Chapter 9 STATE RESPONSIBILITY FOR INJURIES TO 81 Conditions and Procedural Aspects of Cuba Standard of Compensation Section 708 of the Departments of State, Justice, and Commerce, the Judiciary, and Related Agencies Appropriation Act, 1978, approved on August 2, 1977, contains the following prohibition on claims negotiations with Cuba at less than principal value: No part of any appropriation contained in this Act shall be used for the purpose of negotiating a settlement of United States claims against private property confiscated by the Cuban Government at less than the principal value, giving full consideration to the amounts certified by the United States Foreign Claims Settlement Commission on July 6, 1972. P.L. 95-86, § 708; 91 Stat. 444. Claims Against the German Democratic Republic Wayland D. McClellan, General Counsel of the U.S. Foreign Claims Settlement Commission, signed on May 11, 1977, a notice announcing a program for claims against the German Democratic Republic. The notice indicated that the Commission would receive claims against the German Democratic Republic as authorized by law from May 16, 1977, until May 16, 1978. On the same day, Mr. McClellan signed a notice of a rule of the Foreign Claims Settlement Commission prohibiting the total remuneration for attorney fees from exceeding ten per centum of the total amount paid on account of such claims. The text of the notice of program, which appeared in 42 Fed. Reg. 24770 (1977), is as follows: NOTICE OF TIME FOR FILING Notice is hereby given that pursuant to section 600, Title VI of the International Claims Settlement Act of 1949, as amended, the Foreign Claims Settlement Commission of the United States will receive at its principal office located at 1111 20th Street, N.W., Washington, D.C. 20579, during the period beginning on the publication of this notice, and ending May 16, 1978, claims against the German Democratic Republic, as authorized by Title VI of the International Claims Settlement Act of 1949, as amended by Pub. L. 94-542, approved October 18, 1976 (90 Stat. 2509), and in accordance with the Regulations of the Commission made with respect thereto. Title VI of the International Claims Settlement Act, as amended, provides for the determination of the validity and amounts of outstanding claims against the German Democratic Republic which arose out of the nationalization, expropriation, or other taking of (or special measures directed against) property interests of nationals of the United States, whether such losses occurred in the German Democratic Republic or East Berlin. Details concerning the filing and claim applications may be obtained by contacting the Office of the General Counsel, Foreign Claims Settlement Commission, Washington, D.C. 20579, 202/653-6166. The new regulation concerning attorney fees, published in 42 Fed. Reg. 24741 (1977), follows: § 500.3 Fees. (c) The total remuneration on account of services rendered or to be rendered to or on behalf of any claimant in connection with any claim falling within Title I, Title IV, or Title VI of the International Claims Settlement Act shall not exceed ten per centum of the total amount paid on account of such claim. Exhaustion of Local Remedies On November 11, 1977, Robert Rosenstock, U.S. Representative in the Sixth Committee (Legal) at the United Nations, described in his statement concerning the Report of the International Law Commission on the Work of Its Twenty-Ninth Session, when under customary international law a state expropriating the property of an alien is obliged to pay just compensation and when an international wrong will arise as to which the government of the alien's state may make an international claim. Mr. Rosenstock's comments arose in the context of his discussion of article 22, entitled "Exhaustion of local remedies," of the Commission's proposed draft convention on State Responsibility. Mr. Rosenstock expressed some reservation to the possibility that in the further drafting of article 22 a "substantive” approach to the calculation of damages as of the exhaustion of local remedies might result in the accrual of interest not from time of injury but at the time of exhaustion. Set forth below is article 22, entitled "Exhaustion of local remedies," as adopted by the Commission during its twenty-ninth session of May 9 through July 29, 1977: When the conduct of a State has created a situation not in conformity with the result required of it by an international obligation concerning the treatment to be accorded to aliens, whether natural or juridical persons, but the obligation allows that this or an equivalent result may nevertheless be achieved by subsequent conduct of the State, there is a breach of the obligation only if the aliens concerned have exhausted the effective local remedies available to them without obtaining the treatment called for by the obligation or, where that is not possible, an equivalent treatment. Report of the International Law Commission on the Work on Its TwentyNinth Sess., (the "Report") May 9-July 29, 1977, GAOR: Thirty-second sess., Supp. No. 10 (A/32/10), 1977, p. 67. Mr. Rosenstock's comments concerning article 22 appear below: Article 22 deals with the question of exhaustion of remedies, a doctrine well founded in international law. As presently drafted, the article adopts the view that exhaustion expresses a substantive rule concerning the genesis of international responsibility. In our submission, in the further consideration and drafting of this article, a rigid distinction between a "procedural" and a "substantive" definition of the exhaustion of local remedies should be approached with caution. It would seem to follow from the "substantive approach that damages should be calculated not as of the time of injury but as of the exhaustion of local remedies; and that interest will accrue not from the time of injury as it otherwise might in some circumstances, but the time of exhaustion. That is a consideration which gives us pause. For example, under customary international law, when a state expropriates the property of an alien, it is obliged to pay just compensation at, or as of, the time of taking. If it fails to pay such compensation even on the exhaustion of local remedies, then an international wrong will arise as to which the government of the alien's state may make an international claim. But the entitlement of a government to espouse its national's claim is one thing; the time of the injury to the alien as from which the obligation to compensate him runs, is another. It is not clear to my government that the Commission's draft satisfactorily deals with this problem. For our part, we believe that the solution lies in appreciating that there is a wrong for which reparation is due at the time of injury, but that the right of the alien's government to espouse a claim for that wrong arises only upon the unsuccessful exhaustion of local remedies. The United States wishes to emphasize. . . the importance of the point which the Commission makes in paragraph 59 of the report to the effect that a state may make diplomatic representations on a matter even before the exhaustion of local remedies. Such representations are not exceptional; they are in fact common practice. Press Release USUN-112 (77), Nov. 11, 1977, pp. 3–5. Par. 17 of the Report, found on p. 7, indicates that the draft articles under study relating to state responsibility "are cast in such a form that they can be used as the basis for concluding a convention if so decided. . ." by the Commission. Par. 59 of the commentary of the Commission is reproduced from p. 115 of the Report: (59) It must also be pointed out that the requirement that the individual considering himself injured must exhaust local remedies in no way implies that the State of which he is a national may not make diplomatic representations to the State alleged to have committed the wrongful act until he has exhausted the local remedies available in the latter State. Diplomatic action can be taken-albeit as an exceptional step-even before the local remedies have been exhausted by the individuals concerned, for example in order to draw the matter to the attention of the State or simply to prevent the occurrence of an international wrongful act. What is not permissible, on the other hand, is that the State of which the individual concerned is a national should "take over" the wrong done him before he has had recourse to the domestic courts open to him, and on that basis make an international claim, as though a wrongful act infringing its own international subjective right had already taken place, before the exhaustion of local remedies. What has just been said about diplomatic action probably also applies, in the absence of anything to the contrary in the applicable conventions, to an application seeking only a purely declaratory judgment. For other portions of Mr. Rosenstock's statement, see ante, Ch. 2, § 2, pp. 12–14 and Ch. 2, § 4G, pp. 53-54. $2 Substantive Bases for International Claims Expropriation People's Republic of the Congo On January 19, 1977, President Ford notified the Congress, in accordance with the requirements of section 502 (a) (2) of the Trade Act of 1974, of his intention to withdraw the designation of the People's Republic of the Congo as a beneficiary developing country for the purposes of the generalized system of preferences. His notice, which was also communicated to the Government of the People's Republic of the Congo, gave the following considerations as the basis for his decision: During 1974, the Government of the People's Republic of the Congo nationalized foreign-owned oil companies in that country, including companies that were 50% or more beneficially owned by United States citizens. Following several attempts to commence negotiations with a view to reaching a satisfactory settlement of the claims arising from such nationalizations, it is my judgment that the People's Republic of the Congo currently is not meeting the requirements set forth in section 502 (b) (4) of the Trade Act. . . . H.R. Doc. 95-59, 95th Cong., 1st Sess. (1977). Sec. 504 (b) of the Trade Act of 1974 (P.L. 93-618; 19 U.S.C. 2462) reads as follows: The President shall, after complying with the requirements of section 502 (a) (2), withdraw or suspend the designation of any country as a beneficiary developing country if, after such designation, he determines that as the result of changed circumstances such country would be barred from designation as a beneficiary developing country under section 502 (b). . . . Sec. 502 (b) (4) of the Trade Act prohibits the designation of any country as a beneficiary developing country for purposes of the generalized system of preferences if such country has nationalized, expropriated, or otherwise seized ownership or control of property owned by a United States citizen or by a corporation, partnership, or association which is 50% or more beneficially owned by United States citizens... Unless The President determines that (i) prompt, adequate, and effective compensation has been or is being made to such citizen, corporation, partnership, or association, (ii) good faith negotiations to provide prompt, adequate, and effective compensation under the applicable provisions of international law are in progress, or such country is otherwise taking steps to discharge its obligations under international law with respect to such citizen, corporation, partnership, or association, or (iii) a dispute involving such citizen, corporation, partnership, or association over compensation for such a seizure has been submitted to arbitration under the provisions of the Convention for the Settlement of Investment Disputes, or in another mutually agreed upon forum, Libya On January 19, 1977, Rene-Jean Dupuy, Sole Arbitrator of the international arbitration between the plaintiffs Texaco Overseas Petroleum Company and the California Asiatic Oil Company and the defendant Government of Libya (Topco/Calasiatic-Libya arbitration), delivered an Award on the Merits in Geneva, Switzerland, ruling, inter alia, that certain Deeds for Concession between the parties for crude oil production were binding, that the defendant Libyan Government breached its obligations arising from the Deeds of Concession by adopting nationalization measures in 1973 and 1974, and that the Libyan Government was legally bound to perform these contracts. The sole arbitrator, who was chosen by the President of the International Court of Justice, granted the Libyan Government until June 30, 1977, to bring to the attention of the Arbitral Tribunal the measures taken by it to comply with and implement the arbitral award. Libya nationalized various property, rights, and assets of California Asiatic Oil Company and Texaco Overseas Petroleum Company in decrees dated September 1, 1973, and February 11, 1974. In notes delivered to the Libyan Government on September 14, 1973, and June 20, 1974, the U.S. Embassy in Tripoli urged, inter alia, that arbitration be instituted to resolve the differences between the parties and suggested that expropriation of the interests of these American companies "without the offer of adequate compensation would be. . . invalid under international law." The initial request for arbitration was contained in a letter dated September 3, 1973, from the Texas Overseas Petroleum Company and the California Asiatic Oil Company ("companies") to the Government of the Libyan Arab Republic. This request for arbitration pursuant to the terms of the Deeds of Concession and the Libyan Law on Petroleum of 1955 was rejected by the Libyan Government in a letter dated December 8, 1973. Pursuant to the terms of the Deeds of Concession, the companies requested the President of the International |