501.BC Indonesia/6–348: Telegram
The Consul General at Batavia (Livengood) to the Secretary of State
466. Gocus No. 297. Re Usgoc 101:1 Netherlands plan union court (paragraph 18 Gocus 2392 and paragraph 7 Gocus 2413) envisages severe restraints on USI political and economic freedom by court outside USI composed equal number Indonesian and Netherlands judges. Other features Netherlands plan for USI and union calculated assure subordinate position Republic in USI and guaranteed dominance Netherlands adherents in Asi [ USI ] and consequently in court. In addition objections union court set forth Gocus 286,4 right of member state in USI to win judgment against neighbor state through appeal to authority outside nation might well foment civil conflict. Moreover, jurisdiction union court in cases involving individuals and corporations might be used perpetuate Netherlands monopoly position. While established USI [US] interests Indonesia would doubtless gain same protection as Dutch interests through such court, US delegation believes US enterprises seeking participate Indonesia in future would have more favorable position in USI court than in union court, further that should USI and US sign commercial treaty, US interests would best be served if court outside USI cannot interfere in contracts pursuant such treaty. In short, US delegation believes jurisdiction union court should be limited cases brought by USI or Netherlands Governments and arising under union statute with provision that highest court USI or Netherlands could in all cases arising in own jurisdiction request advisory opinion union court. As Netherlands undoubtedly aware, however, formation USI honest basis will result union court chronically split fifty-fifty. US delegation would favor further proviso for election one additional justice by other justices union court or for [Page 211] appeal to international court or other neutral body in case of divided court.
US delegation assumes Department sees US economic interests Indonesia as three fold: (a) earliest restoration islands to stability and full production; (b) maximum reasonable protection Netherlands economic stake Indonesia in interest sound recovery Holland and western Europe and (c) protection established US interests plus assurance future equality opportunity for USI [US] investors and enterprise.
US delegation believes these interests not irreconcilable.
US delegation sees no hope substantial economic rehabilitation Indonesia except within framework settlement satisfactory nationalist aspiration. (This connection see Gocus 228 and weekly report USAOGJA period May 24 to 31.5)
As regard Netherlands economic stake, US delegation tentatively suggests following principles governing Netherlands-Indonesian economic relations be incorporated union statute:
- 1.
- Netherlands nationals and corporate bodies to be granted national treatment as regards legal status (except land ownership which traditionally reserved natives any case), internal taxes and export duties, such guarantee to extend 20 years.
- 2.
- USI to assume full pre-war debts of NEI, internal and external, and proportion post-war debt to be negotiated.
- 3.
- USI to honor all existing NEI contracts and obligations for full terms. (Djuanda has given private assurance Republic would not object extending time period estate and other lease holds to compensate interruption operations since 1942.) Contracts upon expiration to be renewable by negotiation with USI. In cases where impossible fulfill existing contracts, USI to guarantee full indemnification holders contracts and owners physical assets.
- 4.
- Exchange rate Netherlands and USI currencies to be changed only after consultation and agreement on rate at which existing obligations to be discharged.
- 5.
- Right Netherlands nationals to remit foreign exchange to be recognized subject right USI in special circumstances to safeguard its exchange position by temporary measures.
- 6.
- USI to join ITO, Monetary Fund and International Bank.
US delegation suggests Department also consider desirability preferential tariffs for certain Netherlands products for specified period and within limitations ITO charter.
As regards direct US interests, foregoing guarantees would not of course preclude US seeking similar rights. Principle 3 above would by implication define and guarantee rights all foreign concessionaires including Americans.
[Page 212]Following considerations, moreover, bear on future US position Indonesia: (1) Objectionable Dutch pre-war monopoly practices made possible almost wholly by Netherlands political control Indonesia. When this basis withdrawn, door potentially fully open for US business. Principles suggested above would not in themselves restrict American investors. (2) As chief source capital funds, the US is only nation in position provide adequate assistance in reconstruction and development Indonesia during early years USI. (3) USI leadership will undoubtedly seek counterweight to initially predominant Dutch economic interests Indonesia; private American capital is only logical contender. (4) Republic leaders, who greatly impressed all aspects US industrial prowess; express intention looking to US for technical assistance, technical training and higher education, especially in professional fields. (It impossible overstate interest of educated Indonesians in close cultural relations with English speaking nations, particularly US. Pertinent example is beginning already made towards making English second language to the Dutch in Republic schools.) (5) US political prestige in Indonesia will soar on strength political settlement satisfactory to nationalists sentiment.
While Netherlands-Republic agreement cannot itself assure US equality opportunity Indonesia, we feel above considerations hold out good prospect favorable economic agreements US with future USI. Also, though no absolute assurance can be obtained against unwise actions future USI government, this risk, inherent with any sovereign power, will be lessened by dependence USI on US for capital and technical assistance. In opinion US delegation, restrictions on USI sovereignty, as envisaged by Netherlands delegation, can only react against prospects western orientation of USI and will lead eventually to complete dislodgement Netherlands interests at least. In our opinion, moreover, Netherlands delegation approach to sovereignty issue conditioned as much by fear of opening Indonesia to free competition other foreign enterprises as by fear of Indonesian measures against Dutch economic interests.
US delegation would appreciate Department’s views above suggestions and analysis soonest.
Regarding second paragraph Usgoc 101, US delegation intention is that political agreement incorporates specific agreements on steps to be taken to carry out complete program for formation use. Regarding third paragraph, political agreement as contemplated by GOC would also include specific provision for method delineation states. However, actual delineation states by technical commission would follow political agreement. Should parties accept procedure for formation provisional federal government and USI outlined Gocus 292,6 we confident [Page 213] delineation states would present no problem. Critchley believes Republic would accept former provinces and analogous administrative areas as states.
US delegation now drafting procedure outlined Gocus 292 with intention drafting proposal for principles of union statutes soonest thereafter, such principles to include preservation legitimate Netherlands economic and military interests USI. Subject acceptance by GOC, believe our suggestions should go to parties as working papers under covering letter stating that while proposals to be considered informal this stage, GOC would have to reserve right include working papers together with comments parties in report to SC should it become evident to GOC that parties could not agree on its proposals or any other basis for political settlement and that GOC must hence report failure to SC and ask instructions. Should Belgian delegation object both proposals and this form presentation we would, subject Department approval, present proposals this manner anyway if only as joint US delegation–Australian delegation contribution.
Department pass Hague.7