Foreign Relations of the United States Diplomatic Papers, 1939, The American Republics, Volume V

824.6363 St 2/387½

Memorandum by the Bolivian Minister (Guachalla)³⁶

undated

[Translation]

Marginal Notes to the Formula of Agreement Between the Bolivian Government and the Standard Oil Company of Bolivia

I. Although the proposed formula declares that it is the intention of the Parties that the Commission shall not consider or question the validity of the concession contract of the Company or the validity of the cancelation decree of the Government, it cannot, logically, disassociate itself from the legal surroundings in which the question has been placed by virtue of the criminal proceedings started in October of 1935.

We are faced by a post judgment transaction which makes impossible a certain elasticity appropriate in any ante judgment transaction like that suggested to the Company without success last February. Hence it follows that the Government of Bolivia cannot disassociate itself from the bases which the decision of last March 8 and its supplement of the 15th of the same month enunciate. It is not the desire of the Bolivian executive power to depreciate the judgment of the Supreme Court.

II. One gathers the following conclusions from the said decision:

(a) the transfer of concessions in 1921 from Richmond Levering to the Standard Oil Company of Bolivia was illegal since it was made without the previous authorization of the Government.

(b) the appointment of representatives of the Company, in violation of its own statutes, was irregular, annulling their legal capacity to appear before the courts;

(c) in consequence, its representatives lack legal personality, the claims begun by them being not in accordance with the law and inadmissible.

III. This decision, the legal resolution of March 15 says, brings about a situation which means a judgment not subject to review; this is, a juridic situation which cannot be amended by other tribunals of the Republic nor by the decision of another power of the State, through a new process or legal proceeding.

The lawsuit being closed in this way, it should be noted that a decision has not been pronounced on the basis of the action commenced by the company since it was contrary to the law of litigations in view of the lack of legal personality of its representatives. This situation permits the study of some formula of convention which does not imply review, even indirect, of the suit nor of its consequences: the definitive possession of the concessions by the State.

IV. It should be borne in mind that the case of the Standard Oil Company in Bolivia is penal and not one of expropriation, a basic factor which prevents the acknowledgment of a payment which signifies indemnification. However, a formula in equity may solve the divergency, provided that it, as its essence indicates, contemplates the position of both Parties or their mutual complaints. Thus it is equitable to speak of a payment in favor of the Company if there is later given occasion to appraise the amount of the countercharge alleged by the Government before the Supreme Court.

V. The prior considerations pointed out above should, without doubt, suggest several modifications to the proposal. In summary, they would include:

(a) the definitive ownership of the concessions by the State results from a definite legal sentence; it cannot be inferred from an acquiescence of the Company;

(b) the agreement is based on an idea of equity; then, if the Government of Bolivia consents to recognize a payment in favor of the Company, in return it is necessary and just that the Company agrees to recoguize in favor of the Government, another payment, both in principal, which would have as a basis the idea of reparation for damages and injuries;

(c) the valuing commission will be, then, called upon to study the claims of the two Parties and its judgment will have as its object to establish on whom it is incumbent to pay the balance owed which results from this double valuation;

(d) given the character of a post judgment arrangement and its lack of connection with legal aspects, it appears more appropriate to avoid references to “recognition” of an obligation to compensation. Perhaps it would be preferable to begin the formula with the organization of the commission of experts before which the two Parties agree to present their claims of a pecuniary nature, accepting, in advance, the decision which it gives.

36. Handed by the Bolivian Minister to the Chief of the Division of the American Republics June 26. See memorandum of conversation, supra.