Office of the Historian

403. Memorandum From the Executive Secretary of the Department of State (Bremer) to the President’s Assistant for National Security Affairs (Allen)1

Washington, June 16, 1981

SUBJECT

  • Czechoslovak Claims Negotiations

The Department is preparing an analysis of the options we now confront on this issue. You may be approached in the coming days by the Czechoslovaks or by lawyers for the American claimants and we thought you would find it useful to have this information for background.

Since March, United States negotiators headed by Ambassador Rozanne L. Ridgway have been seeking a settlement of the 33-year-old US nationalization claims against Czechoslovakia. A 1974 40% settlement was blocked by Congress, and under the 1974 Trade Act, any new agreement must be approved by Congress. This effort has been given impetus by strong Congressional support for legislation to vest 8.4 tons of Czechoslovak monetary gold held in New York, part of 18.4 tons held by the US, UK and France under the post-war arrangements for restitution of monetary gold looted by the Nazis. Under this legislation, the gold would be sold, the proceeds invested, and the income used to pay the nationalization claims together with claims of persons who were not US citizens when the claims arose and possible holders of defaulted Czechoslovak bonds.2

We have opposed the legislation, and have urged Congress and the claimants to give us time to pursue a negotiated settlement. Seizure and sale of the gold would cast a permanent pall over US-Czechoslovak relations and deny us opportunities to increase our influence in Prague for years to come. The legislation would violate our international legal obligations to France and the UK as well as to Czechoslovakia. Moreover, the Bill’s coverage of some of the additional claimants not [Page 1316] entitled to our protection under international law could weaken our legal position in protecting US investment abroad.

The total principal value of the US claims adjudicated by the Foreign Claims Settlement Commission was $72.6 million. (There is also an unknown amount—perhaps $3–5 million of post-1958 claims.) Interest through the date of adjudication brought the total to $113.6 million. Subtracting $8.5 million from the vesting and sale of a Czechoslovak-owned steel mill in 1962 leaves $105.1, our opening proposal to the Czechoslovaks. The present value of the gold sale legislation to the claimants is about $95 million. We have come down to that amount, which we believe would be fully acceptable to Congress and to the claimants.

During the third round of negotiations on June 12, the Czechoslovaks offered a lump sum cash settlement of $64.1 million. Together with the money received from the steel mill, this covers 100% of the principal of the adjudicated claims. This proposal resulted from a high-level Czechoslovak political decision, and we believe that the Czechoslovaks do not have much or any additional flexibility, although we cannot be sure.

The Czechoslovak proposal is a 300% improvement of the 1974 agreement rejected by Congress. A settlement of 100% of principal is probably unparalleled in international claims settlement practice. (The 1979 China agreement3 was about 40% and even in the case of Yugoslavia, where we held substantial Yugoslav assets, we got only 91%.4) Moreover, if approved and implemented, the lump sum settlement would get much more cash immediately into the claimants’ hands. Nevertheless, the present value of the settlement to the claimants is considerably less than the present value of the future income to them under the gold sale legislation, and a settlement at about this level will be opposed by some claimants and their Congressional supporters. An agreement at this level could be approved by Congress, if at all, only if the Administration firmly supported it and made clear it would veto the legislation.

We are consulting with Congress and the claimants, and will be formulating the options for possible Administration action.

L. Paul Bremer, III5
  1. Source: Reagan Library, Robert Kimmitt Files, Legal: Czechoslovakia. Confidential.↩
  2. Reference is to two bills: one introduced into the Senate by Daniel Patrick Moynihan (D–New York) and one introduced into the House of Representatives by Jonathan Bingham (D–New York). The legislation would have authorized the liquidation of Czech gold in U.S. possession, with the proceeds being paid to certified claimants.↩
  3. See Foreign Relations, 1977–1980, vol. XIII, China, Document 222.↩
  4. TIAS 1803.↩
  5. Printed from a copy that bears this typed signature.↩