shall be exercised in consultation with the Secretary of State in the case of any incident giving rise to a claim of a foreign country or national thereof, and international negotiations relating to Public Law 93-513 shall be performed by or under the authority of the Secretary of State. Fed. Reg., Vol. 41, No. 108, June 3, 1976, p. 22329. For the text of P.L. 93-513, see also the 1974 Digest, p. 418.

Noncombat Activities of Armed Forces

Public Law 94-390 (90 Stat. 1191), approved August 19, 1976, amended 10 U.S.C. 2734a(a) and 2734b(a), to provide for settlement under international agreements of certain claims incident to the noncombat activities of the armed forces. The purpose of the legislation was to make the language of those sections consistent with the provisions of the NATO status of forces type agreements entered into by the United States with other countries to provide for reimbursement or payment for claims which are settled or adjudicated under those agreements.

Under the agreements, the receiving state investigates, settles, adjudicates, and makes final awards direct to third-party claimants in two categories of cases: where the claim arises out of (1) acts or omissions of members of a force or a civilian component of the sending state done in the performance of official duty; and (2) other acts, omissions, or occurrences for which a force or civilian component is

otherwise legally responsible under local law. The agreements require that reimbursement be made in both situations by the sending state on a pro rata basis, usually 75 percent of the amount of the claim allowed by the receiving state.

The amendment to 10 U.S.C. 2734a(a) provides for reimbursement or payment to foreign governments in the "otherwise legally responsible" category mentioned above. It removes a possible ambiguity as to the method of settlement of claims, which under the agreements can be adjudicated by a foreign country under its laws and regulations, including settlement by administrative action. It also provides for payment in cases of settlement by arbitration, a method provided for in the status of forces agreements unless the contracting parties agree otherwise.

For consistency, the legislation makes a corollary amendment in section 2734b which relates to the payment or reimbursement to the United States for claims arising in the United States resulting from property loss, personal injury, or death as the result of the acts or omissions of a civilian employee or member of an armed force of a foreign country.

See also H. Rept. No. 94-543; S. Rept. 94-1121.

Expropriation

Richard J. Smith, Director of the Office of Investment Affairs, Department of State, discussed U.S. policy on expropriation in relation to the protection of U.S. private interests abroad, in an address at Vanderbilt University on April 9, 1976. The following are excerpts from Mr. Smith's address:

Our policy can be simply stated: we recognize the right of any country to expropriate the property of a U.S. investor, in the absence of specific governmental undertakings to the contrary, so long as the taking is nondiscriminatory, for a public purpose and accompanied by prompt, adequate and effective compensation. In our view, these are the minimum standards under international law.

The issue of whether a "taking" has in fact occurred is often not obvious. Further, the determinations of how much is "adequate," and how prompt is "prompt" are far from trivial matters. These are among the questions that the Inter-Agency Expropriation Group, under the auspices of CIEP (Council on International Economic Policy) must wrestle with in its monthly meetings which typically deal with an agenda that includes a review of a dozen or more complex investment disputes. This inter-agency group is charged with reaching determinations regarding appropriate U.S. Government actions in particular disputes, including, where appropriate, the cessation of aid, withdrawal of support for loans

from international development banks, and withdrawal of trade preferences under the Hickenlooper and Gonzalez amendments and the Trade Act, respectively.

In many cases, investment disputes arise from actions short of formal nationalization, but which nevertheless may be expropriatory in effect. Such actions include intervention, cancellation or forced renegotiation of contracts or concession agreements, coerced sales or "participation" arrangements, and the raising of taxes to confiscatory levels. Whether a particular action is expropriatory must be evaluated in light of all the relevant circumstances of the particular case, and this makes it more necessary than ever to carefully review investment disputes on a case-by-case basis to fully develop all the relevant facts.

Once it appears that a "taking" of American-owned property has occurred or is about to occur, it is the longstanding and continuing position of the U.S. Government that international law requires payment of fair market value, calculated as if the expropriatory act had not occurred or were not threatened. Since market value is often not directly ascertainable, and since there usually are not recent sales of comparable properties to which to refer, market value generally must be approximated by indirect methods of valuation. These include:

-The going-concern approach, which attempts to measure earning power (and so encompasses elements such as loss of future profits which may be based on projections of past earnings or estimates of future earnings), and which in the view of the U.S. Government generally best approximates market value. We recognize that there may be circumstances in which application of this method is impracticable, or where it might operate unfairly; for example, where an investment has a limited history of operating results, or where expropriation occurs after significant costs are incurred but before a revenue-generating stage is reached. This method of valuation is also vulnerable to governmental actions which adversely affect profitability, such as increased taxes, threat of cancellation of contractual or concessionary rights, or withdrawals of privileges. We believe that such actions taken for the purpose of or which have the effect unfairly of influencing compensation may not properly be allowed to do so.

-The replacement cost of the property at the time of expropriation less actual depreciation, a standard which is likely to yield an amount substantially greater than book value but which does not take into account earning capacity, is of limited use in valuing intangibles, and, in our view, is generally less acceptable in most circumstances than the going-concern approach.

-Book value, or some variation of it, which (unlike the replacement-cost approach) values assets at acquisition cost less depreciation—a figure which in most cases bears little relationship to their actual value. We believe this to be generally the least acceptable method for valuation of expropriated property.

We recognize that no single method of valuation is valid under all circumstances. The method or combination of methods most likely to provide just compensation for expropriated property varies, and depends upon the attendant circumstances of the particular case. We also recognize that nonmonetary aspects of