The Secretary of State to the Ambassador in Bolivia (Thurston)

No. 365

The Secretary of State refers to the Embassy’s despatch no. 1587, September 20, 194570 concerning the claim of the manager of the Patiño Mines and Enterprises Consolidated, Inc. that that company is an American corporation.71

Any concern incorporated in one of the States of the American union is regarded as having American citizenship. (U.S. v. Laflin, 24 F. (2d) 683, 686). However, the question whether the protection of this Government should be extended to an American corporation operating in a foreign country requires the exercise of administrative judgment, taking into consideration the particular facts and circumstances, and especially the amount of American ownership.

With regard to the protection of corporations in foreign countries attention is called to the following statement in Moore’s International Law Digest Vol. VI, pages 641–642:

“It is well settled that a government may intervene in behalf of a company incorporated under its laws, or under the laws of a constituent state or province. In such case the act of incorporation is considered as clothing the artificial person thereby created with the nationality of its creator, without regard to the citizenship of the individuals by whom the securities of the company may be owned. Hence we find in general claims conventions that the submission or settlement uniformly embraces ‘all claims on the part of corporations, companies, or private individuals, citizens of the United States,’ or of some other government, as the case may be. In other words, the corporation is recognized as having, for purposes of diplomatic protection, the citizenship of the country in which it is created.”

[Page 590]

It is contrary to the practice of this Government to extend protection to a corporation in a foreign country unless a substantial American interest is involved. (Borchard’s Diplomatic Protection etc., pp. 621–622.)

While the extension of the protection of this Government to an American corporation is always discretionary, the rule is that protection will be extended when there is a substantial American interest involved. (Borchard’s Diplomatic Protection p. 622; III Hack-worth’s Dig. of Int. Law pp. 420–426.) The mere fact that considerable foreign interests are also involved does not prevent this Government from extending protection. (Borchard’s Diplomatic Protection p. 621; V Hackworth’s Dig. of Int. Law, 837.)

The Embassy’s communication under acknowledgment reports the claim of Mr. Tamplin72 that American investors own approximately 54 percent of the stock of the Patiño company. If this is the case, it is believed that the protection of this Government may properly be extended to that concern should the facts and circumstances seem to require such protection. Accordingly, the Embassy is instructed to inform the representative of the company that in order to substantiate his claim that the Patiño Mines and Enterprises Consolidated, Inc. is an American company and entitled as such to protection by this Government, there should be established by substantive evidence presented either to the Mission at La Paz or to the Department of State that a substantial American interest rests in the company. The Department should also be informed as to the nationality of the directors and officers of the corporation.

  1. Not printed.
  2. This company was headed by Simón I. Patiño. Its claim to American nationality rested on alleged ownership of 54 percent of the stock by American citizens.
  3. William Tamplin, Technical Manager of the Patiño interests in Bolivia.