(4) if such country

(A) has nationalized, expropriated, or otherwise seized ownership or control of property owned by a United States citizen or by a corporation, partnership, or association which is 50 percent or more beneficially owned by United States citizens,

(B) has taken steps to repudiate or nullify an existing contract or agreement with a United States citizen or a corporation, partnership, or association which is 50 percent or more beneficially owned by United States citizens, the effect of which is to nationalize, expropriate, or otherwise seize ownership or control of property so owned, or

(C) has imposed or enforced taxes or other exactions, restrictive maintenance or operational conditions, or other measures with respect to property so owned, the effect of which is to nationalize, expropriate, or otherwise seize ownership or control of such property,

unless

(D) the President determines that

(ii) good faith negotiations to provide prompt, adequate, and effective compensation under the applicable provisions of international law are in progress, or such country is otherwise taking steps to discharge its obligations under international law with respect to such citizen, corporation, partnership, or association,

and

promptly furnishes a copy of such determination to the Senate and House of Representatives;

On April 2, 1975, Ambassador Clarence C. Ferguson, Jr., in a statement to the Fourth Meeting of the U.N. Committee on Natural Resources at Tokyo, rejected recent U.N. formulations of permanent sovereignty over natural resources as "clearly violative of the accepted and developed principles of transnational law," and as creating additional risks to private investment. He summarized the U.S. position as follows:

-The United States supports the concept of national permanent sovereignty over natural resources for others as well as ourselves.

-The United States recognizes the right of a national state to nationalize property within the jurisdiction of the state so long as that exercise of national sovereignty is in accord with applicable transnational law.

Ambassador Ferguson denied that there had been any consensus in the United Nations on permanent sovereignty since December 14, 1962, when the United States supported and voted for General Assembly Resolution 1803 (XVII), which recognized the

rights of sovereignty in regard to natural resources but also recognized the constraints on those rights expressed in longsettled principles of international law. He noted that since then the United States and other states had voted against or abstained on every permanent sovereignty resolution; had expressly reserved to the permanent sovereignty provisions of the so-called omnibus resolution adopted by the Economic and Social Council on August 1, 1974; and had voted against the Charter of Economic Rights and Duties of States in the 29th General Assembly principally because of the permanent sovereignty formulations therein. The U.S. position, he said, rests upon these principles:

First, the United States believes the recent United Nations formulations of permanent sovereignty are misconceived in this present world of interdependency. It has taken us 500 years to move from an era when nation-states claimed the very seas of our Earth as exclusive domains of permanent national sovereignty. Only today have we reached the point of recognizing that the natural resources of the sea are a common heritage of all mankind and not an endowment subject to narrow chauvinistic nationalistic claims. When we examine recent claims to the Earth's natural resource endowment on land, we cannot but conclude that these claims made in the name of permanent sovereignty over natural resources are perniciously retrogressive.

Second, the United States believes that these recent formulations of the principle of permanent sovereignty over natural resources are clearly violative of the accepted and developed principles of transnational law. Provisions for compensation in cases of expropriation solely under domestic law of the expropriating state are so patently illegal-in the truest sense as to be beyond argument.

Third, the United States believes that these recent formulations of the principle of permanent sovereignty over natural resources are simply bad policy-regardless of the legalities of the issue. The major mechanism for the transfer of real sources to the developing world has been investment from private sources-not official aid. It requires no sophisticated analysis to demonstrate that these transfers are discouraged when nations adhere to formulations which of themselves create additional risks of uncompensated loss of investments.

Press Release USUN-27(75), Apr. 2, 1975.

On December 30, 1975, the Department of State issued a statement of U.S. policy toward nationalizations involving U.S. firms and the ensuing settlement negotiations. The following is an excerpt:

The President of the United States, in January 1972, drew attention to the importance which the United States attaches to respect for the property rights of its nationals. He stated that the policy of the United States concerning expropriatory acts includes the position that: "Under international law, the United States has a right to expect:

-That any taking of American private property will be nondiscriminatory;

-That it will be for a public purpose; and

-That its citizens will receive prompt, adequate, and effective compensation from the expropriating country."

With regard to current or future expropriations of property or contractual interests of U.S. nationals, or arrangements for "participation" in those interests by foreign governments, the Department of State wishes to place on record its view that foreign investors are entitled to the fair market value of their interests. Acceptance by U.S. nationals of less than fair market value does not constitute acceptance of any other standard by the United States Government. As a consequence, the United States Government reserves its rights to maintain international claims for what it regards as adequate compensation under international law for the interests nationalized or transferred. Dept. of State Bulletin, Vol. LXXIV, No. 1910, Feb. 2, 1976, p. 138. For the Presidential policy statement of Jan. 19, 1972, see Dept. of State Bulletin, Vol. LXVI, No. 1702, Feb. 7, 1972, pp. 152-154. See also the 1973 Digest, pp. 382–383.

Libya

On September 14, 1973, the U.S. Embassy in Tripoli delivered to the Government of the Libyan Arab Republic a protest note concerning that Government's recently issued nationalization decree with respect to American-owned oil companies. The Embassy's note reads, in substantive part, as follows:

the Department of State has now reviewed the nationalization decree of the Government of the Libyan Arab Republic that was made public on September 1, 1973, as well as a report of comments thereon of Prime Minister Jallud. That decree seeks to impose on certain American oil companies operating in Libya (Standard Oil Company of California, Texaco, Inc., Exxon, Mobil Oil Company, ARCO and Grace Petroleum) fundamental changes in contractual relations with Libya.

The United States Government is deeply disturbed by the absence of any indication that the Government of Libya intends to provide prompt, adequate and effective compensation for the foreign investments affected by this decree, as required by international law. The "net book value" formula for compensation described by the Libyan Prime Minister is far less than the fair value of the contract rights and properties involved. Accord

ingly, it does not meet the minimum standards for compensation required by international law.

The concession agreements governing the operations of the oil companies specifically provide that: "The contractual rights expressly created by this concession shall not be altered except by mutual consent of the parties." They further provide for arbitration of disputes not otherwise settled. Accordingly, failing further negotiations between the parties on the basis of respect for their contractual rights, the proper remedy for the current disputes between the companies and the Libyan Government is clearly arbitration. The United States Government understands that the companies in question have requested arbitration; it expects that the Government of the Libyan Arab Republic will respond positively to their request since failure to do so would constitute a denial of justice and an additional breach of international law.

In this connection, the Embassy wishes to recall to the Government of the Libyan Arab Republic the statement made to the American Chargé and to other diplomatic representatives on September 1, 1969, by a spokesman of the Revolutionary Command Council that the new regime would fulfill all its international obligations and would respect the rights of the petroleum companies operating in Libya. In the view of the Government of the United States, the expropriation of 51 percent of the interests of these American companies operating in Libya without resort to arbitration and without the offer of adequate compensation would be inconsistent with those assurances, inconsistent with the terms of the concession contracts, and invalid under international law.

Dept. of State File No. D73 0067-0256.

On June 20, 1974, the U.S. Embassy in Tripoli delivered a note to the Government of the Libyan Arab Republic protesting that Government's 1974 decrees nationalizing all remaining interests of three American-owned oil companies. The substantive portion of the Embassy's note reads as follows:

the Government of the United States has reviewed the decrees promulgated by the Revolutionary Command Council on February 11, 1974, and the official commentary upon those decrees. Those decrees nationalize all remaining interests in Libya of Texaco Overseas Oil Company, California Asiatic Oil Company and the Libyan American Oil Company, owned by American companies, namely Texaco, the Standard Oil Company of California and ARCO. They provide that Libya will pay compensation to the interests concerned for the transfer of ownership. That compensation is to be determined by a committee or committees formed by the Government of the Libyan Arab Republic.

Statements by Libyan Government officials and the official commentary of the Government of the Libyan Arab Republic make it clear that the reason for so nationalizing the interests affected is that of political retaliation against the Government of the United States, as a reply to the Washington Conference of Petroleum Consuming Countries.

Under the principles of international law, measures taken by a state against the interests of foreign nationals which are motivated not by reasons of public utility but of political retaliation against the state of which those nationals are citizens are invalid and are not entitled to recognition by other states. The United States Government accordingly expects that the Government of the Libyan Arab Republic will discharge its responsibilities under international law, including the payment of prompt, adequate and effective compensation for the interests affected by the decrees of February 11, 1974.

Dept. of State File No. D74 0146-1148.

Peru

Following the enactment of Peruvian Decree Law No. 21144 of May 13, 1975, concerning the expropriation of Gulf Oil Company's properties and interests in Peru, the U.S. Embassy in Lima sent a note to the Ministry of Foreign Affairs, which stated, in part:

The United States Government, despite the welcome provision that compensation will be paid, notes that Gulf del Peru has not been charged with any violation of Peruvian law, nor with any actions detrimental to the interests or public welfare of the Peruvian nation. Furthermore, even if the Government of Peru had reason to take exception to impermissible actions of the Gulf Oil Company outside Peru, which the United States Government, for its part, has made clear it cannot condone, there is a disparity between such actions of the Gulf Oil Company and the remedy-the termination of activities of Gulf del Peru in Peruwhich the Government of Peru in this case has chosen.

In these circumstances, it is difficult to avoid the conclusion that the action of the Government of Peru was in conflict with accepted principles of international law. Such conduct must inevitably increase the uncertainty felt by other sources of foreign capital inflows and investment in projects desirable for Peru's economic development, even though adequate compensation is paid to Gulf.

The United States Government accordingly believes that the Government of Peru should consider measures which may be appropriate to remedy the situation which has arisen.

Dept. of State File L/ARA.