Current Economic Developments, Lot 70D467
Current Economic Developments 1
No. 192
Czech Compensation Negotiations To Be Continued in Washington
After several years of inconclusive conversations with the Czechs on principles of compensation for US nationalized property in Czechoslovakia, there is now a possibility that agreement will be reached within the next several months. Informal preliminary negotiations have recently been concluded in Praha and we were able to obtain Czech agreement to a continuation of the negotiations in Washington. The chief snag to agreement has been Czech refusal to include as part of the US claim the property of former Czech citizens who became US citizens during the war. This issue is complicated by the fact that in 1929 we adhered to a treaty on nationality with Czechoslovakia which provided that Czech citizens would lose their Czech nationality on assuming US citizenship except when Czechoslovakia is at war.
[Page 386]This section of the treaty is being studied by the Department to determine whether it applies in this instance.
For negotiating purposes we are considering asking for $45 million in settlement of all US claims and the Czechs have so far tentatively offered a figure of $18–20 million, allowing approximately $7.5 million of this amount as compensation for investments which were originally made in dollars. The Czechs have indicated that the lump-sum settlement procedure would be acceptable to them.
Credits and US Export Policy Discussed In the preliminary discussions, before proceeding to the specific issues involved in a compensation settlement, the Czechs stated their desire for a US credit and for the relaxation of US export controls on badly needed items.2 They pointed out that an expansion in exports would be necessary to enable them to meet obligations in dollars under any compensation agreement that might be reached, and that increased purchases of raw materials and equipment from the US would be a prerequisite for such expansion. Therefore, in order to assume obligations under a compensation settlement, as well as to reconstruct Czech international trade, the Czechs felt it necessary to seek a credit from the US of two or three times the amount of money agreed upon as a lump-sum settlement and have since indicated their disposition to use their share of the international gold pool as a guarantee for a private loan in the US which would be used to pay off US nationalization claims. In addition, the Czechs felt that the US export control policy might prove a barrier to reaching a settlement because of the resultant Czech difficulty in obtaining producer investment goods from the US. Our representatives replied that a credit of this size was out of the question and that we would not accept as conditions precedent to a settlement either the granting of a credit or the relaxation of US export controls. Our representatives also refused to make any commitment on what position the US would take regarding credits or export licenses in the event a settlement agreement was reached. The Czechs then stated that they were not asking for a change in US policy, but that they would submit to us a list of the goods they seek. They wish to discuss, in connection with the compensation settlement, the possibility of obtaining some or all of these items.
Issues To Be Negotiated The Czechs again raised the technical issues which have blocked settlement since commencement of negotiations in 1946. They stated that, so long as there is no agreed formula between the US and Czechoslovakia, the Czechs must consider the claims in accordance with Czech law. They indicated that whether the formula arrived at in a compensation settlement would be liberal or restrictive would be dependent on extension of a US loan. Some of the [Page 387] specific points of difference involve: 1) treatment of claims of former Czech nationals who have become US citizens during the war; 2) treatment of claims which represent investments in Czech crowns rather than dollars; and 3) cases where US claims are based on ownership through foreign corporations.
The Czechs stated that former Czech nationals who were naturalized in the US during the war retain their Czech citizenship and that the Czech government would be within its rights in treating such persons on the same basis as other Czechs. They stated that they would consider former Czechs as Czechs, former enemies as enemies, and former Allies on the same basis as native Americans, but later indicated that this was a matter for further negotiation.
In reply to the Czech position that they were not obliged to pay in dollars on claims representing investments in crowns, our representatives pointed out that US citizens were entitled to receive compensation in a usable form for the loss of their properties, and it was agreed that this was an appropriate item for further negotiation. The Czechs indicated that the problem was to find a formula between the economic and legal difficulty of paying dollars for crown investments and an obligation to pay something on such claims.
With respect to US holdings of property in Czechoslovakia through foreign corporations, the Czechs intimated they would be prepared to recognize these claims as American but only when it was obvious that the foreign corporation was a holding company, and only if the holding company were not German. The US position is that the valid beneficial interests of American citizens, held through all foreign corporations, must be recognized.3
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- A weekly classified publication, prepared by the Policy Information Committee of the Department of State, designed to highlight developments in the economic divisions of the Department and to indicate the economic problems which were currently receiving attention in the Department. It was circulated within the Department and to missions abroad.↩
- For documentation on the policy of the United States with respect to trade with the Soviet Union and Eastern Europe, see pp. 61 ff.↩
- Despatch 104, February 14, from Praha, not printed, transmitted the record of discussions of the meetings held in Praha, January 26–February 7, concerning American property claims against the Czechoslovak Government. Representing the United States were Emil Kekich, Commercial Attaché of the Embassy in Praha, and Frank D. Taylor of the Lend Lease and Surplus Property Staff, Department of State. Representing Czechoslovakia were Evzen Loebl, Czechoslovak Deputy Minister for Foreign Trade; Dr. Leopold Chmela, General Manager of the Czechoslovak National Bank; Dr. Rudolf Bystricky, Chief of the Economic Department of the Czechoslovak Foreign Ministry; and Dr. Hugo Skala, Deputy Plenipotentiary for Compensation Claims of the Czechoslovak Ministry of Finance (860F.5034/2–1449).↩