818.5051/5–946

The Secretary of State to the Ambassador in Costa Rica ( Johnson )

No. 680

The Secretary of State refers to the Embassy’s despatch no. 1913 of May 9, 1946, in regard to the status of the employees of certain United States Government corporations that operate in Costa Rica vis-à-vis the courts of that country.

That a Government agency operating in a foreign country is entitled to sovereign immunity in that country is a recognized principle of international law. This is equally true in Costa Rica, and there a Presidential decree has been issued with respect to United States Government agencies operating in that country giving concrete expression to that fact. Consequently, no issue is involved in regard to the recognition of this principle.

[Page 699]

From a policy standpoint The Institute of Inter-American Affairs and the Inter-American Educational Foundation, Inc. have quite properly insisted that they are entitled to sovereign immunity, but at the same time, according to the Deparment’s understanding, have endeavored insofar as possible to conform to local customs and usages in the employment of national personnel, not as a matter of duty or obligation but rather as a gesture of courtesy and good will. …

It should be noted, however, that the practice of the corporations under reference has not been uniform in the various American republics with respect to payment of Social Security and other similar benefits. In some countries, notably Chile and Ecuador, the contributions called for by local laws have been adopted by the corporations as the basis or scale for making such payments, and, as a consequence, there has been in effect almost complete compliance with such laws although on a voluntary basis. In other countries no compliance has been made at all and in still other countries there has been a partial compliance. The variance in practice may possibly be explained, in part at least, as a result of the comparative strength of the Social Security and labor systems and the political situation existing in the particular country at the time the decisions were made. It has not been considered advisable to attempt to lay down an invariable course of action applicable to the activities of the corporations in all the countries, and it has seemed more desirable to follow whenever possible the precedents which had already been established in that regard.

As regards the transfer of certain employees of the Health and Sanitation Division of The Institute of Inter-American Affairs to the Servicio in Costa Rica, it is understood that this has been effected in such a way as to comply with “preaviso” requirements. …

In the case of the Food Mission of the Institute which operates in Costa Rica, substantial compliance with those laws has been made on a voluntary basis by promulgating locally regulations which follow very closely the national Codigo, especially with respect to the provisions of preaviso and cesantía. Upon termination of employment their personnel has been paid amounts equivalent to the cesantía received by employees of private concerns.

In regard to the compensation of local employees for injuries, it has been held that all classes of employees of the corporations are considered to come under the protection of the United States Employees’ Compensation Act and the Field Manual of the corporations provides that claims for injuries and death shall be referred to the Commissioner of the United States Employees’ Compensation Commission36 [Page 700] for action and payment. With the amendment of the United States Employees’ Compensation Act (Public Law 161, 79th Congress, approved, July 28, 1945) considerable freedom has been given to the Commission with respect to the payments of compensation for disability of employees in foreign countries. The Commission can, in effect, adopt either the local laws, customs, or practices or promulgate its own schedules of compensation. It is the understanding of the Department that the Resident Claims Commissioner in the Canal Zone, by letter dated September 18, 1945,37 indicated to the United States Ambassador to Costa Rica that it intends to follow the provisions of the local laws in regard to payments to Costa Rican nationals who are employees of the corporations. Consequently, there is no reason to believe that such local employees are not adequately protected against injury. To comply in addition with the labor laws of Costa Rica by purchasing locally a policy of Workmens’ Compensation Insurance would increase the expenses of the corporations and uselessly duplicate their insurance protection. The additional cost required would have to be defrayed by the corporations and there is certainly a strong possibility that the Comptroller General of the United States would question the propriety of such payments.

It is the understanding of the Department that exceptions have already been taken by the General Accounting Office in regard to payments made on behalf of Social Security in Ecuador. In making such exceptions the Comptroller General referred to his previous ruling in the same sense and cited Volume IV of Hackworth’s Digest of International Law, page 798, as authority for the doctrine that the United States, in its capacity of employer of subjects of foreign countries in its consulates, embassies, etc. abroad, is not required to comply with the laws of foreign governments requiring payments of a similar nature.

It was believed in view thereof, that it would be desirable from the standpoint of good relations, especially because of the type of operations being conducted by the corporations abroad in the fields of Health and Sanitation, Agriculture and Education, that some method be worked out to legalize the payments or contributions under the social security or labor laws of the local governments. In order to clarify the situation generally and with the view to ratifying payments already made by the corporations and providing authority for payments in the future, resolutions of that nature were adopted by the Boards of [Page 701] Directors of The Institute of Inter-American Affairs and the Inter-American Educational Foundation, Inc. on July 15, 1946. These resolutions authorize the Ranking Field Officials of the corporations to determine in each country whether or not and to what extent compliance on a voluntary basis should be made by the corporations with the local social security and labor laws. In arriving at a decision on these points the Ranking Field Officials will be expected to be guided in making an appraisement of the importance of the local factors involved by the experience of the United States diplomatic missions. Relating this to the questions presented in Costa Rica, the effect would be to permit a reappraisement of the situation in the light of existing circumstances by the Ranking Field Officials of the corporations and the U.S. Embassy there.

Employees’ Compensation which was created by the Federal Security Administrator, effective July 16, 1946.

  1. Functions of this Commission were assumed by the Bureau of
  2. Not printed.