824.6363 St 2/407

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

The Minister37 informed me that the latest information he had was to the effect that Señor and Señora Foianini would pass through Washington en route to New York Thursday at 4 a.m. by plane. The Minister said that he did not know when they would return from New York and that he did not have any further information with respect to their plans.

I told the Minister that since his conversation with me on June 26 in which he commented on the proposed agreement for the settlement of the Standard Oil controversy the Department had been studying continuously and carefully a revision of the agreement that would take into account his views. There had been several new drafts prepared and discussed with representatives of the Standard Oil Company. In the beginning the company was most reluctant to consider the inclusion in the agreement of a provision authorizing the tribunal to pass upon the question of the amount of taxes due the Government from the company over and above those that had already been paid. By dint of insistent effort the company had finally been persuaded to accept a formula that would submit to the tribunal this question.

I thereupon handed to the Minister a copy of a new draft38 providing for the submission to a tribunal of three persons two questions—(1) the value in United States dollars of the property of the company in Bolivia on March 12, 1937, and (2) the amount of taxes, if any, over and above those paid by the company, due the Government from the company. I told the Minister that I knew he was as desirous of a prompt settlement of this controversy as was the Department. The company’s agreement had only been obtained after long discussions and after the submission and counter-submission of many drafts. I urged therefore that the Bolivian Government give the most careful consideration to the new draft, suggesting only such changes as seemed [Page 338] absolutely necessary to meet the Bolivian point of view. In particular I urged that no changes in language, unless absolutely essential, be suggested with regard to paragraph 2 (b), since the language relating to that section had been worked out only after a great deal of effort. I said that I considered the company’s acquiescence so precarious that any material change in the language might result in the company’s reconsidering its whole position.

The Minister assured me that he would study the new draft first of all to determine whether the Government could agree to it in principle. If he thought that it could he would keep to a minimum any suggestion to his Government for modifications of language. He again expressed his belief that the Minister of Mines would not be coming to the United States unless he had decided to come to some agreement on this problem. He hoped a settlement along the lines under discussion would meet with the Minister’s favor, but of course he would not know until he had discussed the proposal with the Minister, who so far was not informed as to the informal discussions that had taken place in Washington. Dr. Guachalla reminded me that he had not wished to bring anything to the Minister’s attention until it was in a form which he himself could support and recommend.

The Minister told me that he was returning to Washington on Thursday and that he would probably come in to discuss the new draft.

Laurence Duggan
[Enclosure]

Draft by the Department of State of Proposed Agreement Between the Bolivian Government and the Standard Oil Company of Bolivia

Whereas differences have arisen between the Bolivian Government and the Standard Oil Company of Bolivia growing out of the cancellation on March 13, 1937 by the Government of the concession contract dated July 27, 1922, under which the Company was operating in Bolivia; and

Whereas the Government of Bolivia alleges that the Company has failed to pay certain taxes due to the Government as set out in the preamble of the Decree of March 13, 1937; and,

Whereas the parties desire to put an end to these differences:

The Government of Bolivia, duly represented by . . . . . . . . . . . . , and the Standard Oil Company of Bolivia, duly represented by . . . . . . . . . . . . , freely agree to the following terms of settlement:

1.
There shall be established a Tribunal consisting of three members, one, who must be either an engineer or geologist, to be designated by each party within thirty days following the signature of this agreement, [Page 339] and the third member, who shall preside and who shall not be a national of either Bolivia or the United States. The third member shall be selected by mutual agreement between the parties; provided, however, that if the parties shall fail to agree upon the selection of the third member within thirty days from the date of the signature of this agreement, the selection shall be left to the President of the Geological Society of London, referred to in Article 17 of the concession contract between the Government and the Company, dated July 27, 1922, who shall make the selection within thirty days from the date upon which either the Government or the Company shall notify him of their disagreement.
2.
The questions to be submitted to the Tribunal are as follows:
(a)
What amount in United States dollars may in equity be due the Company for its property, rights and interests in Bolivia based upon their value as of March 12, 1937, which amount with interest, it is agreed, shall be paid by the Government to the Company;
(b)
What amount of taxes may be due the Government by the Company on account of the claims of the Government against the Company as set forth in the preamble to the Decree of March 13, 1937, which amount, with interest, it is agreed, shall be paid by the Company to the Government.
3.
It is the intention of the parties to this agreement that the Tribunal shall not consider or question the validity, under the law of Bolivia, of the Company’s concession contract or of the Government’s cancellation decree of March 13, 1937.
4.
The procedure of the Tribunal shall be as follows:
(a)
Within sixty days from the date of the selection of the third member, the Tribunal shall convene at Buenos Aires or at such other place as it may find appropriate and shall within an additional period of one hundred twenty days make a fair and impartial determination of the amounts to be paid, as above stated.
(b)
Each party shall submit to the Tribunal within ninety days from the date of signature of this agreement a complete statement of its case and the evidence relied upon in support thereof, at the same time furnishing a copy thereof to the other party. Within thirty days after the filing of the last of the two statements just mentioned, each party may submit to the Tribunal such written arguments and additional evidence in rebuttal of the evidence submitted by the other party as it may desire to submit. No further statement or evidence shall be submitted by either party unless requested by the Tribunal; and any such request made by the Tribunal for additional statements or evidence shall be communicated to both parties and each shall have an opportunity to respond to the request;
(c)
Each party shall pay the honorarium and expenses of the member of the Tribunal designated by it and shall bear its own expenses. The expenses of the Tribunal, including the honorarium of the third member, shall be borne in equal moieties by the two parties;
(d)
The decision of the Tribunal shall be by majority vote and shall be accepted by both parties as final and binding;
(e)
The Government and the Company shall, within . . . . . months from the date of the decision of the Tribunal, pay in cash, in United States currency or its equivalent in sound free exchange currency, the total amounts determined by the Tribunal to be proper and equitable.
5.
The Government of Bolivia and the Standard Oil Company of Bolivia declare that, upon the payment of the amounts referred to in paragraph 4(e), no issue will remain pending between them and that there will be no occasion, on the one or the other part, for any subsequent claims or counter-claims of whatsoever character, since the ful-filment of the present agreement, which has been freely entered into, shall be regarded as having terminated satisfactorily and amicably the controversy raised by the Decree of March 13, 1937. If all the terms of this agreement are not duly fulfilled by either party, it is understood that the status quo ante as of the date of this agreement shall be deemed restored at the option of the aggrieved party.

In faith of which, etc.

[Place and date of signature]39

  1. i. e., the Bolivian Minister.
  2. The enclosure, p. 338.
  3. Brackets appear in the original.