852.75 National Telephone Company/9–3044: Telegram

The Secretary of State to the Ambassador in Spain ( Hayes )

3192. We have presented to the Spanish Ambassador a memorandum with regard to the telephone situation. The text of the memorandum is as follows:

“The International Telephone and Telegraph Corporation, an American interest having an important investment in Spain, has been seriously prejudiced over a period of years by acts of the Spanish Government. Claims and complaints of the company have met with no remedial response and the company’s legal personality, recognized when the investment was being made in Spain, appears to be questioned, inasmuch as the company is denied the right to voice its grievances to the Presidency of the Spanish Government.

“The American Embassy in Madrid has protested in writing and orally to the Chief of the Spanish State and to the Minister of Foreign Affairs without effect. On September 11 the former undertook to name a commission with full powers to deal promptly with the company’s representatives, but no further action has been reported. Meanwhile the situation has been aggravated by the issuance on September [Page 441] 24 of a decree regarding the employment of foreigners in public utilities in Spain. This decree, if applied to the subsidiary Compañía Telefónica Nacional de España, would violate the concession contract. Moreover the decree was issued after Ambassador Hayes had been given to understand that pending negotiations no steps would be taken to alter the position either of the CTNE or of the ITT. On September 26 an order was issued by the Presidency to the effect that until the majority of the common stock of the CTNE should be placed in Spain all acts of stockholders’ meetings and of the Board of Directors of the CTNE would be illegal.

“This Government is concerned both because of the particular American interest and investment involved and because the methods of the Spanish Government may reflect the development of a policy having broader implications, at variance with assurances the American Embassy has been given that the Spanish Government welcomes American investments and enterprise.

“The Department feels that the commission proposed by General Franco should be named without further delay and that equitable arrangements should be arrived at with the American company. Continuing unfavorable treatment of this matter cannot fail to be prejudicial to general relations between the two countries.”

Please present a copy of this memorandum to the appropriate authorities indicating that you are doing so under direct instructions from Washington.