Foreign Relations of the United States, 1946, Council of Foreign Ministers, Volume II

C.F.M. Files: Lot M–88: Box 2065: Deputies Documents

Report by the Committee of Economic Experts on Italy²⁵

secret
C.F.M.(D) (46) 133

Paris, 5 June, 1946.

Peace Treaty With Italy

United Nations’ Property in Italy

Part I.	Agreed provisions.
Part II.	Subjects for which the Committee agreed that provisions were necessary in the treaty, but on which agreement was not reached.
Part III.	Proposed provisions on which the Committee did not reach agreement regarding the necessity of inclusion in the treaty.26

Note. Although throughout this Report paragraphs are numbered consecutively in each Part, this is done for convenience of reference and in no way indicates the final order of articles in the Treaty.

Part I. Agreed Provisions

1. “Insofar as she has not already done so, Italy shall restore all the legal rights and interests in Italy of the United Nations and their nationals as they existed on 10th June, 1940, and shall return all property in Italy of the United Nations and their nationals as it now exists.”

2. “The owner of the property concerned and the Italian Government may agree upon arrangements in lieu of the provisions of this article.”

Part II. Subjects for Which the Committee Agreed That Provisions Were Necessary in the Treaty, but on Which Agreement Was Not Reached

1. A disagreement arose amongst the representatives as to whether the following provision had been agreed by the Committee:

“Upon the presentation of a request, the Italian Government shall return the property to its owner, free of all encumbrances and charges to which it may have been subject as the result of Italy’s war on the side of Germany, without the imposition of any charges by the Italian Government in connexion with its return, provided that such request is presented within [. . . . .]²⁷ months after the date of the coming into force of this treaty.[”]

A discussion took place and an alternative wording was elaborated and taken into consideration, viz.

“The Italian Government undertakes that all property, rights and interests passing under this Article shall be returned free of all encumbrances and charges of any kind to which they may have become subject as a result of the war and without the imposition of any charges by the Italian Government in connexion with its return. Application for the return of the property shall be made within [. . . . .]²⁷ months of the date of coming into force of this Treaty.”

An agreement not having been reached on the purport of the provision under discussion, the representatives have set out their views as follows:

a. France: The French Representative proposes the adoption of the following text:

“The Italian Government undertakes that all property rights and interests passing under this Article shall be returned within six months of the date of coming into force of the Treaty free of all encumbrances and charges of any kind to which they may have become subject as a result of the war and without the imposition of any charges by the Italian Government. If the Italian Government have not done so within six months, reclamations for the return of the property shall be made by the owner within a new delay of six months.”

The French consider that the lodging of such a claim cannot be considered as a prerequisite to the return of property.

b. U.S.S.R.: Considering that during the meeting held by the Committee on 31st May the text of the paragraph referred to was agreed in the form proposed by the U.S. and Soviet Delegations, with the only exception of the length of the period during which any claims for the return of property may be lodged, the Soviet Representative adheres to the decision arrived at by the Committee. The Soviet Representative can also accept the alternative form of words above if that wording is acceptable to the Committee. In the matter of the length of the period during which any applications for the return of property may be lodged, the Soviet representative proposes to fix a period of six months.

c. U.K.: The United Kingdom Delegation agree with the proposal in the first sentence of the alternative form of words above viz. that the property should be returned free of charges and encumbrances and without the imposition of fees. They feel unable to agree to the proposal in the second sentence which, in terms, appears to provide that, as a pre-requisite to the return of property, a claim should be lodged within a specified time, after the expiry of which rights under the Article would have lapsed.

d. U.S.A.: The U.S. Representative feels that the second wording quoted would be acceptable if the treaty made it clear that the lodging of the claim is not a necessary condition precedent for the return of the property and if the time period were reasonable. In order to make the first point clear, he believes that the following language should be added:

“The Italian Government will nullify all measures, including seizures, sequestration or control, taken by it against United Nations property between June 10th, 1940 and the coming into force of this treaty.”

The U.S. Representative feels that the time limit for filing applications should be 18 months from the date of coming into force of the treaty. He believes that there might be some advantage in a period based upon the date when the Italian Government shall have notified the Government of the United Nations of its willingness to accept claims and the procedure to be followed in making them, in which case 12 months would seem a reasonable period.

2. Although the principle of compensation for the loss of or damage to the property of the United Nations and their nationals in Italy was not contested, no agreement was reached as to the condition of application of this principle nor on the extent and the form of such compensation.

The representatives expressed the following views:

a. France: Nationals of the United Nations owning property that has suffered damage or loss since June 10, 1940, shall be entitled to compensation. This shall be settled in lires, free from all deduction, and shall, at the time of the payment be such as to enable the beneficiary to acquire similar property or to be compensated in full for all loss or damage.

The amount paid in lires shall be submitted to Currency Control that might be temporarily in force in Italy, but, in all other respects, shall be available for any use.

b. U.S.S.R.: In view of the fact that only the French Representative had supplied any data concerning the damage caused to French property in Italy whereas neither the U.S. nor the British Representatives had supplied to the Committee any such data, the Soviet Representative considers that it is impossible to impose upon Italy any obligation to pay compensation the amount of which is unknown. In the opinion of the Soviet Representative it would be necessary under the circumstances to agree either on a certain global sum, on the basis of the principle of partial compensation, or on a percentage of a possible compensation.

c. U.K.: (Reference CFM (D) (46) 91, Article 66 (4)—)²⁸

The U.K. Delegation are of opinion that the Peace Treaty should provide for the payment of full compensation for loss of, or damage to, United Nations property. The payment should be made in lire and be subject to ordinary foreign exchange regulations but should otherwise be freely usable. In their opinion the provision of this compensation is justifiable and should not place an undue strain on the Italian economy.

d. U.S.A.: The U.S. representative believes that full compensation in lire should be made in cases where as a result of the war property is not available for return or has been damaged. Since such payments would not involve a foreign exchange burden and since the restoration of war damage will contribute to the rehabilitation of the Italian economy, it is believed that the requirement of such compensation would not be detrimental to the Italian economy. Any payments which Italy might be called upon to make to American property owners under this proposal would be small in comparison with the assistance which the United States Government has given to the support of the Italian economy. The position of the U.S. representative is that the subject should be covered in the manner of paragraphs (3), (4), (8), and the second sentence of paragraph (1) of the U.S. proposal CFM (D) (46) 69 and in Article 65 of the U.S. draft treaty for Italy CFM (D) (46) 105, which read as follows:²⁹

(3) “Where, as a result of the war, the property cannot be returned or the United Nations national has suffered a loss because of injury to the property, the Italian Government shall compensate the owner by the payment of a sum in lire sufficient at the date of payment to enable the recipient to purchase similar property or to make good the loss or damage suffered.”

(4) “Sums in lire paid by the Italian Government under this Article shall be freely usable in Italy but shall be subject to the foreign exchange control regulations which may be in force in Italy from time to time. The Italian Government agrees to accord to United Nations nationals fair and equitable treatment with respect to the allocation of materials, and of foreign exchange required for the importation of materials, for the repair or rehabilitation of their properties in Italy, and in no event to discriminate in these respects against nationals of the United Nations as compared with Italian nationals.”

(8) “In cases where a corporation or association of any nationality other than that of one of the United Nations has suffered a loss of its property in Italy as a result of the war, compensation in lire shall be paid by the Italian Government to United Nations nationals who have directly, or indirectly through intermediate corporations or associations of any nationality other than that of one of the United Nations, an ownership interest in the corporation or association which has suffered the loss. This compensation shall be that fractional part of the amount which would be required to enable the corporation or association to make good the loss or damage suffered, which the interest of the United Nations nationals constitutes of the totality of ownership interests in the corporation. Such compensation, however, shall not be required in case the Italian Government shall provide to the corporation or the association itself such full compensation or restoration as would be due under this Article if it were a corporation or association of one of the United Nations. In cases where the corporation or association receives from the Italian Government partial compensation for the damage or loss sustained, the United Nations nationals shall be paid by the Italian Government compensation in lire in an amount equal to their respective proportionate shares of the loss or damage for which the corporation or association does not itself receive compensation from the Italian Government. For purposes of this paragraph the extent of interest of a United Nations national shall be determined as of June 10, 1940, or the outbreak of war between the United Nation concerned and Italy, as may be the more favourable to the United Nations national.”

2nd Sentence, para. 1. “As used in this Article, the phrase “as a result of the war” includes the consequences of any action taken by the Italian Government, any action taken by any of the belligerents, any action taken under the Armistice of September 3, 1943, and any action or failure to act caused by the existence of a state of war.”

3. No agreement having been reached as to the method of settling disputes arising from the restoration of United Nations’ property in Italy, each representative expressed his views as follows:

a. France: Such disputes shall be settled by Joint Commissions comprising Three members, one appointed by the United Nations, the other by Italy and the third after agreement between these two parts, and failing such agreement by the President of the International Court of Justice.

b. U.S.S.R.: The Soviet Representative proposes the adoption of the following text:

“Disputes which may arise in connexion with the execution of the precept Article of the Treaty shall be settled by a Conciliation Commission composed of representatives of the Government of the United Nations country concerned and representatives of the Italian Government on a basis of parity. If, within a period of three months, the Conciliation Commission has not been able to settle the dispute referred to it, the parties shall either settle the dispute through diplomatic channels or shall agree on another method of settling the dispute (arbitration procedure, appeal to the International Court of the United Nations, etc.).”

c. U.K.: (Reference CFM(D) (46) 91 Article 66 (8))

The U.K. Delegation consider that machinery should be established in the Treaty for the final determination of claims made under this Article which are in dispute. In their view it is essential for all parties that a final decision should be given which would be binding on all concerned; that this involves the establishment of a Tribunal or some such quasi-judicial body, and that the members of the Court should be nominated by the Italian and United Nations Government with an independent Chairman. They consider that the establishment of a Tribunal of the kind referred to in CFM(46) 38³⁰ would not merely do justice but make it plain that justice was being done. Further, since the decisions of the Tribunal would be binding on all parties, it ought not to be regarded as in any way damaging to Italian susceptibilities.

d. U.S.A.: The U.S. representative believes that in order to minimize future controversies and to ensure the speedy and effective execution of the treaty provisions, the treaty should provide clearly for a procedure for the settlement of disputes which may arise in the course of its application; that this task is a judicial one for which arbitration before a special Mixed Arbitral Tribunal affords a fair, convenient, normal, and relatively inexpensive method of settlement; and that the requirement that both Italy and the United Nations accept the decisions of such a tribunal is in no way inconsistent with Italy’s sovereignty. Consequently he proposes that the subject of arbitration of disputes be dealt with in the manner of paragraph 7 of CFM(D) (46) 69 (Articles 65 of U.S. draft treaty), which reads:

“United Nations nationals may submit their claims directly to the Mixed Arbitral Tribunal established under Article . . of this treaty if they are dissatisfied with the action or decision of the Italian Government agencies provided for in paragraph 5 in the carrying out of this Article or if the Italian Government fails to take definitive action within one year after the presentation of a request for the return of property or for compensation under this article. The Governments of the United Nations and the Government of Italy agree to accept the decisions of the Tribunal, and the Government of Italy undertakes to give effect to the decisions. No dispute shall be accepted for consideration or decision by the Tribunal after three years from the date when the Tribunal annouces that it is ready to receive complaints.”

4. The representatives of the respective delegations have expressed the following views on the definition of United Nations nationals:

a. France: According to the French Delegation, the conditions required to define the nationality of the properties of the United Nations should be the following:

(a) Persons must be nationals of the United Nations at the date of the coming into force of the Treaty and at the time when the property was damaged or lost.

(b) Legal persons shall be considered as having United Nations nationality if they are constituted in accordance with legislation of one of the United Nations.

(c) Italian companies or companies outside the United Nations in which United Nations nationals held a share shall be treated as legal persons holding United Nations nationality proportionally as the shares are held by persons as per paragraph (a) or legal persons as per paragraph (b)

b. U.S.S.R.: The Soviet Representative suggests the following definition of “United Nations nationals”:

“In the present Article the expression ‘United Nations national’ is used to denote persons who were nationals of any one of the United Nations on condition that they possessed such nationality before the outbreak of war, and also to denote corporations or companies organized or established before the outbreak of war, in accordance with the laws of any one of the United Nations.”

c. U.K.: (Reference CFM(D) (46) 91 Article 66 Annex).

The U.K. Delegation propose that, whatever definition is adopted of a “United Nations national” the effective date for determining nationality should be that on which the Treaty comes into effect. They would prefer to apply this test both for the return of property and for the payment of compensation, nevertheless they are not entirely opposed to the proposal of the U.S.A. Delegation in the latter case and to secure agreement would be prepared to accept it.

The U.K. Delegation consider as unsatisfactory any definitions which would leave outside the protection of this Article the property, rights and interests of companies (wheresoever incorporated) owned or controlled by individuals having United Nations nationality or by companies incorporated under the laws of any of the United Nations.

d. U.S.A.: The U.S. representative is of the opinion that the definition of “United Nations nationals” should be drafted so as to include the persons normally entitled to protection of the U.S. Government. Persons treated by Italy as enemies to the Axis should also receive the benefits of the Article. United Nations interests in corporations or associations not organised under the laws of one of the United Nations would be dealt with in the compensation provisions set forth above. Consequently it is proposed that the persons to enjoy the benefits of the article be those indicated in paragraph (a) and (b) of the Annex to Article 65 of the U.S. draft treaty for Italy, CFM(D) (46) 105, which reads:

(a) “United Nations nationals” is used to mean individuals who are nationals of one or another of the United Nations, or corporations or associations organized or constituted under the laws of one or another of the United Nations, provided that:

(i) for purposes of the return of property, this status shall exist as of the date of the coming into force of this treaty;

(ii) for purposes of compensation for damage or loss of property as a result of the war, the status shall continue from the date of the damage or loss to the date of presentation to the Italian Government of the claim for compensation.

The term “United Nations nationals” also includes all individuals, corporations or associations which under the laws in force in Italy during the war have been treated as enemy.

(b) “Owner” is used to mean the United Nations national, as defined in paragraph (a) of this Annex, who is entitled to the property in question, and includes a successor of the owner, provided that the successor is also a national of one of the United Nations as defined in paragraph (a). If the successor has purchased the property in its damaged state, the transferor shall retain his rights to compensation under this Article, without prejudice to obligations between the transferor and the purchaser under domestic law.

25. This Report was submitted to the Deputies on June 5, 1946, and was discussed by that body on June 8 and 10. Subsequently, the Report was included in the Draft Peace Treaty with Italy, C.F.M. (D) (46) 177, June 13, 1946, not printed, as Appendix III. As Appendix III, this Report Was discussed by the Council of Foreign Ministers at its 20th Meeting, June 17, and its 26th Meeting, June 25. For the United States Delegation Records of those Council meetings, see pp. 509 and 617.
26. Part III of this Report, which was not referred to the Council of Foreign Ministers for consideration, is not here printed.
27. Brackets appear in the source text.
27. Brackets appear in the source text.
28. Not printed.
29. The documents under reference in this sentence are not printed.
30. Not printed.