Foreign Relations of the United States, 1955–1957, Arab-Israeli Dispute, 1957, Volume XVII

250. Telegram From the Embassy in Egypt to the Department of State¹

Cairo, March 26, 1957—8 p.m.

3032. Following is text of draft memorandum specified in point 6 of March 18² just handed me by Fawzi on “personal and confidential” basis. Fawzi said texts also being given governments of India, USSR, Yugoslavia, Jordan, Saudi Arabia, and Syria. Not intended to give publicity at this time, formal announcement being planned in about 6 or 7 days. Hammarskjöld has also been given copy for such use as he thinks appropriate. Fawzi said “comments will be welcomed”.³

“Personal and confidential.

Draft Memorandum.

1. The Government of Egypt are pleased to announce that the Suez Canal will be open for normal traffic by mid-April, and will thus once again serve as a link between the nations of the world in the cause of peace and prosperity.

2. The Government of Egypt acknowledge with appreciation and gratitude the efforts of the states and peoples of the world who contributed to the restoration of the Canal for normal traffic and of the UN whose exertions enabled the clearance of the Canal to be accomplished peacefully and in a short time.

3. In elaboration of the principles set out in their memorandum dated the 18th of March 1957, the Government of Egypt hereby make the following declaration arrangements for its operation.

4. Re-affirmation of Convention.

It remains the unaltered policy and firm purpose of the Government of Egypt to respect the terms and the spirit of the Constantinople Convention of 1888 and the rights and obligations arising therefrom.

5. Observance of the Convention and of the Charter of the UN.

While re-affirming their determination to respect the terms and the spirit of the Constantinople Convention of 1888, and to abide by the Charter and the principles and purposes of the UN, the Government of Egypt are confident that the other signatories of the said Convention and all others concerned will be guided by the same resolve.

6. Disputes, disagreements or differences arising out of the Convention.

(a) Disputes or disagreements arising between the parties to the Constantinople Convention of 1888 and in respect of it shall be settled in accordance with the Charter of the UN.

(b) Differences arising between the parties to the said Convention in respect of the interpretation of its provision, if not otherwise resolved, will be referred to the International Court of Justice under Article 36 of its statute or, by agreement, to an appropriate organ of the UN.

7. Freedom of navigation, tolls and development of the Canal. The Government of Egypt are more particularly [determined?]

(a) To afford and maintain free and uninterrupted navigation for all nations in accordance with the Constantinople Convention of 1888.

(b) That tolls shall continue to be levied in accordance with the last agreement concluded on the 28 of April 1936,⁴ between the Government of Egypt and the Suez Canal Maritime Company; and that any increase in the current rate of tolls within any 12 months, if they take place, shall be limited to 1 percent, and any increase beyond that level to be the result of negotiations, and

(c) That the Canal is maintained and developed in accordance with the progressive requirements of modern navigation and that such maintenance and development shall include the 8 and 9th programs of the Suez Canal Maritime Company, with such improvements to the Canal as are considered necessary.

8. Operation and Management.

The Canal will be operated and managed by the autonomous Suez Canal Authority established by the Government of Egypt on the 26 of July, 1956. The Government of Egypt are looking forward with confidence to continued cooperation with the nations of the world in advancing the usefulness of the Canal.

9. Financial Arrangements.

(a) Tolls shall be payable in advance to the account of the Suez Canal Authority at any bank as may be authorized by it. In pursuance of this, the Suez Canal Authority has authorized the national bank of Egypt and the bank of international settlement to accept on its behalf payment of the Canal tolls.

(b) The Suez Canal Authority shall pay to the Government of Egypt 5 percent of all the gross receipts as royalty.

(c) The Government of Egypt nave decided to establish a Suez Canal capital and development fund into which shall be paid 25 percent of all gross receipts. This fund will assure that there shall be available to the Government of Egypt adequate resources to meet the needs of development and capital expenditure for the fulfillment of the responsibilities they have assumed and are fully determined to discharge.

10. Canal Code.

The regulations governing the Canal, including the details of its operation, are embodied in the Canal Code which is the law of the Canal.

11. Discrimination and Complaints Arising Out of the Canal Code.

(a) In pursuance of the principles laid down in the Constantinople Convention of 1888, the Suez Canal Authority, by the terms of its statute can in no case grant any vessel, company or other party any advantage or favour not accorded to other vessels, companies or parties on the same conditions.

(b) Complaints of discrimination or violation of the Canal Code shall be sought to be resolved by the complaining party by reference to the Suez Canal Authority. In the event of such a reference, the matter may be referred to an arbitration tribunal composed of one nominee of the complaining party, one of the authority and a third to be chosen by both. In case of disagreement such third member will be chosen by the President of the International Court of Justice.

(c) The decisions of the arbitration tribunal shall be binding upon the parties when they are rendered and these must be carried out in good faith.

(d) The Government of Egypt will study the appropriate further arrangements that could be made for fact-finding consultation and arbitration on matters not otherwise covered in the present paragraph.

12. Compensation and Claims.

The question of compensation and claims in connection with the nationalization of the Suez Canal Maritime Company shall, unless agreed between the parties concerned, be referred to arbitration in accordance with the established international practice.

The Government of Egypt make this declaration as an expression of their desire and determination to enable the Suez Canal to be an efficient and adequate waterway linking the nations of the world and serving the causes of peace and prosperity. They do so in full confidence that it will meet with the goodwill and cooperation of the nations of the world.

This declaration, with the obligations therein, constitutes an international instrument and will be deposited and registered with the Secretariat of the UN.”⁵

More on above and other aspects of SYG conversation in subsequent telegram.⁶

Hare

1. Source: Department of State, Central Files, 974.7301/3–2657. Confidential; Niact. Received at 8:34 p.m. Repeated Priority to USUN.
2. See telegram 2929, Document 231.
3. In telegram 3033 from Cairo, May 27, Hare offered an additional account of Fawzi’s presentation. According to Hare, Fawzi made a special effort to emphasize that Egypt had taken various points of view into consideration and had attempted to draw up a that would gain general acceptance. Fawzi hoped, therefore, that the would be received in a spirit of “calm and helpfulness”. Several times Fawzi said that Egypt wanted to be fair. Regarding the unilateral form of the memorandum, Fawzi explained that the procedure had been chosen instead of engaging in negotiations, because the opening of the Canal was imminent and Egypt desired to expedite necessary arrangements. Time was being allowed, Fawzi promised, for consultation and he hoped that time would not be as short as it had been for the February 18 memorandum. Fawzi then commented on individual paragraphs in the March 26 memorandum. (Department of State, Central Files, 974.7301/3–2757)
4. For text of the ministerial decree signed by the Egyptian Minister of Finance Ahmed Abdel Wahab on April 28, 1936, see Compagnie Universelle du Canal Maritime de Suez, Recueil Chronologique des Actes Constitutifs de la Compagnie Universelle du Canal Maritime de Suez et des Conventions Conclues avec le Gouvernement Egyptien, 30 Novembre 1854—1er Janvier 1950 (Paris: Imprimerie E. Desfosses-Neogravure, n.d.), p. 208.
5. On March 27, Department of State officials gave to representatives of the Governments of France, the United Kingdom, Italy, and the Netherlands copies of the March 26 Egyptian draft memorandum on a confidential basis. U.S. officials at the same time told these representatives that the preliminary U.S. view was that the memorandum was a disappointment in that it: 1) represented a unilateral statement of intention rather than an international engagement, 2) failed to mention the six principles of October 13, 1956, and 3) did not provide for organized cooperation between the Egyptian Government and the users. (Memorandum of conversation by Shaw, March 27, and telegram 6747 to London, March 27; both in Department of State, Central Files, 974.7301/3–2757)
6. Telegram 3033; see footnote 3 above.