824.6363 St 2/387½

Memorandum of Conversation, by the Chief of the Division of the American Republics (Duggan)

During the course of a conversation regarding other matters, the Minister handed me the attached memorandum35 regarding the formula presented to him for study for a settlement of the differences between the Standard Oil Company of Bolivia and the Bolivian Government.

The Minister stated that he appreciated that the Department had presented the formula using as far as possible the drafted agreement which had been drawn up in Bolivia in February of this year. Since then has occurred the decision of the Supreme Court which, therefore, would require on the part of his government a somewhat different approach. On the basis of what he knows of his government’s position, he thought that the only formula that would hold promise of acceptance had to be one which was based upon determination by a board of the amounts due, not only by his government to the company, but by the company to the government. He recognized that this would be extremely difficult for the company to accept, but stated his very firm conviction that his government would never agree to any formula that contained in it a statement that the government owed the company an amount for compensation for the company’s properties. The Supreme Court decision of March 15 now made it impossible for the government to admit that it possessed any legal obligation to pay compensation to the company. He felt that his government would be willing in a public document to recognize that in equity the company should receive a payment, but he insisted that his government would [Page 335] require that the document recognize that it had certain claims against the company and that the board should determine the amounts due the government under these claims.

The Minister stated that he had no suggestions for redrafting, although he would suggest a change in the preamble in order to bring in the thought of mutual payments in equity, the omission of paragraphs two and three, the redrafting of paragraph four to give authority to the board to make an examination of the government’s claims against the company in order to determine the amount due, and a redraft of the last paragraph to put it on a bilateral basis, that is, to make it apply to payments from the company to the government as well as from the government to the company.

The Minister stated that he would not be back in town until Monday, July 3, and that he would telephone me on that day merely to inquire whether the Department wished to consult further with him. He stated that he had not yet transmitted to his government the draft handed him by Mr. Welles, and that he did not intend even to inform his government that he was carrying on exploratory discussions until these discussions had advanced somewhat further.

  1. Infra.