use of regulatory powers by the government is not necessarily a taking. Destruction of a monetary claim might have serious consequences for claim holders but may be no more serious than the economic consequences flowing from other regulation not considered a taking. The complexity of the modern world and the increased, almost pervasive regulation that is found in international trade have led to the realization that losses can arise from export controls, import controls, embargoes, and similar government acts. Individual contracts and profits are often sacrificed for what is perceived as greater foreign policy benefits.

There is no set formula for deciding when the Due Process Clause requires that economic injuries caused by public action be compensated by the government rather than remain disproportionately concentrated on a few persons. Penn Central Transp. Co. v. City of New York, 438 U.S. 104, 124 (1978). Essentially ad hoc factual inquiries have been considered necessary. Id. . . .The mere fact that property, in this case claims, may be reduced in value does not mean that a taking has necessarily occurred. Goldblatt v. Town of Hempstead, 369 U.S. 590, 594 (1962). . . .

The courts are also more likely to uphold government action against "taking" claims during war and emergency situations which make demands that "otherwise would be insufferable." United States v. Central Eureka Mining Co., 357 U.S. 155, 168 (1958); Bowles v. Willingham, 321 U.S. 503, 517 (1944); United States v. Caltex, 344 U.S. 149 (1952).

Applying the kind of balancing suggested by recent cases leads to persuasive arguments against the contention that a settlement for less than value is a taking. In dealing with an international emergency, the President must be able to act quickly and without fear that the courts will intervene for any but the most compelling reasons. Cf. Narenji v. Civiletti, 617 F.2d 745 (D.C. Cir. 1979).

Because of the delicate nature of the negotiations with Iran, it is impossible for a court to review political issues and put a value on the extent to which foreign policy considerations may have prevailed over monetary ones. In addition, because of deep government involvement in the crisis, (i.e., the freeze, trade controls, the World Court action) it would be difficult for individuals to demonstrate what they would have recovered absent government intervention.2

2 We would note that these arguments can also be viewed as separate grounds for defending a settlement apart from the taking issue.

Dept. of State File No. P85 0118-1016; Ops. Off. Legal Counsel, Vol. 4A (1985), pp. 248, 250-253.

Assistant Attorney General Harmon transmitted the memorandum, ante, jointly to Robert Carswell, Deputy Secretary of the Treasury, and Roberts B. Owen, Legal Adviser of the Department of State, under cover of a memorandum dated Sept. 16, 1980 that noted:

While several of the points considered probably will not be raised in the immediate discussion, the analysis and conclusions may provide useful background for your present purposes.

Dept. of State File No. P85 0118-1139.

U.S.S. Liberty

United States-Israel

On December 18, 1980, the Department of State announced that the United States Government had accepted the proposal of the Government of Israel to pay $6 million in three annual installments of $2 million each, beginning on January 15, 1981, as final settlement of U.S. claims arising out of an unprovoked attack upon the Liberty on June 8, 1967, by Israeli aircraft and motor torpedo boats in international waters in the Eastern Mediterranean. The attack occurred while the ship was some 20 miles off the Sinai coast during the Six-Day War.

The Israeli Government had claimed that the Liberty had been fired upon in error; and it had immediately accepted responsibility for the attack and had agreed to make amends for the loss of life and material damage. A U.S. Navy Court of Inquiry produced evidence that Israeli armed forces had had ample time to identify the vessel correctly (the Liberty had been under "significant surveillance" from the air on three separate occasions, the first at 8:50 A.M. on the day of the attack, more than five hours before it began). The Court considered, however, that the information before it was insufficient for it to make a judgment on the reasons for the decision to attack. A summary of its inquiry was made public.

The Government of Israel had paid in full on May 27, 1968 a claim by the United States for $3,323,500 on behalf of the families of the thirty-four crewman who had been killed in the attack (see Dept. of State Bulletin, Vol. LVIII, No. 1512, June 17, 1968, p. 799). On April 28, 1969, the Government of Israel had paid a further amount of $3,566,457, which included 164 claims totaling $3,452,275 on behalf of the Liberty crew members injured in the attack, $92,437 for expenses incurred by the U.S. Government in providing medical treatment for them, and $21,745 for expenses incurred by the U.S. Government in reimbursing crew members for personal property damaged or destroyed in the attack (ibid., Vol. LX, No. 1562, June 2, 1969, p. 473).

On July 1, 1968, the United States Government had presented a claim to the Government of Israel for $7,644,146, for the cost of repairs to the vessel, estimated as of July 1967. The Government of Israel offered to pay a nominal sum, which the United States found

unacceptable. The Liberty, a former World War II merchant vessel converted to a Naval auxiliary communications ship, was placed out of commission in reserve; further repairs were never made, and the ship was sold for scrap in 1970.

The position of the parties remained unchanged until 1978, when the Government of Israel acceded to a request by the Government of the United States to proceed with negotiations to settle the claim. Following a series of contacts between the two Governments on this matter through diplomatic channels, the United States Government on December 17, 1980, accepted the Israeli Government's offer to pay $6 million in three annual installments in settlement of the claim. See Dept. of State File Nos. P81 0010-2226 and P84 0015-0162.

See, also, Dept. of State Daily News Briefing, DPC 241, Dec. 18, 1980.

United States-Poland

Request for Further Negotiation After Settlement

In a letter to Secretary of State Edmund S. Muskie, dated June 11, 1980, Congressman Stephen J. Solarz requested the Department on behalf of a constituent to negotiate a further claims agreement with Poland that would provide for additional payments on claims covered by the Agreement Relating to Settlement of Claims of Nationals of the United States against Poland, signed at Washington, July 16, 1960 (TIAS 4545; 11 UST 1953; entered into force, July 16, 1960), and the Protocol thereto, signed at Warsaw, November 29, 1960 (TIAS 4629; 11 UST 2450; entered into force, November 29, 1960).

By a reply dated June 24, 1980, J. Brian Atwood, Assistant Secretary of State for Congressional Relations, explained the Department's inability to comply with the request:

Based upon the total principal amount of the awards rendered by the Commission and the lump sum available for payment, it was estimated that each claimant will receive approximately 38% of the amount awarded. In negotiating the agreement, representatives of the Department did their utmost to obtain immediate payment in United States dollars for the full amount of all legally valid claims of American citizens against Poland. During the negotiations it became apparent, however, that the Government of Poland was not in a position to pay United States dollars for the full value of the claims in one lump sum because of recurring balance of payments problems, low foreign exchange reserves, and increasing foreign debt. Further, the Government of Poland refused to pay an amount exceeding amounts it paid other countries under prior claims agreements. In the circumstances, it was necessary for the Department to decide whether to settle the claims for less than 100% over an extended period or obtain no settlement.

Because of the large number of elderly and small property owners, the Department concluded that an immediate partíal settlement was far more desirable than postponing the settlement in the unrealistic hope of obtaining a greater settlement in the indefinite future. In the circumstances, the Department conducted protracted and difficult negotiations, resulting in forcing the Polish Government to pay $40 million over a period of years in settlement of the claims. The Department remains convinced that the best interests of the claimants as a whole were served by the agreement of July 16, 1960, with the Government of Poland.

The claims agreement of 1960 is considered final, conclusive, valid and binding under principles of international law. Accordingly, the Department cannot legally request the Government of Poland to negotiate an additional lump-sum settlement agreement for an amount over the amount paid in settlement of the same claims which were the subject of the claims agreement of July 16, 1960.

Dept. of State File No. P80 0086-2387.

§4

Agreements for the Protection
of Foreign Investment

United States-People's Republic of China

On October 30, 1980, the United States and the People's Republic of China exchanged notes at Beijing relating to American private investments in China and investment insurance (including reinsurance) against loss from political risk and investment guaranties issued therefor by the Overseas Private Investment Corporation (OPIC) or any successor United States Government agency (referred to in the agreement as the "Issuer").

The agreement applies only to coverage of investments relating to projects or activities approved by the People's Republic of China. Under Article 3, if the Issuer makes payment to a covered investor, the Government of the People's Republic of China will, subject to Article 4 (see, post), recognize the transfer to the Issuer of any currency, credits, assets, or investment, on account of which such payment is made, as well as the succession of the Issuer to any right, title, claim, or cause of action existing or arising in connection therewith. The Issuer cannot, however, assert greater rights than those of the transferring investor. The United States Government reserved its right to assert a claim in its sovereign capacity under international law.

Under Article 4, to the extent that laws of the People's Republic of China partially or wholly invalidate or prohibit the Issuer from acquiring from a covered investor any interest in any property within the territory of the People's Republic of China, that Government will permit the Issuer and the investor to make arrangements

for transfer of such interests to an entity permitted to own them under the laws of the People's Republic of China.

Article 5 provides for conversion of currency and credits acquired by the Issuer as a result of investment insurance or investment guaranties, for the availability of such amounts and credits for United States Government use to meet its expenditures in China, and for transfer of such amounts and credits by the Issuer to any person or entity agreed by the Chinese Government for use by such person or entity in its territory.

Article 6 provides for dispute resolution. Any dispute regarding interpretation of the agreement or which, in the opinion of one of the Governments, involves a question of public international law arising out of any covered investment or project or activity relating thereto is to be resolved through negotiations. Failing resolution within three months of the request for negotiations, the dispute, including the question of whether it presents a question of public international law, is to be submitted at the initiative of either Government to an arbitral tribunal. Article 6 also sets out the procedures for the establishment and functioning of the arbitral tribunal.

Under Article 7 of the agreement, the parties agree that, in the event the Government of the People's Republic of China is authorized under its laws to issue investment insurance in any project or activity in the United States under a program similar to the investment incentive program to which the agreement relates, provisions equivalent to those of the agreement shall be made applicable to such investments through an exchange of notes at the request of either Government.

Article 8 provides for termination of the agreement upon six months notification by either government, and in such event agreement provisions with respect to coverage, issued while the agreement was in force, are to remain in force for the duration of such coverage, but in no case longer than 20 years after the denunciation of the agreement.

TIAS 9924; 32 UST 4010; entered into force, Oct. 30, 1980.

The agreement was negotiated and entered into pursuant to: (1) sec. 237(a) of the Foreign Assistance Act of 1961, as amended, 22 U.S.C. 2197(a); (2) sec. 239(g) of the Act, 22 U.S.C. 2199, as amended by Pub. L. 96-327, dated Aug. 8, 1980, 94 Stat. 1026 (see, post); and (3) Presidential Determination No. 80-25, dated Aug. 8, 1980 and issued under sec. 239(g) of the Act (see, post) under which President Carter determined that operation of the programs of the Overseas Private Investment Corporation in the People's Republic of China is important to the national interest. (Under P.L. 97-65, §8(3), approved Oct. 16, 1981, 95 Stat. 1024, sec. 239(g) of the Act was renumbered to sec. 239(f).)

J. Bruce Llewellyn, President and Chief Executive Officer of the Overseas Private Investment Corporation, testified on May 20, 1980, before the Subcommittees on Asian and Pacific Affairs and on