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

C.F.M. Files: Lot M–88: Box 2079: CFM Documents

Second Report of the Committee of Economic Experts to the Deputies of Council of Foreign Ministers⁶⁸

secret
CFM(46) (NY)20

New York, November 21, 1946.

1. Treaty with Italy: Reparation for other Powers (Article 64, Part D)

The Committee was instructed to consider the drafting of Part D of Article 64.⁶⁹ In the course of the Committee’s discussions, a text was submitted by the French representative which goes beyond mere drafting changes but does not affect the substance of the agreed provision.

The Committee ultimately agreed on the following text:

“The claims of Powers which are receiving territories under the present Treaty and which are not mentioned in Part B of this Article shall also be satisfied by the transfer to the said Powers, without payment, of the industrial installations and equipment situated in the ceded territories and employed in the distribution of water, and the production and distribution of gas and electricity, owned by any Italian company whose siège social is in Italy or is transferred to Italy, as well as by the transfer of all other assets of such companies in ceded territories.

“Responsibility for the financial obligations secured by mortgages, liens and other charges on such property shall be assumed by the Italian Government.”

2. Contracts (All Treaties)

The Committee recommends the following text for Part I of Annex VII of the Italian Treaty⁷⁰ and Annex 5 of the other treaties:

• “1. Any contract which required for its execution intercourse between any of the parties thereto having become enemies as defined in paragraph 4 of this Annex, shall, subject to the exceptions set out in paragraph 2 of this Annex, be deemed to have been dissolved as from the time when any of the parties thereto became enemies. Such dissolution, however, is without prejudice to the provisions of Article 70 of the present Treaty, nor shall it relieve any party to the contract from the obligation to repay amounts received as advances or as payments on account and in respect of which such party has not rendered performance in return.
• “2. Notwithstanding the provisions of paragraph 1 of this Annex, there shall be excepted from dissolution and, without prejudice to the rights contained in Article 69 of the present Treaty, there shall remain in force such parts of any contract, otherwise dissolved under the provisions of paragraph 1 above, as are severable and did not require for their execution intercourse between any of the parties thereto having become enemies as defined in paragraph 4 of this Annex. Where the provisions of any contract are not severable in this context, the contract shall be deemed to have been dissolved in its entirety. The foregoing shall be subject to the application of municipal laws, orders or regulations made by any of the Allied and Associated Powers having jurisdiction over the contract or over any of the parties thereto and shall be subject to the terms of the contract.
• “3. Notwithstanding the foregoing provisions, contracts of insurance and reinsurance shall be subject to separate agreements between the Government of Italy and the Government of the Allied or Associated Power concerned.
• “4. For the purposes of Parts I, II and III of this Annex natural or juridical persons shall be regarded as enemies from the date when trading between them shall have become unlawful under laws, orders or regulations to which such persons or the contract was subject.”

The U.K. representative proposes an additional paragraph 2A as follows:

“Nothing in this Annex shall be deemed to invalidate transactions lawfully carried out in accordance with a contract between enemies if they have been carried out with the authorization of the Government of one of the Allied and Associated Powers.”

Statement by the United Kingdom Representative

The intention of this paragraph is to preserve contracts between enemies which have been properly authorized for execution by the Government of an Allied or Associated Power but might otherwise be dissolved under paragraph 1.

These contracts may have been entered into before the war and kept alive by authority under relative Trading with the Enemy legislation (including, for example, payments to custodians) or authorized transactions with enemies (including enemies by specification) during the war. The U.K. representative regards a provision of this kind as necessary for the protection of persons who have acted under the authority of their governments.

The U.S.S.R. representative cannot agree with the U.K. proposal because it provides for the maintenance of contracts between enemies concluded during the war in accordance with the authorization of the ‘Government.

The French and U.S.A. representatives reserve their positions.

3. Periods of Prescription (All Treaties)

The Committee recommends the following text for Part II of Annex 7 of the Italian Treaty and Annex V of the other Treaties:

• “1. All periods of prescription or limitation of right of action or of the right to take conservatory measures in regard to relations concerning persons or property, involving United Nations nationals and Italian nationals who, by reason of the state of war, were unable to take action or comply with formalities, irrespective of whether these periods commenced before or after the outbreak of war, shall be regarded as having been suspended for the duration of the war in Italian territory, on the one hand, and in the territory of those United Nations which grant to Italy, on a reciprocal basis, the benefit of the provisions of this paragraph, on the other hand. They will begin to run again on the coming into force of the present Treaty. The provisions of this paragraph will be applicable in regard to the periods fixed for the presentation of interest or dividend coupons or for the presentation for repayment of securities drawn for repayment or repayable on any other ground.
• “2. Where, on account of failure to perform any act or comply with any formality during the war, measures of execution have been taken in Italian territory to the prejudice of a national of one of the United Nations, the Italian Government shall restore the rights which have been detrimentally affected. If such restoration is inequitable or impossible, the Italian Government shall provide that the United Nations national shall be afforded such relief as may be just and equitable in the circumstances.”

4. Miscellaneous Provisions (All Treaties)

The United Kingdom representative withdraws Part IV of Annex 7 of the Italian Treaty and Annex V of the other Treaties.

5. Claims on Germany (All Treaties)

The United States representative proposed the following text for inclusion mutatis mutandis in all the Treaties:

1. From the date of coming into force of the present Treaty, property in Germany of Roumania and of Roumanian nationals shall no longer be treated as enemy property and all restrictions based on such treatment shall be removed.

2. Identifiable property of Roumania and of Roumanian nationals removed by force or duress from Roumanian territory to Germany by German forces or authorities after September 12, 1944 shall be eligible for restitution.

3. The restitution and restoration of Roumanian property shall be effected in accordance with measures to be determined by the Powers in occupation of Germany.

4. Without prejudice to these and any other dispositions in favor of Roumania and Roumanian nationals by the Powers occupying Germany, Roumania waives on its own behalf and on behalf of Roumanian nationals all claims against Germany and German nationals outstanding on May 8, 1945, except those arising out of contracts and other obligations entered into, and rights acquired, before September 1, 1939. This renunciation shall be deemed to include debts, all inter-governmental claims in respect of arrangements entered into in the course of the war and all claims for loss or damage arising during the war.

The U.S.A. representative feels that these provisions, including paragraph 4, should be included in all treaties. The first three paragraphs would give substantial satisfaction to the legitimate claims of the former enemy states. One of the principal objections which has been raised to the last paragraph by the enemy states is in connection with the renunciation of claims for goods exported to Germany during the war. These claims represent the material aid given Germany in the conduct of her war against the Allies, and the U.S. representative feels that it would be inadvisable to draw any distinctions in this respect among the enemy states by including the renunciation in certain treaties and omitting it from others.

The U.S.S.R. representative proposed the inclusion of the above draft in its entirety in the treaties with Italy and Rumania, subject to the inclusion of only the first three paragraphs in the treaties with Bulgaria, Hungary and Finland.

The U.K. representative supports the proposal made by the United States representative in this matter and considers that the same provisions should be included in all the Treaties.

The questions involved in each Treaty are the same. There is no intention, so far as the United Kingdom Government is concerned, to treat any of the countries differently regarding the restoration of their property in Germany or in matters of restitution. These will be subject to the dispositions of the Occupying Powers. As regards the claims of the ex-enemy States on Germany the United Kingdom representative could not consent to allow these claims to be kept alive at a time when Allied Governments have renounced their claims and those of their nationals, and in particular he could not be a party to keeping alive claims in respect of goods delivered, or services rendered, to Germany during the war.

6. Insurance (All Treaties)⁷¹

The Committee was unable to reach agreement on this subject and reports the separate views of its members.

Statement by the United Kingdom Representative

1. The U.K. representative has reconsidered the wording of other Articles in the Treaty and remains of the opinion that the position of United Nations insurers whose portfolios of business have been transferred to other companies during the war (see para. 1. of the Insurance Annex) is not covered by them. These portfolios cannot be brought within the terms “property, rights and interests” by any ordinary construction of those terms. Insurance policies are property rights and interests for the policy holder but for the issuer they are a liability or a contingent liability. Policies issued may be regarded in some degree as the “goodwill” of this specialised business; they represent the insurance sold from which the premium income is derived and unless policies are issued it is obvious that the business ceases. There seems every justification in principle for enabling United Nations insurers to recover former portfolios which have been transferred elsewhere or, at the very lowest, to require the ex-enemy Government to see that no obstacles are placed in the way of their resumption. The resumption of portfolios is not covered by other provisions and the U.K. representative considers that an explicit reference must be made in the Treaty to them.

2. In view of the suggestion which has been made that para. 1. of Part B of Annex VI of the Italian Treaty (and the comparable paragraph in the other Treaties) might be considered for inclusion in the body of the Treaty, the U.K. representative has proposed the following phrase for insertion after the word “Treaty” in line 8, paragraph 2 of Article 68⁷² viz:

“and no obstacles (other than any applicable to insurers generally) shall be placed in the way of the resumption by insurers who are United Nations nationals of their former portfolios of business”.

3. As regards the second paragraph of the Annex, which relates to guarantee deposits or reserves, the U.K. representative considers that a provision of this kind should be included but is unable to find a place in the body of the Treaty in which it could be suitably inserted.

4. The position is that as a legal requirement for carrying on business certain guarantee deposits or reserves are required to be constituted; these are to be distinguished from the actuarial or trading reserves of the company which are not referred to in the paragraph under consideration. The proposal is that if the guarantee deposits have decreased they shall nevertheless be accepted as they now stand, for the limited period of three years, as satisfying any legal requirements. This is regarded by the U.K. representative as a reasonable provision. United Nations’ insurers have not been in a position to control their business during the war, they will require a period in which to ascertain their position and even to decide whether or not in the altered circumstances they would wish to resume business. During this interim period it is not considered just that they should be required to put up new money to reconstitute their guarantee funds; it may even be that the Foreign Exchange Regulations in their own countries would make such a course difficult or impracticable. The proposal places no burden on the ex-enemy Government.

5. In the course of discussion the U.K. representative accepted certain drafting amendments suggested and the paragraph would accordingly read as follows:—

“Should an insurer, who is a national of any of the United Nations, wish to resume his professional activities in Italy, and should the value of the guarantee deposits or reserves required to be held as a condition of carrying on business in Italy be found to have decreased as a result of the loss or depreciation of the securities which constituted such deposits or reserves, the Italian Government undertakes to accept, for a period of three years, such securities as still remain as fulfilling any legal requirements in respect of deposits and reserves.”

6. If it is accepted that a provision of this kind should be inserted in the Treaties (other than that with Bulgaria) and if it is agreed that there is no suitable place for its insertion in the body of the Treaty (i.e. that an Annex is necessary), it will be for consideration whether the wording proposed in para. 2 above should be included in the Annex as the first paragraph rather than in an Article in the Treaty.

7. The U.K. representative informed the Committee that his Delegation were prepared to withdraw the Insurance Annex in the case of Bulgaria.

Statements by the U.S.A., French, and U.S.S.R. Representatives

The U.S.A. representative believes that it would be preferable to include any provisions on insurance in a separate annex. He considers that the revised texts set forth in the U.K. statement above are reasonable and supports their inclusion in the treaty.

The French representative supports the inclusion of these two texts in the Treaties but is prepared to advance the time limit to 18 months.

The U.S.S.R. representative does not deem it necessary to include in the Treaty a special annex on Insurance, in as much as the rights and interests of United Nations nationals in all fields of economic activity are guaranteed by the provisions of Article 68 of the Treaty with Italy and the corresponding Articles of other Treaties. Furthermore the U.K. proposal provides special privileges for foreign insurance companies in Italy (Roumania, Hungary and Finland), to which the U.S.S.R. Delegation cannot agree.

7. Petroleum (Rumanian Treaty)⁷³

The Committee was unable to reach agreement on this subject and reports the separate views of its members.

Statement of United Kingdom Representative

1. The U.K. representative considers that having regard to the fundamental changes in the petroleum industry introduced by the Petroleum Law of 1942, enacted under Nazi influence, it would be preferable to include in the Roumanian Treaty specific provisions requiring the Roumanian Government to modify the law and to afford industry fair and equitable treatment. He appreciates none the less the reasons which have prompted certain Delegations to indicate their preference for the inclusion of a form of words in the body of the Treaty which would not refer in terms to a particular industry. In these circumstances, and with a view to securing agreement, he proposed that the following sentence should be added at the end of para. 1 of Article 24:—⁷⁴

“If necessary, the Roumanian Government shall revoke legislation enacted since 1st September 1939 which has adversely affected the rights of United Nations nationals and shall enact such new legislation as would restore the rights then existing.”

2. The U.K. representative considers that the slight difference in wording in this sentence from that contained in para. 3 of Part D of Annex IV is necessary if specific obligations relating to the Petroleum Law of 1942 are to be omitted. The generality of the provisions of para. 1 of Article 24 requires the restoration of the legal rights of United Nations nationals as they existed on Sept. 1st 1939, and even if restoration to exactly the original position might be impracticable, this paragraph taken in conjunction with the explicit requirement to modify the provisions of this Nazi inspired Law, justified the expectation that the pre-war and the post-war positions of United Nations owners would not be substantially different or, after negotiation, would not be unacceptable to them. If however the Treaty is to contain no reference to the Law in question, which has undoubtedly infringed the rights acquired under earlier legislation, has forced United Nations’ nationals into unwilling partnership with other interests and has introduced new elements of discrimination, the U.K. representative considers that the Treaty should in terms provide for legislation to restore the pre-war rights of United Nations’ nationals if this cannot be done in any other way. This course appears to him to be entirely consistent with para. 1 of Article 24 as it now stands.

The French and U.S.A. representatives would be prepared to accept the new U.K. draft if it were confined to discriminatory measures, and propose the following revision:

“If necessary, the Roumanian Government shall revoke legislation enacted since September 1, 1939 which discriminated against the rights of United Nations nationals and shall take all measures necessary to restore the rights then existing.”

The U.S.S.R. representative believes that this question is covered by Article 27 on United Nations property in Roumania and sees no reason for the inclusion in the Treaty of any special provisions with respect to petroleum.

68. This Report was discussed by the Council of Foreign Ministers at its 10th Meeting, November 28, 1946. For the decisions of the Council with regard to the proposals contained here, see the United States Delegation Minutes and the Record of Decisions of that Council meeting, pp. 1324 and 1337.
69. For text of article 64, Part D, of the Draft Peace Treaty with Italy as included in the Record of Recommendations of the Peace Conference, see vol. iv, p. 903.
70. For text of Annex VII of the Draft Peace Treaty with Italy as submitted to the Peace Conference by the Council of Foreign Ministers, see ibid., p. 54. This text had been adopted by the Peace Conference with the amendment included in the Record of Recommendations of the Peace Conference (ibid., p. 914) regarding the inapplicability of the Annex as between the United States and Italy.
71. Under consideration at this point is Annex VI, Part B, of the Draft Peace Treaty with Italy as included in the Record of Recommendations of the Peace Conference, vol. iv, p. 914. Comparable sections had been adopted by the Peace Conference for the other treaties.
72. For article 68, paragraph 2, of the Draft Peace Treaty with Italy as submitted to and adopted by the Peace Conference, see vol. iv, p. 28.
73. Under consideration at this point was Annex IV, Part D, of the Draft Peace Treaty with Rumania as adopted by the Peace Conference by a simple majority; for text, see vol. iv, p. 88.
74. For text of article 24, paragraph 1, of the Draft Peace Treaty with Rumania, see vol. iv, p. 70, and the amendment to that paragraph included in the Record of Recommendations of the Paris Peace Conference, ibid., p. 920.