The Acting Secretary of State to the Ambassador in Brazil (Pawley)
A–431. 1. In the course of negotiations with another country, the Department asked the Civil Aeronautics Board for a more specific interpretation of “substantial ownership and effective control” reference paragraph 1 Embassy’s telegram no. 1007, May 31, 1946.78
2. The CAB replied that insofar as the requirement of “substantial ownership” is concerned, CAB feels this does not connote any definite numerical proportion, but that it should be held to require at the least that the particular nationality referred to shall be the nationality representing the largest interest in the enterprise held in the aggregate by the citizens of any one nation.
3. As to the requirement of “effective control”, CAB feels this must be examined in the light of the circumstances of each particular case. It is possible that although Brazilian (or U.S.) nationals might hold in the aggregate a majority interest in a particular enterprise, effective control of that enterprise might not be lodged in the hands of Brazilian (or U.S.) citizens. For example, the Brazilian (or U.S.) block might be made up of a multitude of small fragments, while the [Page 472] balance of the stock might be held in one comparatively large block by a national of some other country. On the other hand, a less-than-majority interest, such as 40% of the stock of the enterprise, might, in a particular fact situation, satisfy the requirement of effective control, as where that block were closely held by nationals of the particular country, and the remaining stock were widely distributed in small blocks among citizens of other nations. In other words, the Board feels that sufficient stock must be held by the nationals of the country concerned to be effective when voted in the aggregate, and that whether such aggregate stock interest in any particular case is to be regarded as representing effective control must be determined upon the facts of that case.
- Not printed; it transmitted inquiries of the Brazilian Foreign Office to which this airgram provided replies (711.3227/5–3146).↩