740.00119 PW/5–2247
Memorandum by the Assistant Legal Adviser for Political Affairs (Snow) to Mr. Rufus Burr Smith of the Division of Japanese and Korean Economic Affairs98
1. A legal opinion is requested on the problem of the transfer from Japan of assets available as reparations, the reparations properties to be transferred to the United States Military Government in Korea on behalf of the Korean people.
2. It has been stated by the State, War and Navy Departments in SWNCC 310/1, 12 July 1946,99 that Japanese external assets in Korea are to be retained in Korea and “held in trust for the benefit of the Korean people” (par. 2 b). The United States reported to FEC, in FEC 061/3, 23 Oct. 1946, a Soviet comment on an American proposal, to the effect that Japanese assets in Korea should be retained in Korea and excluded from the reparations fund [par. 4(3)],1 and a statement by the United States that it welcomed the Soviet endorsement of the American proposal that Japanese assets in Korea should be retained “for the benefit of the Korean people” [par. 5(3)]. The United States proposed to FEC, in FEC 211/3, 2 April, 1947, that in so far as fulfillment of claims for industrial equipment is in excess of the ability or desire of the claimant country to utilize it, the country should have the right to allocate or otherwise dispose of its claim, to Korea, on a political basis (par. 1 K).
3. The Supreme Commander of the Allied Powers in Japan, in virtue of the military occupation, is in possession of the Japanese assets in Japan determined to be available for reparations. SCAP can allocate part of the United States share of such assets to the United State Military Government in Southern Korea, “for the benefit of the Korean people”, and cause the assets so allocated to be transferred to Korea, into the possession of the United States Military Government in Southern Korea. Property so transferred can then be held by the United States Military Government in Southern Korea “in trust for the Korean people”, precisely on the same terms as Military Government is now holding Japanese external assets in Korea, as appears from paragraph 2 above.
4. Such allocation and transfer of Japanese reparations property to the United States Military Government in Korea need not involve any transfer of title to property while both Korea and Japan remain under Allied, control; transfer of title could be postponed until a [Page 401] Korean government is in being and capable of holding property, or until the Japanese peace settlement.
On the other hand, it may be desired to transfer title at an earlier date from the Japanese owners of property. Such transfers could be effected through the Japanese Government on instructions of SCAP. Title to property so transferred would be vested in the United States. Later, the property would be transferred to the Government of Korea for disposition in the interest of the Korean people.
It is not believed that Article IV, Section 3, of the United States Constitution would govern the disposition of Japanese reparation property transferred to USAMGIK, so that only Congress could authorize a subsequent transfer from Military Government to the national Korean administration. While title to the reparations property allocated to Korea would be in the United States, the United States would not be the beneficial owner, but rather a trustee holding legal title only. When the transfer is made from the Japanese owners it would at that time be clearly understood that the United States was taking title “for the benefit of the Korean people”. Because of the trust thus declared, the property would not be such as to fall within the Constitutional provision for exclusive Congressional disposition of Federal Government property.
Judicial precedents bearing on this problem are unavailable, since the settlement after World War II presents the first occasion on which the United States has sought reparations from defeated enemy states. No sufficiently close analogies in which there are judicial decisions have been found. But a number of precedents in practice exist in Europe and the Far East, in the aftermath of the war.
In Germany, for example, the United States, together with the other occupying powers, vested in themselves the title to German external assets. Law No. 5 of the Allied Control Council, Germany, October 31, 1945. In the absence of any Congressional authorising action, the United States has taken steps together with other of the Allied Powers disposing of title to certain German assets in some of the neutral countries. Similarly, the United States Military Government in Korea vested in the Government title to all Japanese assets in Korea. Pursuant to directives approved by SWNCC (i.e., SWNCC 265/1, September 27, 1946) USAMGIK has been authorized, in the absence of Congressional action, to sell certain of these assets in Korea.
In both of these cases the vesting took place for the purpose of exerting plenary control over the enemy assets in question. While the United States Government took legal title to property, it did not purport to acquire the property in beneficial ownership. Rather, it took title as a trustee or custodian, implying that final disposition of the [Page 402] enemy property involved would be determined by the peace settlements, or by other inter-Allied agreement.
Similarly, if Japanese reparations property were now transferred to the United States, the Government would hold the property virtually in trust, to inure to the benefit of whatever authority or persons should be decided on subsequently in international agreement. The transfer from the Government could at that time be effected under the authority of the President without Congressional authorization.
5. The legal opinion expressed above does not take into account considerations of policy which might make it advisable and desirable for the Executive branch of the Government to secure Congressional approval for, or at least keep Congress informed of, plans to allocate some of the United States share of Japanese reparations to Korea. Such allocations would of course be closely bound up with the program of American relief and rehabilitation of the Korean economy.
- Mr. Smith was head of the reparations mission to Japan.↩
- See annex to SWN–4541, July 12, 1946, Foreign Relations, 1946, vol. viii, p. 546.↩
- Brackets in this paragraph indicated in the original.↩