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Claims Settlement Agreements

U.S.-German Democratic Republic

The Department of State and the Foreign Claims Settlement Commission, in an announcement dated May 28, 1975, advised American citizens who had claims against the Government of the German Democratic Republic for confiscation of property located in East Germany that the deadline for registration of their claims was July 1, 1975.

The Department stated further that information obtained from such registrations would form the basis for the negotiation of an equitable settlement of American property losses between the United States and the German Democratic Republic.

Dept. of State Bulletin, Vol. LXXIII, No. 1883, July 28, 1975, p. 132. On Sept. 4, 1974, the United States and the German Democratic Republic signed an Agreed Minute on Negotiations Concerning the Establishment of Diplomatic Relations (TIAS 7937; 25 UST 2597; entered into force Sept. 4, 1974) containing, in par. 10, a provision for entering into negotiations for the settlement of claims and other financial and property questions which arose prior to or since 1945 which had not otherwise been settled, including losses by victims of nazism.

U.S.-Hungary

Ambassador Robert J. McCloskey, Assistant Secretary of State for Congressional Relations, in a letter to Congressman James J. Florio, dated May 19, 1975, described differing interpretations maintained by the Government of the United States and the Government of Hungary with respect to certain blocked accounts under the U.S.-Hungarian Claims Agreement (TIAS 7569; 24 UST 522; entered into force March 6, 1973; see the 1973 Digest, Ch. 9, § 3, pp. 336-337). Congressman Florio had inquired concerning the cancellation by the Government of Hungary of a blocked account which had been established from funds received for the taking of property. Ambassador McCloskey replied, in part:

On March 6, 1973, a claims settlement agreement was signed between the Government of the United States and the Government of the Hungarian People's Republic under which the Government of Hungary agreed to pay the Government of the United States one lump sum in settlement of claims of nationals of the United States for war damage, the nationalization, expropriation or other taking of property, and dollar obligations and other rights which arose between 1945 and March 6, 1973 . . . .

Subsequent to the date of the agreement, the Government of Hungary began cancelling such accounts on the grounds that

claims based upon blocked accounts were settled under the provisions of the agreement of March 6, 1973. The Government of the United States does not agree with the interpretation of the Government of Hungary. It is the position of the United States that claims for cancelled bank accounts did not arise until after the date of the claims agreement. Further, the claims agreement did not contemplate nor provide for the settlement of any claim which was settled directly between the Government of Hungary and a national of the United States before March 6, 1973. The action of the Hungarian Government in the circumstances is improper and contrary to principles of international law.

.. The Department is seriously concerned about this matter and is doing everything it can to obtain a reinstatement of the accounts, at least. The matter is the subject of discussions between the Governments of the United States and Hungary. Regrettably, the Government of Hungary has not indicated, as yet, its intentions concerning the settlement of such cases.

Ambassador McCloskey's letter also pointed out that if a claimant did not agree with the Department, he had every right to file a claim with the Foreign Claims Settlement Commission under the provisions of the agreement of Mar. 6, 1973, and the legislation approved by the President on Oct. 20, 1974 (P.L. 93-460; 88 Stat. 1386). See the 1974 Digest, Ch. 9, § 3, pp. 426-427. Dept. of State File No. P75 0084-1701.

U.S.-France

The United States and France concluded an agreement by exchange of notes on June 12, 1975 (TIAS 8146; 26 UST 1909; entered into force June 12, 1975), concerning the settlement of the U.S. claim in connection with the removal of U.S. military personnel, supplies and equipment from France at the request of the French Government in 1966. The agreement provides for payment by the French Government to the United States of $100 million over a period of five years, beginning in June 1975, as a financial settlement of the claim submitted by the United States in 19681969 following the denial of further U.S. use of French military facilities in which the United States had made a significant investment prior to 1966.

U.S.-Peru

On December 11, 1975, the United States and Peru signed a memorandum of understanding (TIAS 8173; 26 UST; entered into force December 11, 1975) on an interim agreement relating to compensation for the Marcona Mining Company, whose miningmetallurgical complex in Peru was nationalized by the Govern

ment of Peru. It provided a framework for continuing governmentto-government discussions aimed at providing just compensation for Marcona while at the same time permitting the immediate resumption of shipments of Peruvian ore for the mutual benefit of the Government of Peru and the Marcona Corporation. In the event that final agreement on compensation was not reached within 90 days, the arrangement was to be reevaluated.

§ 4

Agreements for the Protection of Foreign
Investment

U.S.-Bangladesh

The United States and Bangladesh exchanged notes on January 17 and 20, 1975, for the purpose of activating in Bangladesh U.S. Government private investment programs administered by the Overseas Private Investment Corporation (OPIC). The agreement will enter into force when Bangladesh notifies the U.S. Government of its approval in accordance with applicable constitutional procedures. The agreement calls for any differences concerning interpretation or any claims arising out of investments under the programs to be settled by negotiations between the two Governments or, if such negotiations do not succeed, by an arbitral tribunal.

Dept. of State File L/T.

U.S.-Saudi Arabia

On April 26, 1975, an investment guaranty agreement between the United States and Saudi Arabia, signed February 27, 1975, entered into force (TIAS 8045; 26 UST 459). On June 17, 1974, the OPIC Board of Directors had authorized the addition of Saudi Arabia and other oil-rich but otherwise technologically underdeveloped areas to the OPIC list of eligible countries, provided that such investments did not require significant outflows of capital from the United States. The agreement includes third-party arbitration of disputes and claims, and stipulates that investment projects must be approved by the host government.

Dept. of State File L/T.

U.S.-Haiti

The United States and Haiti exchanged notes on October 7 and 14, 1975, supplementing prior agreements made in 1953 and 1970 between the two countries on investment incentive programs (TIAS 2818, 7006; 4 UST 1546; 21 UST 2651). The new agreement

provides for assurances of foreign exchange for repayment of loans or guaranties made by OPIC and exemption from all taxes and charges of Haiti for all such loans and guaranties. The agreement will enter into force upon notification of approval by Haiti.

Dept. of State File L/T.

§ 5

National Legal Provision for Protection of
Foreign Investment

The Overseas Private Insurance Corporation

Private Insurance

On February 19, 1975, the Overseas Private Investment Insurance Corporation (OPIC) announced that a group of insurance companies, other insurers, and OPIC had signed a constitution forming the Overseas Investment Insurance Group to insure and reinsure United States private investment abroad against the political risks of expropriation and currency inconvertibility as of January 1, 1975.

The Group is the first of its kind and creates a partnership designed to encourage the participation of the insurance industry in the field of political risk insurance, a field traditionally administered by the Government. The Group functions as a combined underwriting and reinsurance pool, providing for the issuance of new insurance coverages and for sharing a portion of the risks in OPIC's existing portfolio. OPIC is a member of the Group and acts as a reinsurer for the Group's excess losses.

Although the political risk coverages offered by OPIC include expropriation, inconvertibility of currency, and war, revolution or insurrection, the Group participates only in insuring the expropriation and inconvertibility risks. The private insurer members at the time of the formation of the Group had subscribed a total of $6,550,000 of a $40 million per country first loss pool, with OPIC taking up the balance. The Group has indicated it plans to seek additional insurance company participation for its fiscal year commencing December 1, 1975.

OPIC acts as manager for the Group and provides services for users of the program. The Group is continuing OPIC's practice of issuing long term policies, in most cases providing twenty years of coverage. Fourteen insurance companies participated in the signing of the Group's constitution.

See OPIC press release, TS/320, Feb. 19, 1975. The Overseas Private Invest

ment Corporation Amendments Act of 1974 (P.L. 93–390; 88 Stat. 763), approved Aug. 27, 1974, authorized the gradual transfer by 1980 of OPIC's investment insurance underwriting activities to an association of private insurance companies. See the 1974 Digest, p. 433.

Claims

On January 7, 1975, the Overseas Private Investment Corporation (OPIC) announced that it had reached a settlement of all outstanding issues in connection with International Telephone and Telegraph Corporation's $95 million political risk insurance claim for expropriation of the Chile Telephone Company. The claim had been denied by OPIC on April 9, 1973, but a commercial arbitration tribunal of the American Arbitration Association had ruled on November 4, 1974, that OPIC was legally obligated to pay an undetermined amount to ITT. See the 1974 Digest, p. 434.

According to Marshall T. Mays, president of OPIC, the settlement was based on the successful outcome of ITT's negotiations with the Chilean Government, which agreed to pay a total package of $125.2 million for ITT's equity and debt in the nationalized utility.

Under the terms of OPIC's settlement with ITT, the U.S. Government agency purchased notes valued at $35 million from ITT and guaranteed an additional $59 million of notes issued to ITT by the Chilean Development Corporation (CORFO). OPIC also returned $4 million in premiums paid by the company since the expropriation.

The notes acquired by OPIC consist of $17 million in existing obligations of the Chile Telephone Company, guaranteed by the Central Bank of Chile, and the last three years of semiannual notes, amounting to $18 million, issued by CORFO for payment of ITT's equity in the telephone company.

Under ITT's agreement with Chile, the corporation received $21 million in cash for past due principal and interest on debt owed by the telephone company to ITT. The remaining $17 million of this debt, since acquired by OPIC, is to be paid to the U.S. agency over a period of six years in accordance with the original debt agreement. In addition, payment for ITT's equity in the telephone company consisted of a down payment of $10 million in an interestbearing letter of credit payable in 1975. The balance of $77.2 million is payable in notes issued by CORFO, maturing semiannually between January 1, 1975, through July 15, 1987, and bearing interest at the rate of 10 percent.

Mr. Mays, president of OPIC, said:

The settlement was an equitable one. The $35 million of notes

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