U.S. DEPARTMENT OF STATE REPORT ON NATIONALIZATION, EXPROPRIATION, AND OTHERTAKINGS OF U.S. AND CERTAIN FOREIGN PROPERTY SINCE 1960Reviewed work(s):Source: International Legal Materials, Vol. 11, No. 1 (JANUARY 1972), pp. 84-118Published by: American Society of International LawStable URL: http://www.jstor.org/stable/20690846 .Accessed: 31/07/2012 16:49

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U.S. DEPARTMENT OF STATE REPORT ON NATIONALIZATION, EXPROPRIATION, AND OTHER TAKINGS OF U.S. AND CERTAIN FOREIGN PROPERTY SINCE 1960*

I. RISING TREND IN RECENT YEARS

The list of noncommunist countries that have nationalized, expropriated, or negotiated purchases of foreign-owned assets, usually in connection with nationalization actions, now incorporates some 34 countries. Included among these countries ?

depending on how actions are defined ? are 9 in Latin America;!5 in Africa;5 in the Middle East; and 5 in Asia. Prominent among recent actions has been the takeover of the large copper companies

in Chile, the

Congo (Kinshasa), and Zambia (a majority share); petroleum production firms in Bolivia, Peru, and Algeria; and either banking and insurance firms or both in Libya, Somalia, Sudan, Uganda, Zambia, Yemen (Aden), and India.

Principal Causes

Studies of economic nationalism in developing countries suggest that, aside from fundamental changes in form of government, its causes are to be found in such factors as:

a) increasing support for the widely held view in many of the LDCs that they are excessively dependent on foreign companies which export resources, take a disproportionate share of profits out of the country, and more generally exercise undue influence over governments and lives of people through their international economic power;

b) the increasing political responsiveness of developing country leaders to the popular sentiment outlined above, despite its debatable merits;

c) the increasingly positive and self-reliant attitudes taken by many developing countries toward their development problems, partly as a result of increasing technical

*[Reproduced from U.S. Department of State, Bureau of Intelligence and

Research, Research Study RECS-14 of November 30, 1971, entitled "Nation

alization, Expropriation, and Other Takings of United States and Certain

Foreign Property since I960'1, pp. 1-6 and pp. 19-60. [Parts II and IV of the Study have been omitted. Part II concerns the

11 impact on assets of United States companies in noncommunist countries";

Part IV deals with "pending claims in communist countries". [The cutoff date for the information in the Study is June 30, 1971,

with some notes added through August. There will be an updating of the

Study in the future. International Legal Materials will carry the ad ditional information as an addendum to the original Study. Foreign Ser vice reports have been the principal source of the material contained in

the Study. [The United States policy statement on economic assistance and invest

ment security in developing nations appears at page 23 9. The report on

expropriation of American-owned property by foreign governments in the twentieth century, published by the U.S. House of Representatives1 Com

mittee on Foreign Affairs on July 19, 1963, appears at 2 I.L.M. 1066 (1963).]

competence, partly as a result of frustrations over trade 85 and aid issues, and partly because they have an increasing range of choices in a world of expanding capital centers and institutions; and

d) the appearance of infant industries that compete against foreign firms with easier access both to less expensive financing and more up-to-date technology.

In LDCs a primary aim of economic nationalism is to increase control over their economies and to reduce the role of foreign firms, even at the expense of economic growth and technological advantages

gained from association with the developed countries. In the view of some LDC governments, the gains in self-confidence and national pride will outweigh this cost which they tend to minimize.

In Latin America and in Africa, especially among the least

developed countries, resentment of foreign control and fear of

exploitation by foreign interests are deep. In many LDCs the economic benefits of foreign investment are not particularly visible to the people. Many of their people believe that valuable natural resources, especially minerals and petroleum, have been exploited much more for the benefit of the foreign firm than for local economies. Governments of some of these countries appear to have concluded that not only are the economic gains from continued foreign operation of such enterprises questionable, in terms of new investment and technology, but also they are outweighed by social costs, particularly domestic political instability.

Thus, in some countries nationalization* actions probably have been based more on political motivation than on an assessment of the economic gains or losses, although the latter may have been taken into account.

Impact on Developing Countries

Private venture capital from developed countries and the manage ment, technical, and marketing skills associated with it have contributed substantially to the output and exports of the LDCs. For example, almost all of the major mines and petroleum fields in LDCs were opened up by foreign firms. Nationalization of these firms or taking an increased share of their profits can yield certain political gains for the LDC governments involved.

Whether any balance-of-payments benefits, resulting from nationali zation or expropriation, can be sustained depends largely on both the ability of the nationalizing country to run the enterprise well and on the general climate of investor confidence the government is able to inspire. If the nationalization action is taken in the context of a political course which gives the business sector ?

foreign and domestic cause to have doubts in the future stability of the currency, declines in investment and capital flight may be far greater than any "savings" which the elimination of the profits remittances of a foreign firm may entail.

The major short-term economic drawback of nationalization is its effect on the investment climate, particularly where prompt, adequate, and effective compensation is in question. Credit may dry up as potential lenders and investors hesitate pending an assessment of the new situation. A number of projects involving substantial new investment in some Latin American countries, for example,

reportedly have been suspended during the past year. 86

Additional, more direct costs of nationalization are frequently overlooked in considering the pros and cons of this issue. These include the cost of technological assistance, often at higher costs to the host country than previously provided by the foreign investor, and the cost of financing imported equipment to maintain the operation, usually at shorter terms and higher interest rates than would have been available to the foreign firm. Moreover, commercial creditors offering such loans expect payments on time, regardless of the foreign exchange situation, whereas remittances by foreign firms tend to be tempered by business conditions and foreign exchange situations prevailing in the host country.

The decision to pay adequate compensation depends on the domestic political situation at the time of takeover as well as on economic factors. However, where profits are low or negligible, or where the government is already deeply in debt and has little financial resources, compensation becomes difficult. Where it is economically possible, other factors may influence the decision, including a need to maintain overall credit worthiness.

The long-term impact of growing economic nationalism in the LDCs which possess resources that might attract additional invest ment will depend largely on what happens to the investment climate ?

whether the countries establish clear and workable rules for foreign investors, and whether they apply them consistently. The flexibility and adaptability of investors in responding to new operating conditions wi 11 also be a major determinant of the future.

Negotiations are underway an all current cases involving nationalization or expropriation of US interests in noncommunist countries,and an agreed settlement is considered likely in most cases. India, for example, has stated that it will compensate all insurance firms recently nationalized in repatriatable foreign currency. In the International Petroleum Company case in Peru, negotiations have been difficult. In Chile, the amount of compensation for expropriated properties of the large copper companies is in dispute. However, agreement has been reached in Chile on takeover of some other concerns, including an iron mining comoanv and a bank. Compensation agreements on current cases have not been reached in a number of other countries, including Libya and Yemen (Aden). In the latter country, as well as in some others, settlement is complicated by the lack of diplomatic relations. In others, progress has been slow.

Impact on Developed Countries

Although some compensation for nationalized or expropriated property is generally offered ? and is often required under the laws of LDC governments

? payments may not be considered adequate by

the former owners who expect fair market value. Recently LDCs have tended to base their offers on depreciated book value, and to spread payments out over fairly long periods, say 15 to 30 years. Often, however, other factors may influence the conclusion of an agreement, for example, related agreements with governments for repatriation of profits, management contracts, etc.

Government-backed guarantees against expropriation covering portions of large US investments in LDCs are a matter of considerable concern to the United States. Government-guaranteed investments amount to several hundred million dollars in Latin America alone.

87

The guarantee program, formerly under AID, is now administered by the Overseas Private Investment Corporation (OPIC).

The Hickenlooper Amendment to the Foreign Assistance Act, passed in 1962,provides for the suspension of assistance to countries that take property of concerns owned 50 per cent or more by US interests and that fail to take "appropriate steps" to discharge their obligation, under international law, to make prompt, adequate, and effective compensation. The Hickenlooper Amendment was applied in Ceylon, soon after enactment. Further invocation has not occurred,although when expropriations have taken place, the US Government has used diplomatic and other measures to foster settlements providing for just compensation. Negotiations looking toward a settlement are generally considered by the US Government to be "appropriate steps" Negotiations are usually between the company and the foreign government.

Unlike investor companies or individuals, the investor countries are not likely to experience a heavy impact even if many LDCs national ize the bulk of existing foreign-owned enterprises and apply increasingly restrictive measures to new investment. Some developing countries, among them many of the more prosperous ones, will continue to welcome foreign investment. In others, new forms of investment are likely to replace the older forms and will continue to produce income, though probably not at as rapid and high a rate, for the developed countries. Further, capital for certain natural resource enterprises is being shifted by developed countries to domestic opportunities and to areas such as Canada and Australia, which have generally welcomed such investment and where the outlook is favorable for new discoveries.

Effect on Relations Between Developed and Developing Countries

Over the next few years, rising economic nationalism in the LDCs probably will result in greater friction between them and the developed countries, at least in some areas. In the petroleum industry, producer governments, which in recent years have been participating in new oil production companies, have also demanded a share of the older, wholly foreign-owned private companies. A larger share of oil production is likely to come under government control. The copper-producing countries, having gained control of a substantial portion of the world industry, may try to control prices, although because of their disparate interests, and the competitive position of copper, they are not likely to be successful. A prolonged attempt to raise prices by restricting production, for example, would encourage the development of alternate sources elsewhere.

Probable Related Changes in Investment Patterns

In spite of numerous recent nationalization moves in LDCs, the trend toward increasing foreign private investment in these countries during the past decade will probably continue, although possibly in different forms. Management contracts, joint ventures, and similar arrangements are likely to replace the older forms of investment in many cases, and will continue to produce income for developed countries. Investors continue to seek entry into expanding markets, development of new sources for both raw and semi-processed materials and products, and a satisfactory rate of return which, however, may be lower than in the past. Developing countries want additional foreign investment to develop those industries which

they cannot finance independently,but they also want greater control of profits and decision-making. Demand for local equity participation, either private or state, will undoubtedly increase. The Andean Group of countries in Latin America proposes to experiment with built-in mechanisms for eventual transfer of equity from foreign to local investors.

In the Japanese type of investment, the investor typically makes loans, often to pay for machinery and equipment which he supplies; takes little or no equity; may or may not supply managerial skills on a contract basis; and contracts to buy the enterprise's output for a long term during which time the loan is paid off.

The review of nationalization, expropriation, and other takings of foreign property cited in this paper suggests that the time may be opportune for developing new international approaches to invest ment disputes. The settlement of investment disputes has generally been on a bilateral basis, sometimes leading to rigid positions on the part of the investing company and the host government. The home government of the investing company may also be involved.

Possibly both developed countries and LDCs may come to view more favorably the facilities of international organizations for the settlement of disputes. An international institution exists for the arbitration of investment

disputes (the International Centre for Settlement of Investment Disputes), but thus far little use has been made of it. Some Latin American countries, for example, have traditionally refused to submit foreign investment disputes to international arbitration because of conflict with local laws or constitutional provisions. The establishment of an international investment insurance agency, along the lines proposed in the discussions that have been taking place for a number of years in the World Bank, would offer foreign investors safeguards against political risks while avoiding bilateral confrontations.

III. DETAIL BY COUNTRY OF SETTLED AND CURRENT SITUATIONS IN NONCOMMUNIST COUNTRIES

The following review covers settled and current situations involving nationalization, expropriation, and other takings of United States and certain foreign property since 1960. Some situations involving negotiated purchases in connection with nationalization actions that have been brought to the attention of the Department are also included. Brief statements concerning US claims in non communist countries are also included in this section. US claims in communist countries are covered in Part IV.

Limitations of this review, which also apply to Part II, include:

1. Coverage ? believed to be virtually complete with respect

to situations involving nationalization, expropriation, and other takings of property in which US firms hold a majority interest; not complete with respect to situations in which US firms have a minority interest, or on negotiated sales, since information on such

89

situations may not have come to the attention of the Department of State;

? some cases that are settled adequately and promptly may not come to the attention of the Department;

? a few borderline cases which may not constitute either nationalization or expropriation or negotiated sales but do involve takings are also included in this section, particularly where they involved the attention of the Department (these cases might more appropriately be classified as various types of contract disputes);

? certain cases involving foreign firms have been included for comparative purposes ?for example, Congo (Kinshasa) and Zambia], in Part III;

2. More emphasis has been placed on current than on settled cases.

3. Both source information and this review have been prepared principally by political or economic officers who do not have legal training. Statements do not necessarily constitute a legal view. Particularly for older cases where information was scarce, sources included private research studies, newspaper accounts, etc.

4. The definition of "prompt, adequate, and effective compensation" is a contentious issue between developing countries and investing countries.

5. Cutoff date for data in this report is June 30, 1971. Some information has been added through August.

LATIN AMERICA

Argentina

Settled

Argentine Cities Service Development Company owned by: Cities Service Oil Company - 63 per cent

Signal Oil and Gas Company - 20 per cent

Union Oil and Gas Company of California - 17 per cent Argentinian Southeastern Drilling Company Continental Oil Company of Argentina)

"

iftint ,/Dnfllv%? Marathon PetroleuTliraentina EftTf

a J01nt venture Esso Argentina, Inc. (Standard Oil of N.J.) ParTAmerican International Oil Company (Standard of Indiana) Tennessee Argentina S.A. (Tenneco) Trarisworld Drilling Company (Kerr-McGee Company) Union Oil Company of California (separate from Cities Service above)

90

On November 15, 1963, in Decree 743-45, the Ulia administration annulled petroleum exploration and development contracts awarded to

foreign firms from 1958 to 1961 by the Frondizi administration. Eleven American firms and at least one other foreign firm, Shell Production Company, of Argentina, a British firm, were affected, although not all were entitled by their contracts to claim financial compensation. All negotiated out-of-court settlements by 1967, and some continued operating in Argentina under new arrangements. Settlements in each case varied with the terms of the original contract or other factors. Cash settlements to six US firms (Cities Service, Esso, Pan American, Tennessee, Transworld, Union),usually in the form of notes discounted by foreign banks, ranged from about $4 million for Transworld to about $42 million for Esso and Pan American. Shell received $21.5 million.

Bolivia

Current

Bolivian Gulf Oil Company

Three weeks after taking office in a coup, the Revolutionary Gov ernment nationalized all Gulf assets on October 17, 1969. According to

Gulf, it had since 1957 invested nearly $150 million in Bolivia, had only earned a return since 1967, and valued its assets at about $120 million. Bolivia set their worth at about $85 million. Compensation talks with the company started almost immediately. An agreement was announced September 10, 1970,under which Bolivia would pay Gulf $78.6 million, plus $16.4 million in outstanding loans, under a separate agreement, during a 20-year period after the resumption of full-scale oil and gas exports. The agreed settlement is in process of being implemented.

International Metals Processing Corporation (IMPC)*

On January 12, 1971, the Bolivian Government announced the abrogation of the concession granted in 1965 to IMPC to work the wastes and tailings from a COMIBOL tin mine. The expropriation decree providing for compensation will be taken under consideration by the Cabinet before discussions are held with the company. Both IMPC and its parent company, Harvest Queen Mill and Elevator Company, carry an amount of OPIC investment guarantee insurance against expropriation.

Mina Matil de Corporation*

On April 30, 1971, President Torres announced the rescinding of the Mina Matilde Corporation's concessionary contract. Mina Matilde, jointly owned by the US Steel Corporation and Philipp Brothers, operated a zinc mine under a twenty-year lease granted in 1966 from COMIBOL, the Bolivian National Mininq Company. The investment of the US firms is covered by OPIC'insurance. The Torres decree turned the Mina Matilde operation over to COMIBOL and

* The advent to power of the Government of Colonel Hugh Banzer in August 1971 has improved the prospects for resolution of these cases.

91

specifically froze all of the Corporation's bank accounts. The decree established a commission which had 60 days to evaluate the amount of indemnification.

Private Claim

A small parcel of land owned by United States nationals was expro priated in 1961 under the Bolivian agrarian reform program. The property is valued by claimants at $825,000. For several years, the

Department has been prepared to espouse the case, provided claimants filed a formal claim.

Brazil

Settled

American and Foreign Power Company

On May 11, 1959, the State of Rio Grande do Sul expropriated the holdings of American and Foreign Power Company. On April 22, 1963, Brazil agreed to purchase all of the company's holdings in Brazil for $135 million. Another property, in the State of Pernambuco, had been expropriated,and many of the company's operations in Brazil had become unprofitable. The agreement called for a cash payment of $10 million with the remainder payable in 6 to 6 1/2 per cent notes over 25 years. Final agreement was reached in 1964.

Companhia Telefonica Nacional

The Governor of the state of Rio Grande do Sul decreed the expropriation of a subsidiary of Companhia Telefonica Nacional, a subsidiary of International Telephone and Telegraph, on February 16, 1962, after two years of unsuccessful negotiation over the valuation and sale of the company's assets in the state. Failure to reach agreement promptly on compensation was one of the chief reasons for the passage of the Hickenlooper Amendment by the US Congress in 1962. In January 1963 ITT reached a satisfactory interim settlement and final settlement was agreed to in 1967, when Brazil purchased all of iTT's Brazilian utility holdings. The property in question reportedly was valued at $7 to $8 million.

Chile

The Government of Chile* which has been in oower since November 1970, plans to extend state ownership over many important sectors of the private economy, including domestically-owned as well as foreign-owned enterprises.

Current Copper

Nationalization of large-scale copper mining companies and one smaller copper mining company was accomplished by adoption of a con stitutional reform, introduced in the Senate on December 22, 1970, and signed by President Allende on July 15, 1971. The nationalization law departs from traditionally accepted methods of compensation in several respects. For example, it provides for the retroactive deduction of "excess profits" earned by the companies. It bypasses established

92

Chilean judicial appeals procedures, including access to the Supreme Court, and it in effect nationalizes only those companies in which US investors had interests. Compensation was to be equal to book value as of December 31, 1970, less certain deductions. The term for paying compensation cannot be more than 30 years, nor the interest rate less than 3 per cent per annum. On July 16, 1971, by special decrees, the Government of Chile took over the five copper mines.

The nationalization bill affects the equity held by Anaconda in the Chuquicamata, El Salvador, and Exotica mines; by Kennecott in the El Teniente mine; and by the Cerro Corporation in the Rio Blanco mine.

Compania de Cobre Chuquicamata S.A. (formerly the Chile Exploration Company, an Anaconda subsidiary)*

This company, the largest of the Chilean copper producers, was 51 per cent owned by the Chilean Copper Corporation (C0DELC0), the Chilean state-owned copper concern, and 49 per cent by Anaconda. Under the agreement between Anaconda and the Frei Government, payment for CODELCO's 51 per cent interest in this company and in Compania de Cobre El Salvador S.A. (see below) totaled $174.6 million, to be made in semiannual installments over 12 years starting June 30, 1970, at 6 per cent tax free interest on the outstanding balance. The

agreement included an understanding to purchase the remaining 49

per cent equity between 1973 and 1981. At year end (1970) Anaconda listed its investment in Chile at $457.5 million.

Compania de Cobre El Salvador S.A. (formerly the Andes Copper Mining Company)*

This company was also 51 per cent owned by C0DELC0, 49 per cent

by Anaconda.

Compania Minera Exotica S.A.*

This relatively new,mixed company was 25 per cent owned by C0DELC0, 75 per cent by Anaconda. A part of Anaconda's investment is covered by 0PIC insurance against expropriation.

Soc. Minera El Teniente S.A. (formerly the Braden Copper Company, a Kennecott subsidiary)*

This company was 51 per cent owned by C0DELC0, 49 per cent by Kennecott Corporation. The Chilean Government in 1967 obtained a 51 per cent interest in this company for $80 million, in promissory notes, payable over 1967-71, with interest based on the US prime rate. Kennecott agreed to relend El Teniente these note payments as received. Kennecott1s loan is partially covered by 0PIC guarantees. The dollars thus lent, bearing interest at the rate of 5.75 per cent per annum, were to be amortized in annual installments over a 15-year period beginning December 31, 1971.

* Taken over July 16, 1971, by the Government.

93

Cia. Minera Andina S.A.*

This company, which operated the new Rio Blanco mine, was 70 per cent owned by the Cerro Corporation and 30 per cent by C0DELC0. Tentative agreement was reached on the purchase of Cerro1s interest by the Government May 19. Final approval of the arrangement by the Chilean Government has been delayed. Cerro holds OPIC insurance against expropriation with respect to some of Cerro's debt invest ments in Andina.

Other situations

Banco do Brasil (Brazil) Frances e Italiano (French and Italian) Bank of London and South America (UK) First National City Bank (US) Bank of America (US]

The Chilean Government has indicated its intention of nationalizing the principal commercial banks in Chile. This would entail taking control of the operations in Chile of the above banks, including the US-owned City Bank and the Bank of America. The Government of Chile has reportedly concluded a agreement with the Bank of America.** City Bank carries OPIC expropriation insurance.

Alimentos Purina

In December 1970 the Chilean Government officially intervened in the operations of Alimentos Purina, a company 80 per cent owned by the Panamanian affiliate of the US Ralston Purina Company. Alimentos Purina had initiated their Chilean operations in 1966 and have OPIC investment guarantees against expropriation. Negotiations with the Chilean Government for the purchase of Ralston Purina's equity interests are well advanced.

Anglo-Lautaro (Soquimich)

The Government announced, at the end of May, nationalization of the nitrate industry through acquisition from Anglo-Lautaro of 49 per cent of the shares of Soquimich, in which it already had a 51 per cent interest. The Chilean Development Corporation (CORFO)paid $4.1 million plus $3.5 million in notes due March 31, 1972.

Bethlehem-Chile Iron Mines Company

Bethlehem-Chile, one of Chile's large iron ore mining concerns, was a wholly-owned subsidiary of the Bethlehem Steel Corporation, a US concern. Agreement was reached on March 22, 1971, on the terms of sale to the Compania Acero del Pacifico (CAP), the Chilean state-owned steel company. Transfer took place as expected in June 1971. The price, by agreement between the parties, is to be definitively established by a recognized independent auditing firm.***

* Taken over July 16, 1971, by the Government. **

Completed July 31, 1971. *** Price is to be based on book value.

94

Compania de Telefonos de Chile (Chiltelco)

The International Telephone and Telegraph Corporation announced June 10 that it is holding talks with the Chilean Government, at Chile's request, to explore the possible purchase of ITT's 70 per cent interest in Compania de Telefonos de Chile (Chiltelco). Of the remaining 30 per cent, 24 per cent is already owned by Corporation de Fomento, a Chilean Government agency, and 6 per cent is owned publicly in Chile. In 1967 Chiltelco had agreed that Chile could increase its ownership of the company's stock to 49 per cent over a period of years with the right to buy the company outright by 1980. Chiltelco was intervened by the GOC October 1, 1971.

Ford Motor Company

On May 27, 1971, the Chilean Government requisitioned the Ford Motor Company's facilities at Casablanca to forestall the closing of the plant. Ford's operations had become unprofitable within the past year and considerable financial losses had induced the company to gradually wind down operations of the assembly plant. When negotiations with the Chilean Government failed to find a mutually satisfactory means for keeping the plant open, Ford on May 7 laid off 400 of its 600 employees. A labor dispute ensued and the plant was subsequently requisitioned by the Chilean Government.

Industrias Nibco SGM Sudamericana Ltda.(NIBSA)

This company was owned 50 per cent by the Northern Indiana Brass Company (NIBCO); 25 per cent by Adela, a European-based financing consortium; and 25 per cent by C0RF0. The plant was "intervened" by the Chilean Government in November 1970 when the NIBCO- appointed plant manager decided to close the plant due to lack of marketing

prospects for a mounting inventory of brass fittings. On April 30, 1971, NIBCO sold its interest in NIBSA to CORFO.

RCA-Chile

In February 1971 the Chilean government agency CORFO purchased the controlling interest in RCA-Chile, which assembles TV sets under foreign licenses. CORFO also received the option to buy out RCA completely after ten years.

South American Power

In August 1970, after lengthy negotiations, South American Power, a Boise-Cascade subsidiary, agreed to sell its 70 per cent holding in Compania Chilena de Electricidad Limitada (Chilectra) to the Government-owned CORFO for a total of $81.3 million. The agreement called for a cash payment of $3 million with the remainder payable in 6 per cent CORFO debentures over 25 years.

Ecuador

Current

All America Cables and Radio

By Decree 256, March 25, 1970, the Ecuadorean Government

95

nationalized All America Cables and Radio (AACR), a subsidiary of International Telephone and Telegraph. The Decree was made public on April 9, 1970. The principal assets of the Company in Ecuador included a contract running through February 20, 1976,to operate cable and radio services, an operating plant ana equipment, and several pieces of real estate. Compensation provisions were not specified,but, in general, Ecuadorean law does not permit the takeover of private property without compensation.

In its adjusted claim against the Ecuadorean Government, ITT placed the value of its expropriated assets at about $4.5 million, including $3.6 million for lost future profits through the term of the contract, and $800,000 for physical assets- Agreement appears imminent.

Guyana

Current

Demerara Bauxite Company (Demba)

Formal takeover of the Aluminum Company of Canada's (Canadian owned) subsidiary, Demba, with gross investment of rouahlv US $118 million, pending since final enactment of the nationalizing legislation March 1, occurred on July 15, 1971. In last-minute

negotiations prior to takeover, Alcan and the Government reached agreement on amount ($53.5 million) and terms of compensation. The new GOG concern will be known as Guybau.

Haiti

Settled

Valentine Petroleum and Chemical Corporation

On August 28, 1964, the Haitian Government cancelled a refinery concession agreement held by Haitian Petroleum and Refining Company in which Valentine Petroleum and Chemical Corporation (US) had investments covered by AID investment guarantees. A board of arbitration found that expropriation had occurred and awarded

compensation to Valentine. AID recently concluded a settlement with Haiti. This was the first claim under the investment guaranty program, now under 0PIC.

Mexico

Settled

American and Foreign Power Company

In 1960 the Lopez Mateos administration took over the American and Foreign Power Co., a subsidiary of Ebasco Industries, Incor

porated,of New York. (A Canadian-registered power company also was taken over in preparation for a constitutional change reserving the power industry to the state.) The transactions were completed September 27, 1960. American and Foreign Power was to be paid $69.5 million, principally in the form of Mexican Government notes, which have by now largely been repaid to Ebasco.

96

Asarco Mexicana, S.A. Industrias Penoles, S.A.

These companies, the largest mining companies in Mexico, were Mexicanized within 5 years after the passage of a new mining law in T961, restricting foreign capital in mineral development. Ascarco Mexicana, formerly the Mexican operating subsidiary of American Smelting and Refining Company (ASARCO) is now owned 51 per cent by Mexican interests and 49 per cent by ASARCO. ASARCO continues to handle the marketing of exportable production of lead, zinc, copper, silver, and other minerals. Mine and plant expansion are planned. American Metal Climax holds a minority interest in Industrias Penoles, producing mainly lead, zinc, and silver.

Compania Azufrera Mexicana, S.A. de C.V. Compania Explotadora del Istmo S.A. de C.V.

These former US sulfur-producing companies were Mexicanized in 1967. Compania Azufrera Mexicana, S.A., sold a 66 per cent interest for $49.5 million to the Mexican Government (43 per cent) and a group of private Mexican investors (23 per cent), with 34 per cent remaining with the original owner, Panamerican Sulfur Incorporated, of Houston, Texas. Gulf Sulfur agreed to Mexicanize by selling 66 per cent of its newly formed operating subsidiary, Compania Explotadora del Istmo S.A. de C.V.-,to Mexican nationals. Both of these actions followed imposition of quotas by the Government limiting exports of sulfur companies to a maximum of 10 per cent of their proven reserves. These reserves have in recent years been increased.

Current

Compania de Azufre Veracruz S.A. (CAVSA)

This concern, a subsidiary of Gulf Resources and Chemical Corporation, of Houston, was limited by the Mexican Government to production of 250,000 metric tons in 1969, and required to sell 150,000 tons in Mexico, whereas other sulfur producers were not restricted to quotas. Gulf Resources interpreted this action to be evidence that the Government desired it to Mexicanize and started negotiations with a group of Mexican investors. Because of a fall in the price of sulfur on the world market, the parties could not agree to a sale at the originally agreed amount of US $24 million, and the mine was shut down at the end of 1969.

Private Claims

After discussions with the Foreign Ministry, the Department obtained the promise of settlement of a claim for the taking of property owned by a US national and valued at $1 million. Four other property claims involving US citizens, valued at $2 million, have been discussed but are not yet settled.

Peru

Settled

Banco Continental

A 51% interest in this bank was held by Chase Manhattan and 5% by Deutsch Sudamerikanische Bank. In early 1969 the Government issued a banking decree restricting foreign ownership of domestic commercial banks to 25 per cent. Chase Manhattan had planned to reduce its share by negotiating a merger of Banco Continental with another Peruvian Bank, Banco Popular, but negotiations ended when that bank was seized. On August 28, 1970, the Peruvian Government announced that Banco de la Necion had negotiated purchase of Chase Manhattan's and Deutsch S?damerikanische^ shares in Banco Continental. Terms of the settlement were satisfactory to both of the foreiqn holders.

Peruvian Telephone Company

In October 1969, the Government of Peru agreed to buy out the Peru vian Telephone Company, an ITT subsidiary. The settlement was satisfactory to ITT, which received part of its payment in long-term bonds that could be used at face value if reinvested in Peru, Sheraton, an ITT subsidiary, is using the bonds to build a luxury hotel in Lima which complements the Peruvian Government's plans for developing tourism.

Current American Smelting and Refining Company Andes del Peru (Anaconda] Cerro de Pasco Corporation (Cerro Corporation)

Because of lack of compliance with new requirements under mining laws passed in 1970 American Smelting and Refining Company gave up its Michiquillay copper concession and Andes del Peru lost its Cerro Verde concession. The Government declared that four mining concessions held by Cerro Corporation had lapsed; the company is appealing on two of the concessions and accepting the Government's ruling on two others. Six active mining projects of Cerro de Pasco, which is the largest mining company in Peru, were not affected.

Cerro de Pasco Corporation (estates and animals)

Under the Agrarian Mining Reform law of the Belaunde Government (pre-October 1968), 19 mountain estates and the animals on them were to be expropriated. The Military Government has expropriated the estates and made an ample settlement on one estate and on all of the animals. The valuation of the remaining estates is currently in the courts.

International Petroleum Company, Ltd. (IPO

In its first week in office, the Revolutionary Military Junta on October 9, 1968, abrogated a compromise settlement by the previous Government and expropriated the refinery complex and oil fields of IPC, owned 99.99 per cent by Standard Oil Company (New Jersey). On July 25, 1969, title was assigned to the state oil firm, Petroleos del Peru (Petroperu). Peru claimed that the Government has always owned title to IPC's oil field, a claim IPC rejects. Valuing IPC's oil production since 1924 at a price based on the East

Texas Field price, Peru claims IPC owes the Government $690 million. Peru offered to oav IPC $71 million if "debts owed Peru" were paid. Efforts at various levels to settle the dispute have been underway over an extended period but have not thus far been successful.

W.R. Grace & Company

In June 1969 the Peruvian Government, acting under the provisions of the Agrarian Reform Act, took over W.R. Grace and Company's Cartavio and Paramonga sugar estates, including sugar refineries. Grace was offered compensation in the amount of $10,148,000, of which $67,000 would be in cash and the balance in 20 and 25-year nontransferable bonds carrying 6 and 5 per cent interest respectively.

Grace values the expropriated properties at about $26 million. The difference arises from the absence of any valuation for standing cane and roots by the Peruvian Government, from the increased indemnity for the liabilities of W.R. Grace (mainly associated with separation of W.R. Grace employees stemming from the expropriation), and from differing evaluations of machinery values, receivables,and inventories.

On March 3, 1971, the Peruvian Government appointed a commission to deal with the proposed sale of Grace industrial properties in Peru and, as a practical matter, with compensation questions. The Commission was given 120 days to complete its work and was to report by July 1, 1971.

Both estates are now in the hands of private cooperatives comprised of former workers.

AFRICA

Settled

Algeria

Following independence in 1962, Algeria nationalized or otherwise intervened in numerous foreign firms and properties. From 1967 to 1970 nine settled cases involving American petroleum or related firms are known to the Department of State, although they were not necessarily the subject of official claims. A summary listing follows:

Petroleum and Related Firms (US)

Description

Atlas and Magcobar, two Dresser subsidiaries that were oil field service companies, placed under custodianship.

El Passo Natural Gas assets placed under custodianship* but El Paso apparently remains in control.

Disposition

Custodianship ended when new joint venture ALDIA?formed by Dresser and S0NATRACH (state company).

On June 23, 1969, and subsequently, agreements for new projects concluded.

Legal Basis

Custodianship June 1967

Custodianship June 1967

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Description Disposition Legal Basis

Getty Oil Co. operations placed under custodianship, still operational.

Mobil Oil Co. refining, pipe line>and distribution system nationalized. Other holdings placed under custodianship, then announced as "nationalized/1

Phillips Petroleum and subsidiary Drilling Specialities Co., placed under custodianship and taken over.

Agreement signed October 19, 1968k

Agreement reached regarding compensation November 22, 1970.

Reported subsequently as settled.

Custodianship June 1967

Ordinance 67 166 August 24, 1967 Custodianship June 1967

Custodianship June 1967 Ordinance 70-46 June 12, 1970

Sinclair concessions revoked for alleged breach of concession agreement by merging with Atlantic Richfield without Algerian consent.

Standard Oil Co. (New Jersey Marketing and distribution system and share of a refinery nationalized.

Compagnie Francaise des Prospection Seismiques (Seismograph Services Corp., Tulsa) placed under custodianship.

Settlement announced November 3, 1970.

Settlement announced April 17, 1971.

Still operational.

Decree 69-50 April 25, 1969

Ordinance 67-164 August 24, 1967

Custodianship June 1967

Current

Algeria

Compagnie Francaise des Petroles (French) Enterprises de Recnerches duplications Petrolieres (French)

On February 24, 1971, Algeria nationalized most French natural gas and oil interests by increasing the Government's minority or partial ownership of oil, gas,and pipeline companies to majority or complete owner ship. Algeria took 51 to 57 per cent ownership of 9 oil companies and 100 per cent control of five natural gas and pipeline companies, but seems to have retained unchanged its holdings in five oil, refinery,or gas liquification companies, where Algerian Government holdings range from none to 80 per cent. The action came after an impasse in lengthy negotiations involving a wide range of French-Algerian relationships and seems to have ended the special relationship between the two countries. On June 30, 1971,

100

a comprehensive agreement between the Algerian Government and Compagnie Francaise des Petroles (CFP), the second-largest company affected, was announced. It provides for compensation payments of remaining CFP assets through 1978 and the possibility of an Algerian takeover in 1975 if the two parties fail to agree on renewing portions of the agreement. It was also announced that the major company affected, Entreprise de Recherches duplications Petrolieres (ERAP), will open compensation talks with

Algeria July 19. The French Government holds a majority interest in ERAP and a minority interest in CFP.

Detersav-Algerie

Detersav-Algerie's detergent plant operations were nationalized on September 7, 1967. Assets were valued at $2.1 million. This company was a branch of Proctor and Gamble's French subsidiary,and the French Government is believed to have acted on its behalf. No claim has been submitted through the US Government.

Private Claims

Twelve private claims, valued at $4.5 million, dating from govern ment actions in 1963 and 1964, were submitted officially by the US Government during 1965-66. Settlements have not yet been achieved.

Congo (Brazzaville)

Societe Industrielle et Agricole du Nairi (SIAN) Socifetfe Sucriere du Niari (SOSUNIARlT

In 1970 the Government of Congo (Brazzaville) nationalized two companies to avert the loss of a major part of the sugar cane harvest and to maintain the production of sugar in the Congo. The companies had become embroiled in wage disputes with company workers and the directors had planned to cease operations in September 1970. SIAN was 100 per cent owned by Grand Moulins de Paris,and SOSUNIARI ownership was divided between Grand Moulins de Paris,with a 60 per cent share, and the Congo Government with a 38 per cent share.

These enterprises operated two sugar factories in Jacob and engaged in oil milling, transportation, and other activities elsewhere in the Congo. The two companies constituted a complex employing 7,000 workers earning about $30 million per year. Their exports generated about $20 million in foreign currency and about $5 million in taxes annually.

The Government of Congo is now operating the former properties of the two companies. No settlement has been made.

Congo (Kinshasa)

Settled Union Miniere du Haut Katanga (mainly Belgian-owned)

La Generale Congolaise des Mines (GECOMINES), a state-owned firm, holds the former concession and facilities of the Union Miniere du Haut Katanga (UMHK), an affiliate of Societe Generale de Belgigue, a Belgian concern. Before nationalization at the end of 1966, the Government of

101

the Democratic Republic of the Congo owned a 24 per cent voting and an 18 per cent equity interest in UMHK. An arrangement to reopen the mines in February 1967 after nationalization was facilitated by the good officeb of the Belgian Government and those of the United States. It provided for a management contract^by Societe Generale des Minerais (SGM), also an affiliate of the Societe" Generale. Counter-claims clouded prospects of resolving compensation, which was left open for further negotiation while operations were resumed. Before the settlement, the Government sought new foreign capital to take a 40 per cent equity interest in the property, but prospective investors were deterred by the probability of legal entanglements with UMHK, principally over marketing arrangements abroad.

Differences between the company and the Government were finally settled in 1969, with the help of the IBRD, in the hope that new foreign investment would thereby be facilitated. SGM will continue to manage the property under a 25-year contract, receiving a payment of a commission of 6 per cent of sales less marketing expenses for the first 15 years and 1 per cent thereafter. UMHK will eventually realize compensation of approximately $500 million to be paid out of the fees accruing to SGM. (Exports of Congolese copper have been valued at about $400 million annually during the past few years.)

Two foreign groups have invested in Congolese copper since nationali zation of UMHK. Both groups were granted concessions in Katanga Province in areas that were carved out of the old UMHK reserves.

Societe' de Developpement Industrie! et Minier du Congo (Sodimico) is 85 per cent owned by the Japanese firm, Nippon Mining Company, through its Congolese subsidiary, CODEMICO, and 15 per cent by the Congolese Government. Japanese exploration of the concession preceded the seizure by the Congolese of UMHK assets. Production is scheduled to begin at the company's Musoshi mine in southern Katanga in October 1972.

An international copper consortium, in which two US companies have about a one-third interest, is developing properties in Tenke and Fungurume. The consortium companies are Soci?t? Internationale des Mines du Congo (SIMICO) and Soci?t4 Congolaise de Tenke-Fungurume (SOCOTEF).

Pahomey Settled

Port Services

On May 1, 1969,the Council of Ministers of the Government of Dahomey decreed the nationalization of all stevedore and dock services at the Port of Cotonou. Four French companies were affected by the nationalization action: Soci?t? Commerciales des Ports de L'Afrique (SOCOPAO)i Societe Ouest Africaine d'Enterprise Maritime (SOAEM); Delmas; and Transcap. The companies derived 60 million CFA monthly from the operations.

Although the companies were unhappy with the Dahomey Government action, they had no choice other than to comply.

The French Ambassador took up compensation with the Dahomey Govern ment,and the latter agreed to reimburse the French companies 26 million

102 CFA for port equipment; only a relatively small sum remained to be disbursed as of September 1969.

The Dahomey Government has reorganized the entire port operation into a central office responsible directly to the Ministries of Public Works and Finance.

Guinea Settled

Bauxites du Midi (French; parent company Canadian)

Bauxites du Midi (Bamidi), a French subsidiary of Alcan, a Canadian firm with substantial US ownership, was taken over by the Government of Guinea in 1961. This action was taken because the company could not fulfill requirements of its contract. Subsequently, the Government tried to maintain mining and exporting of bauxite but, even with technical assistance from Hungary, was not able to do more than make a few shipments from the nearly exhausted Kassa Island deposit to Eastern European countries. Bamidi's former concession at the large Boke deposit remained undeveloped.

In 1962-63 the Boke' concession was turned over to a joint enterprise, Cie. des Bauxites de Guinee', 51 per cent owned by Halco (Mining) Inc.? a subsidiary of Harvey Aluminum, a US firm?and 49 per cent by the Government of Guinea. In 1968 Halco divided its 51 per cent share among a consortium of Western firms. Harvey retained a 20 per cent interest in Halco: other participating firms are Alcan and Alcoa, each with 27 per cent; P6chiney-Ugine, 10 per cent; Kuhlman Vereinigte Alu minum-Werke A.G., 10 per cent; and Montecatini Edison S.A., 6 per cent. Thus, although a new firm will be managing the expanded operations, the former owner is represented in the new firm, with about 14 per cent (51x27) ownership; as a part of the consortium agreement, Alcan was reimbursed for its original investment of several million dollars.

Settled and Current

The Guinean assets of a number of French enterprises were nationalized during the period 1960-62. Compensation was promised in certain cases, and unsettled claims constitute an important element in the financial negotiations currently underway between Guinea and France. Among the enterprises nationalized were several bank branches, privately-owned water and electric power companies, a maritime traffic and harbor lighterage company,and two French credit and insurance companies. Values of the assets nationalized are unknown.

Kenya

While some other countries are pursuing a publicized policy of nationalization of industrial and commercial enterprises, the Government of Kenya has quietly embarked on a variant policy intended to provide it with meaningful economic leverage. At the same time the Government is continuing its efforts to obtain increasing amounts of foreign capital to support growth for its mixed economy. Beginning in June 1970 the Govern ment of Kenya began to acquire significant holdings in a number of existing major firms and industries. The Kenyan program has been marked by a number of characteristics: (1) Government involvement of less than 100 per cent, (2) management contracts with existing management,

103

(3) negotiations private and confidential and public announcement delayed until negotiations are completed; (4) Government involvement reserved for selected industries and implemented one at a time; and (5) the Government program implemented without reference to an ideological framework. In fact, it was not until March of 1971 that any Government spokesman publicly referred to the fact that a program of this type existed. At that time, the Kenyan Minister for Finance and Economic Planning mentioned in the course of a public speech that there had been comment about the Government's acquiring interest in several important in dustries and that these actions did not represent a new policy, but were merely an implementation of the Government's long standing "basic objective" to "establish a direct involvement in the strategic industries."

So far, the Government has worked out a relationship with the country's major banks which provides for competition between four major institutions, three of which now have substantial Government involvement. In another major industry, electric power, the Government purchased sufficient shares on the London Stock Exchange to give it a majority holding. In a third area, petroleum refining, the Govern ment negotiated a purchase of 50 per cent of the stock holding from the owners, a consortium of the petroleum companies in business in Kenya.

American involvement in these developments has been minimal; Chase Manhattan, Bank of America, and First National City Bank of New York have minority interests in the three British banks affected by the GOK arrangements, and Esso, Mobil, and Caltex oil companies are

participants in the petroleum refinery consortium. American investors are obviously not concerned by the Government program, as they continue to make new investments in the country. US private investment in Kenya now totals about US $80 million and involves close to 80 different firms.

Libya

Current

Bank of America and Morgan Guaranty

On December 22, 1970, Libya nationalized foreign-held shares in Libyan Banks, including Bank of America's 29 per cent share in the Sahara Bank and Morgan Guaranty's 10 per cent share in the Bank of North Africa. Compensation was to be paid for the value of the compensated shares but has not yet been awarded.

Libyan Engineering and Construction Company

Libya confiscated the properties of a former Prime Minister on March 23, 1971, which included Libyan Engineering and Construction Company, 49 per cent owned by Brown and Root Company. Libya stipulated that foreign shareholders would be compensated,but the exact status of

compensation is unknown.

Chappagua Oil Company

In November 1969 Libya revoked a joint venture agreement between the Libyan Petroleum Company and the American-owned Chappaqua Oil

104

Corporation. On May 3, 1970, Chappaqua filed an appeal to the Libyan Supreme Court over the revocation. A full hearing is due sometime in 1971.

Gulf Oil

In mid-1970 Gulf Oil Company relinquished its exploration con cession after a dispute over rentals. Libya sequestered property valued at $350,000 by Gulf. No further action is known.

Sahara Insurance Company

On December 22, 1970, the Libyan Government nationalized all insurance companies. The Sahara Insurance Company has a 25 per cent US interest. The Government will presumably purchase shares held by foreigners. Value of the US interest is unknown.

Standard Oil of New Jersey (Esso)

In July 1970 Libya nationalized foreign-owned petroleum import and distribution facilities. The only American property taken is valued by Esso at about $17 million and consists of 100 Jersey Standard service stations and some port facilities. Libya appointed a three-man commission to decide on compensation,but the case is not yet settled.

Church of God,Seventh Day Adventists

Property of two US-based religious groups, the Church of God and the Seventh Day Adventists, has been taken by the Libyan Government. The Department of State has facilitated discussions between the Government representatives and these groups concerning settlement of their claims. Settlements are imminent.

Malawi Settled

Watch Tower Society

In January 1968 the Government of Malawi declared the various properties of Jehovah Witnesses1 leader M.J. Vigo and of the Watch Tower Society subject to forfeiture in accordance with section 2 of the Forfeiture Act. The Watch Tower Society apparently did not take any steps to protect property rights prior to seizure,and it refused to dispose of its property in manner earlier prescribed by the GOM.

The American Embassy conferred with the Malawi Government regarding means for determining fair market value and cited urgency of arriving at equitable settlement. Full compensation for assets was paid by the Malawi Government.

Sierra Leone

In December 1969 the Prime Minister announced that the Government intended to enter into a full, just,and freely negotiated partnership agreement with each of the mining companies operating within its borders. The Government hoped to achieve an example of government-business cooperation which would assure economic justice to all the people and a healthy climate to prospective investors, avoiding both foreign domination and domestic confiscation through mutual agreement on fair participation.

105

Settled

Sierra Leone Selection Trust (mainly British)

On September 4, 1970, an agreement was signed by the Government and by Sierra Leone Selection Trust Limited (SLST) providing for the acquisition by the Government of a majority interest in SLST's diamond mining operations in Sierra Leone. The agreement was ratified by the legislature in December 1970. Under the terms of the agreement, a new company has been formed, the National Diamond Mining Company (Sierra Leone) Limited, which is 51 per cent owned by the Government and 49 per cent by SLST. The new company has a share capital of Leones 10 million (t5 million). The Government is paying for its proportion of the fixed assets of the business by issuing negotiable sterling bonds totaling Leones 5.1 million (k2.55 million). The principal is being repaid in 16 equal semiannual installments between June 30, 1971,and December 31 , 1978, and the bonds carry interest at a rate equivalent to 5 1/2 per cent after payment of Sierra Leone tax. The Government paid for its share of the net current assets in cash. The joint company will pay Sierra Leone taxes on its profits at a rate of 70 per cent.

The Board of the new company has 11 directors of whom six, including the Chairman, are appointed by the Government and the other five by SLST. The Constitution of the joint company, as well as the agreement, contains safeguards for the protection of SLST as minority shareholders.

Somalia Current

Caltex

The Somali Government nationalized Caltex on May 17, 1970. The company has a small investment in stations and equipment which it is attempting to sell to a local franchise rather than claim compensation. The only remaining assets for which Caltex is requesting cash payment are $423,000 in inventory.

Fearn International Inc.

Fearn International Inc., whose parent organization in the United States is the Kellogg Company of Battle Creek, Michigan, and whose operation in Somalia went under the name of Prodma, has filed an expropriation claim with the Overseas Private Investment Corporation (0PIC). By letter of January 13, 1971, Fearn filed the claim under guaranty contracts covering (1) a debt and equity investment in Prodma for the construction of a facility at Chisimaio, Somalia, for the processing, freezing>and selling of shell fish, and (2) a debt investment in Prodma for the construction and operation at Chisimaio of a petroleum products depot. The project was closed down in August 1970. The case is now under investigation by 0PIC which has suggested the company try to recommence operations in Somalia.

First National City Bank and Other Nationalizations

By Law No. 26 of May 1970 the Government of the Somali Democratic Republic ordered the nationalization of the Italian-Somali Electric Company and of the commercial banks (branches of Banco di

Napoli, Banco di Roma, Banco di Porto Said,and National and Grindlays Bank). First National City Bank holds 40 per cent share interest in National and Grindlays, the other banks and business companies are owned by Italian

106

citizens. National and Grindlays Bank held three small branches in Somalia of unknown value.

The Embassy took up the nationalization of National and Grindlays Bank with the Government of Somalia and urged fair compensation for the properties taken over under the nationalization decree. It is expected that the Government will arrive at an equitable settlement with the Bank.

Sudan Settled

Sterling Drug Company

Sterling Drug assets were nationalized in June 1970 but were

subsequently "denationalized." Sterling Drug is reported to be seeking a joint venture with local Government-owned drug firms.

Current

American Life Insurance Company Barclays Bank Hartford Fire Insurance Co. National and Grind!ays Bank

In 1970 the Sudanese Government ordered all foreign-owned insurance companies to cease writing new business as of May 25, 1970, but required that they service existing policies until transfer to one large Govern ment-owned insurance company. During May-June 1970, the Government also nationalized all banks. US banking interests affected included First National City Bank's 40 per cent interest in National and Grindlays and Bank of America's 3 per cent interest in Barclays Bank. Amount of compensation due the banks arid insurance companies is to be determined by Sudanese Government committees. The form of compensation offered is 15-year Sudanese Government bonds, redeemable 10 years from date of issuance.

National Cash Register (NCR)

In June 1970 NCR's sales and service agency in Khartoum with assets of approximately $500,000 was nationalized. No compensation has yet been offered,although a Government committee set up to consider the case had been instructed to submit its report by the end of May 1971. However, no further report of progress has been received. The US Government has not been approached to offer assistance in any of the current cases.

Tanzania Settled

American Life Insurance Company and Other Insurance Companies

The Insurance (Vesting of Interest and Regulations) Act of 1967 provided for the compulsory acquisition of foreign-held shares by the National Insurance Corporation. American Life Insurance Company of

Wilmington, Delaware, was the only American firm affected. The company considered, but then dropped, a plan to sue for loss of future business. Compensation was not an issue. Foreign shareholders?Munich Reinsurance (Germany), Eagle Star (UK), Mercantile and General Insurance (UK), Provincial Insurance (UK), Guarantee and General Insurance (India), New

107

India (India), and Jubilee Insurance (Kenya)?reached an amicable agreement with the Tanzanian Government which provided for the payment of just over $170,000 in 1967 and 1968 installments.

Bank Nationalizations

The National Bank of Commerce Act of 1967 established the National Bank of Commerce as the sole commercial bank in Tanzania and acquired 100 per cent of the Tanzanian assets and liabilities of the country's nine commercial banks. American banks held minority interests in the parent companies of three of the larger banks acquired under the act: National and Grindlays Bank Ltd. (40 per cent owned by First National City Bank of New York); Standard Bank (14 per cent owned by Chase Manhattan); and Barclays Bank (3 per cent owned by Bank of America). Compensation was subsequently agreed to in all three cases.

Private Claim

Acting under the provisions of the Land Acquisition Act of 1967 the Tanzanian Government seized a farm of some 6,700 acres owned by a resi dent American citizen and known as the Missouri Plantation. The owner

protested the seizure and with the help of the American Embassy negotiated a satisfactory settlement. Compensation by the Tanzanian Government will total $628,850 to be paid in installments through 1972. The plantation has been subdivided and is now being worked by a number of African farmers.

Current Bata Shoe Company (Canadian]"

On January 25, 1971, the Tanzanian Parliament passed bills which authorized the Government to acquire full control of two local firms and to complete the nationalization of the former Bata Shoe Company (Canadian). Sixty per cent of the stock of the former Bata Shoe Company was acquired by the Government during earlier nationalizations. The parent Bata Shoe Corporation after extensive negotiations refused to recognize the Government's actions in this takeover. The Government has been holding the 40 per cent of the local firm's stock which in theory belongs to the parent corporation in a sort of escrow account since 1967. The new bill now allows the Government to absorb this latter block of stock. Compensation terms apparently remain those offered to the parent firm in 1967, i.e., full and fair.

Sisal Estates

Under the terms of the Tanzania Sisal Corporation (Establishment and Vesting of Interest) Act of 1967 the Tanzanian Government nationalized six larje groups of sisal estates and took majority interest in 33 other groups (European ownership). Settlement has been delayed by lack of agreement on a costing formula for sisal estate investments. Apparently most of the acquired estates were losing money at the time of nationalization and did not resist takeover. No American firms were involved in this expropriation. The seized estates are currently being operated by the Tanzania Sisal Corporation, a parastatal organization of the Tanzanian Government.

108 Nationalization of Buildings

On April 22, 1971, Tanzania enacted the Acquisition of Buildings Act, which in effect nationalizes all rental property not wholly owner occupied and valued at more than $14,000. No compensation is to be paid on buildings over ten years of age, and payments will be made on a declining scale according to age on buildings erected in the last ten years. Primary impact of the bill will be upon the Asian property-owning classes. Thus far American-owned property affected includes two Caltex buildings, a building owned by Singer Sewing Machine of Kenya (a wholly owned subsidiary of Singer, U.S.), and the private residence of a U.S. citizen. The latter takeover is presumably an error, as the American owner resides in the home herself. Both Caltex and Singer have engaged lawyers and are negotiating with the government over their properties.

Tunisia Settled and Current

Agricultural Property

By Law 64-5 of May 12, 1964,the Tunisian Government expropriated all agricultural property held in Tunisia by foreigners and provided that compensation be determined by the Government. Insofar as is known, the property holders have not challenged the expropriation actions of the Government.

All but one of the several properties of US citizens affected involved claims of relatively minor value. Some have been settled; others are still pending. For the one sizable claim, the Tunisian Government has offered Dl50,000 ($78,750). The claim is being pursued by the UK Embassy as the claimant is married to a UK national. No request has been made for US Government assistance.

Uganda

On May 1, 1970, President Obote of Uganda announced his government's decision to acquire 60 per cent ownership of all commercial banks and the mcst important private companies in manufacturing, mining, plantation agriculture, and transportation. By the time of the military coup d'etat of January 25, 1971,many of the 24 foreign-owned companies affected had reached agreement, at least in principle, on partnership with the Government. Ongoing negotiations to conclude the remaining agreements have been stalled since the military takeover, as there were Indications that the new regime was reconsidering these proposed measures. On May 1, 1971,President Amin announced that his Government was now interested in obtaining only minority share (49 per cent) participation in those firms with which agreements had not been reached and would consider renegotiating the 60/40 and other arrangements already signed. Presumably the foreign firms concerned will now reconsider their positions,and final implemen tation of the Government's nationalization program, as redefined by General Amin, will be pursued.

American companies affected by Uganda's nationalization policy are as follows:

African Ceramics Company

Interkiln Engineering, Inc., a Houston-based firm, holds a 17 per cent share in a local firm, African Ceramics Company. The Government is

109

increasing its equity interest in African Ceramics from 55 per cent to 60 per cent.

American Life Insurance Company

This was the first foreign-owned firm to reach an agreement with the Ugandan Government. A new joint company, Uganda-American Insurance, Ltd., was formed on a 60/40 basis with management held by American Life. However, determination of the value of the company's assets, and therefore the amount owed by the Government for its 60 per cent share>has not yet been made.

Bank of America

Bank of America has a 3 per cent interest in the nationalized Barclays Bank.

Chase Manhattan

Chase Manhattan has a 14 per cent interest in the nationalized Standard Bank.

First National City Bank of New York

First National City Bank of New York has a 40 per cent interest in the nationalized Grindlays Bank.

Caltex

Negotiations for a 50/50 share relationship are still continuing concerning Caltex1s petroleum distribution organization in Uganda.

Mobil

This company has not yet accepted the proposed nationalization scheme. It is the smallest oil company in Uganda.

Standard Oil of New Jersey (Esso)

At the time of the coup, Esso was still negotiating a 50 per cent Government of Uganda interest in its local marketing operation. No further information has been received.

Other Nationalizations

Foreign-owned companies nationalized include:

Company Nationality Type of Business

Agip Italy

Bank of Baroda, Ltd. India

Bank of India, Ltd. India

Bata Shoe Canada

British American Tobacco UK

Petroleum

Banking

Banking

Footwear

Tobacco

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Brooke-Bond Uganda, Ltd.

Kilembe Mining

Shell-BP

Total

Uganda Breweries, Ltd.

Uganda Company

Unknown

Canada

UK/Netherlands

France

Kenya

UK

Tea and coffee

Copper

Petroleum

Petroleum

Beer

Cotton

Zambia Settled

Roan Selection Trust Ltd. (RST)

Until nationalized on January 1, 1970, RST was one of Zambia's two large foreign-owned copper holding companies. The company was approxi mately 80 per cent American-owned at the time of takeover, with a US firm, American Metal Climax, Inc. (AMAX), holding the plurality interest, 42.3 per cent. The negotiated book value ($117.8 million) of the Zambian Government's acquisition of a 51 per cent equity in the reorganized company was considerably less than RST had proposed, but related concessions made settlement possible. The Government agreed not to raise taxes of the new company for 8 to 12 years. RST also obtained 10-year sales and management contracts. As sales compensation RST receives 3/4 per cent of turnover, and for management services another 3/4 per cent of turnover plus 2 per cent of gross profits after payment of the mineral tax, but before income tax. Compensation is made in negotiable dollar bonds, backed by the Zambian Government, that are being retired through 16 semi-annual payments of $9.52 million. Provision is also nade for accelerated payments when the price of copper exceeds about 57 cents per pound.

The Government's 51 per cent share in the mining company, renamed the Roan Consolidated Mines Ltd. (RCM), is held and administered by a new

holding company, the Mining Development Corporation Ltd. (MINDECO), a subsidiary of the Zambia Industrial and Mining Corporation Ltd. (ZIMCO). RST was reorganized as RST International, a wholly owned subsidiary of AMAX, and holds a 20 per cent share in RCM. Private shareholders, largely American, hold a 16.75 per cent share in RCMjand an affiliate of the Anglo American Corporation of South Africa holds the remaining 12.25 per cent minority interest. RCM owns and operates the Mufulira, Luanshya, Chilbuluma, Chambishi, and Kalengwa mines,as well as the Ndola Copper Refinery.

Zambian Anglo American (Zamanglo): (mainly Republic of South Africa)

This firm, prior to nationalization in 1969, was one of the two large copper holding companies operating in Zambia. Its equity was held primarily by nationals of the Republic of South Africa. Zamanglo is to receive compensation totaling about $175 million under an arrangement similar to that reached with Roan Selection Trust, viz., acquisition by the Government of 51 per cent of the assets with a payout over 12 years in negotiable bonds carrying 6 per cent interest. The bonds, guaranteed by the Government, have been issued by the Zambia

Ill

Industrial and Mining Corporation, Ltd, (ZIMCO), of which MINDECO is a wholly-owned subsidiary. They will be retired by half-yearly payments of $10.3 million. Provision is also made for accelerated payments when the price of copper exceeds about 57 cents per lb. Zamanglo also received 10-year management and sales contracts. The Government has agreed not to raise taxes of the new company for 8 to 12 years.

The new company, Nchanga Consolidated Copper Mines, Ltd. (NCCM), will own and operate the Nchanga, Rhokana, Bancroft, Bwana Mkubwa, and

Nampundwe mines,as well as the Rhokana Copper Refinery. The Anglo American Corporation, through Zamanglo Ltd. (Bermuda) and Zambia Copper Investments Ltd. (Bermuda),will hold 49 per cent of NCCM, as well as 12 per cent in the other new concern, Roan Consolidated Mines Ltd.

Bank of America Chase Manhattan Continental Illinois National Bank First National City Bank of New York

The Zambian Government announced in November 1970 its plans to acquire 51 per cent interest in the country's five private banks. The following American banks have minority interests in four of the nationalized banks: First National City Bank of New York (40 per cent in National and Grind!aysJI Chase Manhattan (14 per cent worldwide in Standard Bank, Ltd.), Continental Illinois National Bank ($250,000 in Commercial Bank of Zambia), and Bank of America (indirect interest in Merchant Bank of Zambia through Societe' Financi&fe pour les Pays d'Outre-Mer). The Zambian Government is presently involved in negotiating a settlement with the banks and is expected to provide compensation for any assets taken over. Negotiations have recently been suspended.*

A fifth foreign-owned bank, Barclays (UK) was also affected by the nationalization action (Bank of America owns 3 per cent).

Insurance Companies

President Kaunda also announced that he was "closing down" the

private insurance companies, leaving the State Insurance Company the sole underwriter in Zambia. Existing private insurance companies, which are virtually all subsidiaries of British firms, have not been permitted to write new policies since January 1, 1971, and will not be permitted to renew existing policies after December 1971.

Other Apparently a number of foreign-controlled companies will be compelled

to offer at least 51 per cent participation to the State Industrial

Corporation (INDEC0). The firms are: Lever Brothers Limited; Refined Oil Products; National Milling Company Ltd; Supra Bakeries, Ltd; Duncan, Gilbey and Matheson Ltd; and Central Ciqarette Manufacturing, Ltd.

(British American Tobacco and Rothman's).

* The Zambian Government announced on July 27 that it had rescinded its plan to nationalize all the country's private banks. According to the announcement, the Government would enter into partnership only with the Commercial Bank of Zambia, would require all other banks wishing to operate in Zambia to incorporate there, and would transfer all bank business from the Merchant Bank of Zambia to other private banks.

112 EUROPE

France Current

Private Claim

The United States Government has espoused the Arragon claim against France. The claim arises from the nationalization after World War II of eight gas and electric utility companies in which Alan V. Arragon owned substantial interests valued at $8.7 million plus interest. There are extremely complex valuation problems. Formal discussions between the Department of State and the French Ministry of Foreign Affairs began in November 1970.

NEAR EAST

Iraq Settled

American Life Insurance Company

In July 1964 the Iraqi Government compelledthe American Life Insurance Co., a subsidiary of a US company, to transfer its portfolio of policies to a government-owned insurance company. American Life, however, is understood to have reached a settlement with the Government involving the recovery of funds due the firm. The Value of the assets affected is unknown.

Banks

Several British and Lebanese banks were also affected by the 1964 Iraqi nationalizations. No information is available about the value of the assets taken over by the Iraqi Government.

Current American Eastern Tankers Basra Slipway Everett Shipping Company

American Eastern Tankers supplied tankers that took off some Iraqi oil. The two other companies were associated with the date trade. They were all nationalized sometime after the February 1963 Baath takeover of the Iraqi Government.

Frequent representations were made to the Government of Iraq from 1963 to 1967 about outstanding claims, but Governments succeeded each other so rapidly after 1963 that no Government felt secure enough?or, indeed, well enough acquainted with the circumstances?to make a decision in the matter. The US Government has had no direct represen tation in Baghdad since the 1967 Arab-Israeli war when Iraq broke off relations with the United States.

Iraq Petroleum Company (IPC): (mainly British-owned)

On December 12, 1961, the Qasim Government terminated two years of negotiations and reduced Iraq's concession agreement with IPC and two subsidiaries from 168,000 square miles to 748 square miles. IPC has never accepted this action,although in the negotiations it had already agreed to relinquish 90 per cent of its concession area in stages. The

113

former concession area covered virtually the entire country. Standard Oil of New Jersey and Socony Mobil together own 23.75 per cent of IPC, which is mainly British-owned.

Although the company retained all of its oil-producing areas, it states a small portion of the area lost, most of which had not been prospected, included some proved oil reserves and a few capped oil wells in the North Rumaila Field. In 1964 Iraq assigned the former IPC concession area to the Government-owned Iraq National Oil Company (INOC).

Although it is prepared to negotiate with the IPC, the Government has refused to consider rescinding the original law which reduced the company's concession area.

Israel Current

Private Claims

Although unsuccessful to date, the Department of State continues to provide good offices on behalf of several United States nationals whose property has been taken or destroyed in Israeli-occupied territory in or since 1967.

United Arab Republic

In 1961 the UAR enacted a sweeping series of nationalization laws. The laws covered almost all financial and industrial sectors of the economy and were directed against both Egyptian and foreign-owned firms, which were either fully nationalized or obliged to admit the UAR Government to 50 per cent ownership. The most important of these laws were: Law No. 117 of 1961, which nationalized all banks and insurance companies as well as 42 large industrial, transport, commercial, financial and land reclamation companies; and Law No. 118 of 1961 which decreed the partial nationalization of 82 firms. These enterprises were to be converted into Arab joint-stock companies, at least 50 per cent of the shares of which were to be owned by a public organization. Law No. 119 of 1961 prohibited any person or corporate entity from owning shares in 148 companies with a market value of more than LE 10,000 ($23,000). Law No. 72 of 1963 fully nationalized 222 companies, some of which had been subject previously to Laws Nos. 118 and 119 of 1961. Law No. 150 of 1964 released from public custody property of natural persons that was sequestrated since 1956 under previous measures, and transferred ownership of the property to the state. In general, compensation was paid *n 15-year 4 per cent Government bonds.

Further land reform measures were passed in the 1960's, following on the land reform measure of 1952, the first act of the new Egyptian Government. The latter measures further restricted (Law 27 of 1961) and finally prohibited (Law 15 of 1963) land ownership by foreigners in the UAR. In general, compensation was paid in 15-year 4 per cent Government bonds.

114 Settled and Current

US Losses Through Nationalizations

The State Department is reviewing possible procedures for the presentation of claims for the nationalizations of US agricultural and business properties. The Department is aware of 33 uncompensated claims of probable validity under international law held by US nationals against the UAR as a result of the various Egyptian nationalization decrees. The total amount claimed by the persons whose interests were affected is approximately $3.75 million. Negotiations for settlement of these claims, which were being carried out on a case-by-case basis, have been suspended since the rupture of diplomatic relations in 1967.

European Losses Through Nationalizations

The major losers in the Egyptian nationalizations were Egyptian and European (many of them Egyptian resident) entrepreneurs. It has been estimated that the major losers were nationals of Greece ($20 million), Switzerland ($10 million), and Italy and the Netherlands ($5 million). The major foreign firm nationalized at the time was the Anglo-Egyptian Oilfields, in which $2 million was Dutch investment and $1.5 million British. The Department is not aware of the compensation arrangements that were worked out in this case. In most of these cases, compensation has generally been negotiated through bilateral repayments agreements negotiated between the Government of the UAR and the Governments of the European countries concerned. The UAR has been paying off these claims under the terms of the agreements.

The only substantial nationalization actions taken by the UAR against foreign interests since 1961 were nationalization of all remaining Belgian properties and of Shell Oil (both in approximately 1965). The Belgian claims have been negotiated and are currently being repaid; Shell negotiated a compensation agreement with the UAR in 1965 and has been receiving repayment.

Syria Current

Socony Mobil Oil Company; Standard Oil of New Jersey

On March 4, 1965,Syria nationalized the marketing facilities of the

Socony Mobil Oil Company. Syria reportedly offered compensation in 15-year, 3 per cent bonds^but to the best of the Department's knowledge the company did not accept and the case remains unsettled in the

company's view. Syria also nationalized Esso's small marketing facilities. Both companies, at last report, felt that Syria was not offering prompt or adequate compensation and were interested in the principle involved as well as the monetary loss.

People's Democratic Republic of Yemen

Current American Life Insurance Co. (Aden) Caltex Esso and Mobil

By a decree of November 27, 1969, the Government of Southern Yemen nationalized the Aden assets of three U.S. companies: (a) Caltex, (b) Esso and Mobil, and (c) American Life Insurance Company (Aden). No company, apparently, accepted the twenty-year state bonds offered at 2

per cent interest as compensation. The Department, in the absence of 115

diplomatic relations with the Government of Southern Yemen, requested the Embassy of Great Britain as our protecting power in Aden to reserve the position of the US Government on the question of compensation, This was done on November 29, 1969.

ASIA

Burma

Based on the scanty information available, it is estimated that the value of expropriated foreign investment, including

blocked accounts, totals about $100 million. Of this amount, about $70 million is believed to be United Kingdom property and blocked accounts; about $25 million the assets of Indian firms; and the remaining $5 million the assets of Pakistani, Swedish, Chinese (People's Republic), and other foreigners.

The Burmese Government acknowledges liability to compensate the owners of nationalized firms, but with few exceptions has not taken steps to settle the hundreds of outstanding claims. The notable exceptions are: (1) the compensation of $26 million paid to the Burma Oil Corporation, the largest single foreign investor in Burma; and (2) the compensation awarded to five of fourteen foreign banks totaling Kyat 1.4 million ($294,000 at the official rate of exchange). One of the foreign banks reportedly accepted its award, but three others (two British and one Indian) have appealed theirs.

Among other expropriated British firms, some twenty-five have joined together to form a compensation claims committee. This committee has submitted a joint claim to the Burmese Government for compensation of about L8 million ($.19 million). This, however, does not include UK blocked insurance account claims amounting to possibly another tlO million. India's claims cover four large firms and hundreds of small enterprises and shops. The British and Indian Embassies have made periodic represen tations to the Burmese Government to settle the outstanding claims, but with limited success.

Current US cases are outlined below.

Home Insurance Company

In 1964 the Burmese Government nationalized all insurance companies at the same time and blocked their local currency accounts. Home Insurance Company of New York held Burmese deposits (minus estimated liabilities) which it valued at about Kyat 221,000 (or approximately $46,000 at the official rate of exchange). At first Home tried through various representations to the Burmese Government to obtain the release of its accounts. However, Home is not now pressing its claim and is attempting to develop a reinsurance relationship with the Burmese Govern ment.

The American Embassy has provided advice to the Home Insurance Company and has made official inquiries on its behalf.

Burma International Inspection Company, Ltd.

Under Law No. 33 of October 19, 1963, the Enterprises Nationalization Law, the Burmese Government in 1963 nationalized the Burmese holdings of the International Inspection and Testing Corporation of Chicago and Tokyo (INTEC0). These constituted a 40 per cent share in the Burmese cargo-inspection joint venture, Burma International Inspection Company,

116

Ltd. INTECO is seeking compensation of about $421,000 for its invest ment in the joint venture, plus an additional amount for real and estimated dividends.

Since INTECO's office in Japan does a considerable amount of inspection work on behalf of the Burmese Government on Japanese cargoes destined for Burma, INTECO has limited its representations to the Burmese Government to periodic requests to the Burmese Nationalization Claims Committee for early settlement of its claim.

INTECO has not pressed its claim vigorously,nor has it asked the Embassy to intercede with the Burmese Government.

Ceylon Settled

Caltex Ceylon Ltd. Esso Standard Eastern

In April, May, and June of 1962, in the case which caused the only suspension of aid under the Hickenlooper Amendment, Ceylon nationalized by decree 83 service stations, distribution facilities,and related equip ment of Esso Standard Eastern, a subsidiary of Standard Oil Co. (New Jersey), and Caltex Ceylon Ltd., a subsidiary of California-Texas Oil Co. The companies originally evaluated their nationalized properties at $8 million, reportedly the fair market value, and the Government of Mrs. Bandaranaike evaluated the properties at $3.4 million, reportedly the original cost. On February 8, 1963, US aid to Ceylon was suspended.* After taking office in March 1965, the Government of Dudley Senanayake and the companies signed on June 22, 1965,a five-year compensation agreement under which each company was to receive $2.25 million.

Current Esso Standard Eastern

In Mav 1970 a Government led by Mr. Bandaranaike was again elected to office on a Socialist program. On December 29, 1970, the Government nationalized minor bunkering facilities of Esso Standard Eastern.

India Current

American Insurance Company Great American Insurance Company Hanover Insurance Company Hartford Fire Insurance Company Home Insurance Company New Hampshire Insurance Company

On May 13, 1971, the Indian Government announced that it would take over all general insurance firms, foreign and domestic. Among the 42 foreign firms affected are six American companies earning between $250,000 and $500,000 annually on premium income of about $4 to 5 million. Four of the concerns are members of the American and Foreign Insurance Associates Worldwide Insurance Group (American, Great American, Hartford and Home); and two are members of American International Underwriters (Hanover and New Hampshire). The Government has agreed to compensate * On January 1, 1964 virtually all internal petroleum marketing facilities were nationalized. The largest distributor, Royal Dutch Shell, lost about as many installations as the two US firms combined and received about $7 million.

all firms nationalized and has stated that foreign firms would be paid in repatriatable foreign currency. Four Government firms are to handle general insurance in order to provide some degree of competition.

India has seldom nationalized foreign business,and the takeover of

general insurance firms in 1971 is the first nationalization affecting US concerns. When India nationalized larger commercial banks in 1969, it

exempted all foreign banks.

Indonesia

During 1960-65, the last years of the Sukarno period, virtually all

foreign enterprises had been nationalized except for the petroleurti companies. Among the properties taken over by the Indonesian Government were plantations, processing plants, and factories. On January 1, 1966, the Shell Oil Company's assets were sold to the Indonesian Government through an agreement which involved a sales contract which the company found satisfactory.

After the assumption of power by President Suharto in 1966, Indonesian policy toward foreign investment was reversed, and on December 14, 1966, he issued an order to all Government departments requesting them to take appropriate measures to return the assets taken over in 1964-65. Further, under an Indonesian Government policy of encouraging foreign investment, foreign firms have since 1966 sought and received approval for new investments totaling $1.8 billion, with roughly one-third of the investments by American companies.

Important non-US companies whose assets were returned included Unilever, Bata, Harrisons and Crossfield, Fraser and Neave, British-American Tobacco, Dunlop Rubber Company, and Heineken. Most Dutch properties were not returned since Indonesian ownership of Dutch properties had been generally accepted. Several Dutch companies have reinvested in joint ventures with their nationalized former companies.

The American Embassy intervened both officially and informally in all cases involving the takeover of US assets. It was instrumental in the return of assets of the eight firms listed below and continues to

help in the three current situations.

Settled

American Foreign Insurance Association Goodyear Tire an3 Rubber Company (rubber estate and tire plant) International Flavors and Fragrances, Inc. Motion Picture Export Association of America, Inc. National Carbon Company (Java) Ltd. (Union Carbide) National Cash Register Company Singer Sewing Machine Company U.S. Rubber Company

- now Uniroyal (rubber estate)

Assets of the eight businesses listed above were taken over during 1964-65 and returned since 1966. The National Cash Register Company voluntarily chose to have its returned assets disposed of by its agent and to confine itself to sales, but the other seven firms listed aoove resumed and expanded their activities.

Current P.T. Baud

P.T. Baud was taken over in 1964 under a separate decree, because of

118 alleged internal squabbling and incompetence in the company. The Indonesian Government has expressed its willingness to return the company, which had two tea plantations and three rubber estates in Java. The case has been complicated, however, by lack of a definite decision on the part of the owners as to whether they wanted the estates back or compensation. Confusion has also arisen over differences between P.T. Baud, the Indonesian company, and Sea Oil and General Corporation of New York, the principal shareholder, as to who is in charge of the company. The Indonesian Government is presently awaiting a letter from Sea Oil and Central Corporation, promised in July 1970, permitting consideration of an amicable settlement in lieu of court adjudication. The estates are valued by Sea Oil at $6 million.

Manhattan Securities Company

Manhattan Securities Company is the owner of a small estate in West Java, valued at $750,000 by the firm, which was taken over in the early 1960's. In 1969 the Indonesian Government, in an effort to speed resolution of claims cases, established July 31, 1969, as the deadline for filing claims for compensation for property whose return was not desired. Manhattan Securities filed a request for compensation in accordance with these provisions, but on July 29, 1969, the company cabled the Minister of State for Economic, Financial, and Industrial Affairs requesting an extension of the July 31 deadline and the right to apply either for restoration or compensation at a later date.

Manhattan Securities does not appear as yet to have settled its claim, although its New York attorney, Alfred W. Green, has appointed a local attorney to deal with the Government.

N.V. Tamiang Cultuur Maatschappij

The land concession of the N.V. Tamiang Cultuur Maatschappij, an estate in North Sumatra owned in part by Dr. Bram B. Boonstra, who became an American citizen on September 28, 1959, was revoked in February 1962. Ostensible grounds for the revocation was "mismanagement although Dutch ownership of a portion of the company's shares appears to have been an element in the proceedings. Dutch property was being nationalized at the time. Dr. Boonstra is seeking compensation based on the value of the assets of the estate at the time of the seizure with 5 per cent interest per year added since that time. The Embassy has asked the Department of Foreign Affairs to investigate this case.

Khmer Republic (Cambodia)

Current Caltex, Esso, and Other Nationalizations

In late 1963 the Cambodian Government nationalized various functions such as export-import business and banking. Foreign and locally-owned firms were permitted to retain physical assets. In 1967 a law was passed nationalizing various industries including petroleum. However, American oil firms?Esso and Caltex? were given 12-year grace periods with the understanding that they would assist in the development of a new Cambodian oil distribution firm. In 1970 the nationalization act of 1967 was repealed. Constraint was thus lifted on the US oil companies. French and Chinese interests were the most strongly affected by the 1967 decree.