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

No. 1621

Sir: I have the honor to refer to the many communications exchanged between the Department and the Embassy regarding the compliance by the United States Agencies operating in Bolivia with Bolivian labor laws and to bring the matter again to the attention of the Department in anticipation of the claims which will probably be made against those agencies as they begin to decrease their Bolivian staffs and to cease their operations. The Embassy understands that the Sanitary Mission has as a matter of policy complied with the Bolivian labor laws but that the FEA,81 the U.S. Commercial Company, and the Rubber Development Corporation have not done so.

[Here follows background material on cases regarding compliance by these agencies with Bolivian labor laws.]

From the foregoing review of the record, it is difficult to escape the conclusion that there has been a great deal of confusion in Washington regarding the status of Federal Agencies operating in foreign countries. The Embassy infers from the record as set forth above that the basic point of view of the Department of State is that such Agencies should submit to local labor laws and to suits in local courts as a matter of grace without raising the question of diplomatic immunity unless treatment in the local courts is obviously prejudiced or unless compliance would work a serious hardship to the Agencies in their functions but that circumstances in Washington have made it difficult or impossible for the Department to consistently maintain this stand.

It would appear that in arriving at a decision,—due thought ought to be given both to the legal and to the political aspects of the problem, that is, the effect which our course will have upon public opinion in Bolivia.

From a legal standpoint, it must be noted that the Foreign Office, as quoted above, has on two occasions admitted the diplomatic immunity of the Rubber Development Corporation. But it would seem that this immunity and its effects might be attacked in the Bolivian courts from two standpoints: (1) whether such immunity was properly granted and (2) whether the granting of the immunity could operate to deprive employees of rights and benefits guaranteed to them by the Bolivian Constitution.

With reference to the first viewpoint, it is perhaps pertinent to point out that the Agencies under reference are not direct branches of the [Page 597] United States Government, but rather are corporations, incorporated as any private corporation but owned by the Government; that they are not engaged in diplomatic representation of the United States, but rather in commercial activities—the buying and selling of products, the making of loans and entering into commercial contracts—and that it would be difficult to establish that there is any commonly accepted principle of international law which clothes such government-owned commercial entities with diplomatic immunity or immunity from compliance with the laws of the country in which they operate. The evidence available to the Embassy indicates that the policy and the laws of the United States deny immunity to such organizations operating within its borders. For the Minister of Foreign Affairs (or the Minister for Labor, or any other branch of the Executive) to grant United States Agencies exemption from compliance with Bolivian labor laws would in effect amount to a renunciation by the Executive of rights and benefits of employees of the Agencies which are specifically guaranteed to them as irrenunciable by the Bolivian Constitution (Section 129 quoted above82). It would seem that an appropriate court might, and properly so, hold that in so doing the Executive exceeds its constitutional power and that the exemption is accordingly null. The preponderance of Bolivian legal opinion in the Embassy files seems to concur in the viewpoint.

From this point of view, it is doubtful that either oral or written assurance by a Cabinet Minister that employees of the United States Commercial Company are not subject to Bolivian labor laws would be valid. Nor does it appear in view of the constitutional provision quoted above that any agreement signed by an employee at the time of his employment (such as that obtained by FEA from their Bolivian employees) renouncing his rights and benefits under the Bolivian labor laws could operate to relieve the employer of his responsibilities. Indeed, it would appear that the provision of law cited was written with the express purpose of nullifying such agreements. Nor does it appear a valid argument for exemption that the United States Commercial Company pays salaries and confers other benefits in excess of those generally shared by Bolivian employees. It would appear that the policy of the FEA should have been rather to pay salaries more in accordance with Bolivian standards and thereby be in a position to pay those benefits to Bolivian employees required by law.

In summary, it appears from a legal standpoint that although diplomatic immunity might be asserted this immunity established by Executive Act would be subject to judicial review and should it operate to contravene the Bolivian Constitution the courts could probably intervene. [Page 598] It is perhaps significant that Dr. Pacheco83 in his opinion in connection with the controversy between RDC84 and Dagley85 (see paragraph 386) asserted the legal right of the Labor Court at Cocha-bamba to entertain Dagley’s suit notwithstanding the diplomatic immunity claimed by the RDC and granted by the Minister of Foreign Affairs.

From a practical viewpoint, apart from the legalistic standpoint, it must be recognized that the Bolivian courts are only theoretically independent of the Executive and sufficient diplomatic pressure would probably result in the court’s refusal to entertain such cases. However, the application of such pressure would appear to be immoral and unwise; immoral because it would be an application of the principle that might makes right, and unwise in the precedent that it would set, and in that if it is our policy in the Latin American countries to encourage democratic process under law we ought not to take steps which would further discredit Bolivian courts and further bring them under domination of the Executive.

From a policy standpoint, two points might well be considered:

The desirability of insisting upon the diplomatic immunity and exemption from local laws in view of the fact that we might be unwilling or possibly unable to grant similar exemption to agencies of other Governments operating within the United States. In this connection, it might be added that if we wish to further strengthen the principle of free enterprise within the United States it might be unwise to confer additional advantages upon Government agencies which may operate in the postwar period in direct competition with private enterprises. United States Agencies operating in foreign countries are presumably temporary war agencies; those of foreign governments in the United States might well be permanent.
The question arises whether in view of the amount of money which has been invested in Bolivia in an effort to promote goodwill and understanding it might be “pennywise and pound foolish” to offset to a considerable degree that goodwill through our refusal to pay certain benefits which, in total and in comparison with our other investments, could not be large. In this connection, it must be remembered that at least a considerable segment of Bolivian legal opinion considers that these rights and benefits are legally due to the employees of Federal Agencies in Bolivia and that from a propaganda standpoint it would be a difficult defense to claim that such employees have been overpaid and have received other benefits in excess of those given by law.

[Page 599]

The Embassy realizes that the foregoing treatment of the problem is by no means exhaustive and that there are probably other factors to be evaluated of which it is unaware. However, it is the Embassy’s judgment based upon the reasons set forth above that the United States Government Agencies operating in Bolivia should comply voluntarily, and without raising the question of immunity, with Bolivian labor laws and should pay to their Bolivian employees such bonuses and discharge indemnities as may be required thereunder.

Inasmuch as it is apparent that the Embassy will have to take a stand in connection with the problem presented herein, the Department’s early comments and instructions will be appreciated.

Respectfully yours,

For the Ambassador:
Wallace W. Stuart

Third Secretary of Embassy
  1. Foreign Economic Administration.
  2. The quoted translation of Section 129 reads as follows: “The rights and benefits recognized by law in favor of workers and employees are irrenunciable—contrary conventions which tend to evade their effects are void.”
  3. Lt. Col. Alfredo Pacheco, Bolivian Military and Air Attaché in the United States.
  4. Rubber Development Corporation.
  5. George H. Dagley, a British subject who instituted a suit against the Rubber Development Corporation in a Labor Court located in Cochabamba, Bolivia.
  6. Not printed.