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The Gravel Amendment to the Trade Reform Act of 1974: Congress Checkmates a Presidential Lump Sum Agreement

Published online by Cambridge University Press:  28 March 2017

R. B. Lillich
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Editorial Comments
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American Journal of International Law , Volume 69 , Issue 4 , October 1975 , pp. 837 - 847
Copyright
Copyright © American Society of International Law 1975

References

1 Trade Act of 1974, Pub. L. No. 93–618, §408, 88 Stat. 2064 (Jan. 3, 1975).

2 On July 5, 1974, Czechoslovakia and the United States reached preliminary agreement on such a settlement. See N.Y. Times, July 6, 1974, at 5, col. 1; The Daily Telegraph (London), July 7, 1974, at 7, col. 6 (QE2 ed.).

3 The last such settlement being the Agreement with Hungary, March 6, 1973, [1973] 1 UST 522, TIAS No. 7569, 1 Lillich, R. & Weston, B. , International Claims: Their Settlement by Lump Sum Agreements 324 (1975)Google Scholar. See Lillich, , The United States-Hungarian Claims Agreement of 1973, 69 AJIL 534 (1975)Google Scholar.

4 See Rado, , Czechoslovak Nationalization Decrees: Some International Aspects, 41 id. 795 (1947)Google Scholar. See also Doman, , Postwar Nationalization of Foreign Property in Europe, 48 Colum. L. Rev. 1125, 1143–16 (1948)Google Scholar; id,, Compensation for Nationalized Property in Post-War Europe, 3 Int. L. Q. 323, 332–35 (1950); and Drucker, , The Nationalisation of United Nations Property in Europe, in 36 Transact. Grot. Soc’y 75,87–89 (1951)Google Scholar.

5 See [1945] 4 Foreign Rel. U.S. 478 (1968).

6 See id. at 420–557 passim; [1946] 6 Foreign Rel. U.S. 178–241 passim (1969); and [1947] 4 Foreign Rel. U.S. 196–255 passim (1972). Czechoslovakia’s clearest commitment to pay compensation is found in Paragraph 7 of the Agreement with Czechoslovakia relating to Commercial Policy, Nov. 14, 1946, 61 Stat. (3) 2431, TIAS No. 1569, 6 C. Bevans, Treaties and Other International Agreements of the United States 1776–1949, at 1314, 1315–16 (1971):

The Government of the United States and the Government of Czechoslovakia will make adequate and effective compensation to nationals of one country with respect to their rights or interests in properties which have been or may be nationalized or requisitioned by the Government of the other country. In this connection, the Government of the United States has noted with satisfaction that negotiaions concerning compensation on account of such claims will shortly begin in Praha.

7 Such aid and credits totaled at least $191 million. Senate Comm. on Finance, Trade Reform Act of 1974, S. Rep. No. 93–1298, 93d Cong., 2d Sess. 216 (1974) [hereinafter cited as Senate Report] . For an earlier breakdown, see Telegram from Ambassador Steinhardt to the Secretary of State, [1946] 6 Foreign Rel. U.S. 209 (1969):

As the $20,000,000 cotton credit, $50,000,000 surplus war material credit, $2,- 500,000 American relief for Zecho, $2,000,000 American Red Cross, $1,000,000 Catholic welfare and $275,000,000 UNRRA gift have been made available without any move by Zecho Government other than vague general promises to compensate American citizens for their properties which have been nationalized, I am disturbed at the prospect of our last trump, the $50,000,000 reconstruction loan, being played before we have a definite commitment from the Czechs that adequate and effective compensation means to them what it means to us.

8 Senate Report 215.

9 International Claims Settlement Act of 1949, as amended, 72 Stat. 527 (1958), 22 U.S.C. § 1642a (1970).

10 International Claims Settlement Act of 1949, as amended, 72 Stat. 528 (1958), 22 U.S.C. §1642c (1970).

11 For the leading decisions under the Czech Claims Program, see FCSC, Dec. & Ann. 379–455 (1968).

12 Id. at 379.

13 Id.

14 Under the provisions of Title IV, the principal amounts of awards under $1,000 were paid in full, plus 5.3 percent of the principal amounts of awards in excess thereof. Doman, Remarks, 58 ASIL Proceedings 53 (1964).

15 N.Y. Times, Jan. 7, 1965, at 8, col. 5.

16 109 Cong. Rec. 25148 (1963). S. 2405, 88th Cong., 1st Sess. (1963), was designed to amend Section 4 of Title I of the International Claims Settlement Act of 1949 by adding the following subsection:

(k) It is the sense of the Congress that any agreement hereafter entered into between the Government of the United States and any foreign government relating to the settlement of claims, determined or in the process of determination by the Foreign Claims Settlement Commission, by nationals of the United States against such foreign government shall be submitted to the Senate for its advice and consent.

Id. at 25149.

17 Id. at 21593. Compare text at and accompanying notes 65–69 infra.

18 Id. at 25149. “What is more, even the Czechs, who now plead poverty, might think twice if they expected such an argument to be weighed by the Senate, which is well aware of Czech foreign aid to Cuba and other nations around the world.” Id. at 21592.

19 “I am sure the State Department is opposed to the amendment, because it does not want any interference in regard to the amount for which it can settle such claims of U.S. citizens against other countries.” Id. at 21593. Compare text at note 56 infra.

20 See note 2 supra.

21 Senate Report 216.

22 See text at note 15 supra.

23 Extended discussion of the merits of the pending agreement is beyond the scope of this Editorial, which is concerned primarily with the process by which such lump sum agreements are concluded by the United States. In brief, though, the Department of State, claiming a 42 percent return thereunder, argues that “[i]t is the most favorable settlement we have concluded with any Eastern European country during the postwar period.” Statement of Robert S. Ingersoll, Deputy Secretary of State, before the Senate Finance Committee, September, 1974 (unpublished). These contentions, according to a claimant’s attorney, “are patently false.” Statement of Edward L. Merrigan, Attorney for Aris Gloves, Inc., before the Senate Finance Committee, September, 1974 (unpublished). Accord, Senate Report 217 (above contentions are “simply not true”). From an examination of available data, it is apparent that the Department of State greatly overstated its case, for the return actually is nowhere near 42 percent, and would be one of the lowest—if indeed not the lowest—obtained by the United States under its postwar lump sum agreements.

24 See text at note 21 supra. In the past, the United States has refused to condition lump sum agreements upon the granting of such quid pro quos. Note, however, that in the recent Agreement with Hungary, note 3 supra, the United States agreed in Annex F to seek authority from Congress to extend most-favored-nation treatment to Hungary, a commitment which if not fulfilled apparently allows Hungary to suspend payments thereunder. See Lillich, supra note 3, at 557.

25 Trade Act of 1974, Pub. L. No. 93–618, §§401–409, 88 Stat. 2056 (Jan. 3, 1975).

Title IV of the Act authorizes the President to extend, under certain circumstances, most-favored-nation (nondiscriminatory) trade concessions to countries whose products do not currently receive such treatment. The only countries not now receiving nondiscriminatory treatment in the U.S. market are the communist nations (with the exception of Poland and Yugoslavia, whose products do receive such treatment).

Staffs of Senate Comm. on Finance and House Comm. on Ways and Means, 93rd cong., 2d sess., Trade Act of 1974, at 17 (Comm. Print 1974).

26 To implement Part III of the Paris Reparations Agreement, Jan. 14, 1946, 4 Bevans, C. , Treaties and Other International Agreements of the United States of America 1776–1949, at 5, 17–18 (1970)Google Scholar, France, Great Britain, and the United States established the Tripartite Commission for the Restitution of Monetary Gold on September 27, 1946. 15 Dept. State Bull. 563 (1946). The bulk of Nazi-looted gold under its jurisdiction was restored to its rightful national owners long ago, but 18.4 tons belonging to Czechoslovakia has been withheld at the behest of the United States pending the conclusion of a satisfactory lump sum agreement. Senate Report 215. See Int. Herald-Tribune, Dec. 18, 1974, at 2, cols. 2–4.

27 The Executive had not sought congressional authorization to release non- Czech gold in the past. Cf. the Aide-Memoire to the Agreement with Yugoslavia of 1948, July 19, 1948, 62 Stat. 2658, TIAS No. 1803, 2 R. Lillich & B. Weston, supra note 3, at 10, by which the Executive released Yugoslav gold reserves in the United States as part of that lump sum agreement.

28 Senate Report 214–15.

29 Id. at 216.

30 Id.

31 Id. One-sided agreements of this nature are especially dangerous to the United States and its citizens at this particular time in history when nations in various parts of the world are threatening to expropriate or nationalize U.S. properties worth billions of dollars, while other nations have already taken valuable U.S. holdings without the payment of just compensation. The United States simply cannot afford to proclaim in the face of this trend that expropriations of U.S. properties will quickly be forgotten if the taking nation ultimately offers a relative pittance in return.

Id. at 217.

32 As the Committee pointed out, the amendment “does not prohibit the granting of most-favored-nation status or other economic benefits to [Czechoslovakia]. Rather, it provides that those benefits may be extended, but only after Czechoslovakia first pays at least the principal amount ($64 million) owed on its outstanding $105 million expropriation debt.” Id. See text at notes 12–13 and 28 supra. In effect, the amendment merely preserves the status quo ante pending agreement.

33 120 Cong. Rec. S21445–46 (daily ed. Dec. 13, 1974). The second amendment goes well beyond its author’s first one, in that it does not just preserve the status quo ante pending agreement but provides a source of funds to compensate U.S. claimants even if Czechoslovakia refuses to conclude a lump sum agreement on the terms laid down by Congress.

The Department of State had maintained that “[w]e have no legal authority to vest and sell the gold to satisfy domestic claimants and we have no legal way to attain that authority.” Statement of Robert S. Ingersoll, note 23 supra. Note, however, that 16 years earlier it had had no such difficulty with respect to the vesting and selling of a Czech steel mill for the identical purpose. See text at notes 8–9 supra. On the use of self-help in such situations, see Christenson, , The United States-Rumanian Claims Settlement Agreement of March 30, 1960, 55 AJIL 617, 636 (1961)Google Scholar.

34 In view of Czechoslovakia’s subsequent refusal to renegotiate the pending agreement (see text at notes 43–44 infra), further legislative attempts to use the Czech gold to compensate claimants can be anticipated.

35 See note 1 supra.

36 Conference Report, Trade Act of 1974, H.R. Rep. No. 93–1644, 93d Cong., 2dSess. 49 (1974).

37 Id.

38 Under the Act, the President is directed to renegotiate the agreement with Czechoslovakia on the settlement of U.S. claims. There must be a full and fair settlement before most-favored-nation treatment will be granted. Czechoslovakian gold held by the United States will remain in the United States until a settlement is negotiated and submitted to Congress as part of any bilateral commercial agreement with Czechoslovakia. Both must be approved by both Houses of Congress before nondiscriminatory treatment and credits may be extended.

Staffs of Senate Comm. on Finance and House Comm. on Ways and Means, supra note 25, at 19.

39 Newspaper accounts have not picked up this important point. See, e.g., Wash. Post, Jan. 17, 1975 at A18, col. 3: “When the trade bill was passed in December, it contained an amendment . . . requiring that Czechoslovakia pay U.S. claims in full before the gold could be returned and most-favored-nation status granted.” See also N.Y. Times, Aug. 6, 1975, at 2, col. 4.

40 Requiring the Executive to seek payment in full of the principal amount of the FCSCs adjudicated awards would have placed a heavy burden upon the Department of State, since, with all due respect to the FCSCs decisionmaking process, there is no reason why Czechoslovakia should be expected to accept automatically the unilateral determination by the United States of the validity and amount of each and every claim. See generally Lillich, R. , The Protection of Foreign Investment: Six Procedural Studies 180–81 (1965)Google Scholar.

It is worth noting that the Keating Resolution also took a flexible approach in this regard. According to its co-sponsor, the late Senator Douglas:

I do not think this amendment interferes improperly with the responsibilities of the Department of State. We do not ask for a 100 percent settlement, merely for Senate review of the settlement the State Department asks that we accept. Perhaps a case can be made that other considerations among the issues at stake justify a less than 100 percent settlement. But in a case in which the decision of the responsible agency [the FCSC] is threatened with almost complete contradiction by another agency, I think we can properly insist on Senate review to provide an opportunity for the protection of legitimate interests of citizens.

109 CONG. Rec. 21594 (1963).

41 See the references to “a more equitable” and “a full and fair” settlement agreement contained in the text at note 37 and accompanying 38 supra.

42 See text at note 35 and accompanying note 38 supra. In this respect, the Gravel Amendment goes beyond the Keating Resolution, which would have required only the Senate’s advice and consent. See text at and accompanying note 16 supra.

43 It is our firm conviction that [the Gravel Amendment] would not bring the Czechoslovaks promptly back to the negotiating table. We do not believe that the Czechoslovak Goverment would, in the foreseeable future, be willing to participate in new negotiations on the claims, particularly if they knew in advance that we would demand settlement in full of the claims in order to have the gold returned. . . . In our judgment they would react sharply and negatively if we repudiate the initialled settlement.

Statement of Robert S. Ingersoll, note 23 supra.

44 Wash. Post, Jan. 17, 1975, at A18, cols. 1–3. See also Letter from Ambassador Spacil to the Editor, Wash. Post, Feb. 14, 1975, at A31, cols. 4–6. On the worsening of Czech-United States relations in recent months, see Int. Herald-Tribune, June 7–8, 1975, at 5, cols. 5–8. This situation, of course, cannot be attributed exclusively to the effect of the Gravel amendment. N.Y. Times, Aug. 15, 1975, at 2, cols. 4–5.

45 See text at and accompanying notes 65–69 infra.

46 “That the President’s control of foreign relations includes the settlement of claims is indisputable.” United States v. Pink, 315 U.S. 203, 240 (1942) (Frankfurter, J., concurring). Cf. Moore, , Treaties and Executive Agreements, 20 POl. SCi. Q. 385, 403 (1905)Google Scholar (emphasis added): “[P]ecuniary claims against foreign governments have constantly been settled by the president, and no question as to his possession of such a power, apart from discussions as to its possible limitations, appears ever to have been seriously raised.”

47 “The case of the ‘Wilmington Packet’ set a precedent which was to be followed in a long line of subsequent claims, settlement of which has been sought by the authority of the Executive alone.” McCluke, W. , International Executive Agreements 44 (1941)Google Scholar. See generally Corwin, E. , The President’s Control of Foreign Relations 119 (1917)Google Scholar; Mathews, J., American Foreign Relations: Conduct and Policies 543 (rev. ed. 1938)Google Scholar; and Wright, Q., The Control of American Foreign Relations 244 (1922)Google Scholar.

48 W. McClure, supra note 47, at 53. See generally 14 Whiteman, M. , Digest of International Law 247 (1970)Google Scholar: “A large number of executive agreements have been concluded for the settlement of claims of American nationals against foreign governments.”

49 Moore, supra note 46, at 399–403, whose examples include many lump sum agreements.

50 ‘In 1859 Secretary [of State] Cass took occasion to declare that it was not necessary to submit claims conventions to the Senate.” W. McClure, supra note 47, at 44, citing 2 Haynes, G. , The Senate of the United States: Its History and Practice 643 (1938)Google Scholar, who notes that despite Cass’s comment “that continued to be the general practice prior to 1870.” See text at note 51 infra.

In 1860 President Buchanan, in submitting to the Senate “an agreement with Venezuela, signed January 14, 1859, for the settlement of claims of citizens of the United States as the result of their expulsion by the Venezuelan authorities from the Aves Island, said: ‘Usually it is not deemed necessary to consult the Senate in regard to similar instruments relating to private claims of small amount when the aggrieved parties are satisfied with their terms.’“ Crandall, S. , Treaties: Their Making and Enforcement 108 (2d ed. 1916) (emphasis added)Google Scholar. Under this settlement agreement, found in 2 Malloy, W., Treaties, Conventions, International Acts, Protocols and Agreements Between the United States of America and Other Powers 1776–1909, at 1843 (1910)Google Scholar, Venezuela paid the United States $130,000 in satisfaction ,of five claims.

51 See text accompanying note 50 supra. See also Moore, supra note 46, at 399: “Such an agreement the president no doubt may in any case submit to the Senate, if he sees fit to do so; and we find, especially in former times, that this course was often taken.”

52 See Lillich, R. , International Claims: Their Adjudication by National Commissions 7–9 (1962)Google Scholar.

53 14 M. Whiteman, supra note 48, at 247. Such statements are in marked contrast to earlier assertions by the Department of State, which were far less dogmatic and much more sensitive to the need for Executive self-restraint in this “twilight” area. See text accompanying note 50 supra. See also S. Crandall, supra note 50, at 108: “Agreements for the adjustment or settlement or pecuniary claims of citizens against foreign governments, which meet with the approval of the claimants, . . . are not usually submitted to the Senate.” (Emphasis added).

54 Since World War II the Executive has relied almost exclusively upon the executive agreement as the vehicle for settling claims against foreign countries. For the last major lump sum agreement submitted to the Senate for its advice and consent, see Agreement with Panama, Jan. 26, 1950, [1950] 1 UST 685, TIAS No. 2129, 2 R. Lillich & B. Weston, supra note 3, at 35.

55 The trend, incidentally, is exactly the opposite of the one described by McDougal in his classic work. “The notion that the Executive has exclusive control over the settlement of international private claims has, however, yielded in favor of a doctrine of coordinate control, with primary presidential responsibility.” McDougal, M. & Associates, Studies in World Public Order 491 n.167 (1960)Google Scholar. When and where the notion has yielded is left unsaid. Certainly this writer has seen little evidence of an emerging “doctrine of coordinate control” during the twentieth century, much less during the postwar period.

56 J. Mathews, supra note 47, at 546–47. In this regard, at least three treaties dealing with claims have been rejected by the Senate and returned to the President. 2 G. Haynes, supra note 50, at 630 n. l.

57 The ill-fated Keating Resolution being a rare effort to reassert Congress’s responsibilities in this area. See text at notes 15–19 supra.

58 1 U.S.C. §1126 (Supp. III 1974).

59 Hearings on S. 596 Before the Senate Comm. on Foreign Relations, 92d Cong., IstSess. 74 (1971).

60 On the question of just what constitutes just compensation, see generally 1–3 The Valuation of Nationalized Property in International Law passim (Lillich, R. ed. & contrib. 1972–1975)Google Scholar.

61 Comment, Blocked Assets and Private Claims: The Initial Barriers to Trade Negotiations Between the United States and China, 3 Ga. J. Int. & Comp. L. 449, 455 (1973).

62 W. McClure, supra note 47, at 44. More recently Berger, questioning the constitutional basis of the Executive’s claim ‘to oust Senate participation in the making of such settlement agreements,” has underscored “the confiscatory impact of such settlements on the reimbursement claims of citizens.” Berger, R. , Executive Privilege: A Constitutional Myth 153 (1974)Google Scholar.

63 Claims against these countries have been preadjudicated by the Foreign Claims Settlement Commission under Title V of the International Claims Settlement Act of 1949, as amended, 22 U.S.C. $1643 (1970). See Murphy, , Claims Against the Republic of Cuba, 27 U. Miami L. Rev. 372 (1973)Google Scholar, and Redick, , The Jurisprudence of the Foreign Claims Settlement Commission: Chinese Claims, 67 AJIL 728 (1973)Google Scholar.

64 See text at note 52 supra.

65 See McDougal & Associates, note 55 supra.

66 The recent spate of criticism of presidential usage of the executive agreement would probably mean that a decision to consummate such a transaction [a lump sum agreement with China predicated upon the utilization of blocked Chinese assets] would precipitate a congressional-executive confrontation which the President would be well-advised to avoid. If a decision to settle claims with China through a self-executing executive agreement is made, we might expect certain elements in Congress to initiate a legislative effort to define and limit the scope of the executive agreement power.

Comment, Self-Executing Executive Agreements: A Separation of Powers Problem, 24 Buffalo L. Rev. 137, 158 (1974).

67 See text accompanying note 66 supra. Senator Byrd of Virginia has indicated that he intends to introduce legislation “calling for congressional approval of U.S. claims if they are settled for less than 100 cents on the dollar.” Wash. Post, Jan. 17, 1975, at A5, col. 1. Compare text at and accompanying note 40 supra.

68 Ohly, , Advice and Consent: International Executive Claims Settlement Agreements, 5 Calif. Western Int. L.J. 271, 273 (1975)Google Scholar. The Congressional Research Service of the Library of Congress has acknowledged that “it would seem that Mr. Ohly’s [article] arguably contains a constitutional basis upon which Congress could enact the proposed legislation.” D. Sale, International Claims Settlement Executive Agreements, Oct. 16, 1974 (Library of Congress, Congressional Research Service, American Law Division CRS-8).

69 While the President, as matters now stand, “certainly possesses the inherent power to settle international claims by executive agreement and thus avoid the necessity of securing Senate consent,” R. Lillich, supra note 40, at 198, attempts to limit or restrict this power, raising acute constitutional questions, apparently are in the offing. See text at and accompanying notes 65–68 supra.