824.6363 St 2/448a

The Chief of the Division of the American Republics ( Duggan ) to the Bolivian Minister ( Guachalla )

My Dear Mr. Minister: With reference to our recent conversation I enclose a revised draft of the proposed agreement for the settlement of the Standard Oil Company controversy which may be substituted for the draft enclosed in my letter of February 17, 1940.10

With warm personal regards [etc.]

Laurence Duggan

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 Commission consisting of three members, two of whom must be either engineers or geologists, one to be designated by each party within thirty days following the signature of this agreement, 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 a jurist of outstanding ability. He 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 [Page 518] 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 only questions to be submitted to the Commission are as follows:

What was the value in United States dollars of the rights and interests of the Company in Bolivia under its concession contract of July 27, 1922, and of its properties connected therewith, immediately prior to March 13, 1937.
Are there any taxes, over and above those paid by the Company, due the Government from the Company, and if so, what is the amount thereof?

3. It is the intention of the parties that the Commission shall not question or consider the validity of the concession contract of July 27, 1922 or of the cancellation decree of March 13, 1937.

In determining the question under paragraph 2 (a) hereof the Commission will take into account the right granted to the Company under its contract to extract oil from the developed and undeveloped areas covered by the contract and to transport, refine and sell the same. The term “properties” in the same paragraph refers to the wells, roads, buildings of every nature, pipelines, installations, machinery, refineries, furniture and fixtures, utilities, inventories of materials and petroleum, credits and surface rights of the company pertaining to the operation of the contract concession immediately prior to March 13, 1937.

4. The procedure of the Commission shall be as follows:

Within sixty days from the date of the selection of the third member, the Commission shall convene at Buenos Aires or at such other place as it may find appropriate and shall within an additional period of one hundred fifty days make a fair and impartial determination of the questions submitted under 2 (a) and (b);
Each party shall submit to the Commission and to the other party within ninety days from the date of signature of this agreement a complete written statement of its case, together with such evidence as it may see fit to submit; provided that, if the Commission does not convene within the said period of ninety days, the submission of the statements shall be made within thirty days after the date when it convenes.

Within sixty days after the filing of the last of the two statements just mentioned, each party may submit to the Commission such written arguments and additional evidence in rebuttal of the arguments and evidence submitted by the other party as it may desire to submit.

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No further argument or evidence shall be submitted by either party unless requested by the Commission, and any request made by the Commission for additional written or oral statements or evidence shall be communicated to both parties and each shall have an opportunity to respond to the request;

Each party shall pay the honorarium and expenses of the member of the Commission designated by it and shall bear its own expenses. The expenses of the Commission, including the honorarium of the third member, shall be borne in equal moieties by the two parties;
The decision of the Commission shall be by majority vote and shall be accepted by both parties as final and binding.

5. The Government agrees that the amount determined under 2 (a) shall be paid to the Company with interest at the rate of 6 percent per annum from March 13, 1937, within twelve months from the date of the decision of the Tribunal, in cash, in United States currency or its equivalent in sound free exchange currency. The Company agrees that it will pay to the Government, in Bolivianos within twelve months any such taxes as may be found due under 2 (b) with interest at the same rate, from the date when such taxes became due. Thereafter no issue will remain pending between them and there will be no occasion, on the one or the other part, for any subsequent claims or counterclaims of whatsoever character, since the fulfilment of the present agreement, which has been freely entered into, shall be regarded as having terminated satisfactorily and amicably the existing differences between the Government and the Company. 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, et cetera.

(Place and date of signature)

  1. Not printed. The draft of February 17 was submitted to the Bolivian Minister and to Mr. E. Holman of the Standard Oil Company of New Jersey and revisions made in consideration of their suggestions. A copy of this revised draft was sent to Mr. Holman on March 8.