53 Observations and Conclusions of the Government of the French Republic submitted to the International Court of Justice in the Case concerning the Compagnie du Port, des Quais and des Entrepôts de Beyrouth and the Société Radio-Orient, France v. Lebanon, I.C.J. Pleadings at 75, 87 ff. (arguments made by France in 1960, after the Court's Interhandel Judgment).

54 The Compagnie du Port case was settled before judgment. Reply Brief of the United States, pp. 36-44, 46-49, 51-52.

The Award of the Arbitral Tribunal stated in part:

29. It has, however, been argued that, even if the question put to the Tribunal is formulated as a pure question of law independent from any existing factual situation, in reality a specific set of actual facts involving acts of Pan Am and of the French authorities (communication by Pan Am to French aeronautical authorities and reply thereto; landing of Pan Am aircraft at Orly on May 3, 1978, and acts of the French gendarmerie on that date) is at the root of the request for a decision on Question (A). In this connection, reference has also been made to the fact that paragraph (3) of the Compromis, dealing with interim arrangements, mentions a specific air carrier-Pan Am-and specific conduct of that company in the period from the date of signature of the Compromis up to December 10, 1978.

30. The Tribunal does not consider these elements to be of such a character as to justify the application of the rule of exhaustion of local remedies in the present situation, with the effect of excluding-even if only for the time being a decision of the Tribunal on Question (A). Quite naturally, governments of states are not likely to create a legal dispute between them if there exist no factual situations which somehow raise questions of international law. Similarly, if these governments agree on any interim arrangements pending the settlement of the dispute, such arrangements are likely to be expressed in terms of actual conduct, be it conduct of private individuals or entities or conduct of state organs in relation to those individuals or entities. Indeed, rules of international law, though primarily conceived in terms of conduct of and relationships between states, are ultimately concerned, like all rules of law, with the reality of physical persons, objects and activities in their interrelationship within human society. Accordingly, the rule of international law relating to the requirement of exhaustion of local remedies, when making a distinction between the state-to-state claims in which the requirement ap plies, and claims which are not subject to such a requirement, must necessarily base this distinction on the juridical character of the legal relationship between states which is invoked in support of the claim. Consequently, with respect to the applicability of the local remedies rule, a distinction is generally made between "cases of diplomatic protection" and "cases of direct injury." 31. If it is argued that, by virtue of the French reservation contained in the sixth preambular paragraph of the Compromis, a parallel distinction should be made in the present case, where the question before the Tribunal is not one of reparation for, or even only determination of, injuries allegedly caused to a state by actual conduct of another state, such a distinction could only be based on the juridical character of the rules of international law which the Tribunal is requested and required to apply in deciding on Question (A). . . . [U]nder article I of the Air Services Agreement, "[t]he Contracting Parties grant to each other the rights specified in the Annex hereto ..." (emphasis added), and sections I and II of the Annex both mention [respectively] "the right to conduct air transport services by one or more air carriers of French (United States) nationality designated by the latter country. . ." as a right granted by one government to the other government. Furthermore, it is obvious that the object and purpose of an air services agreement such as the present one is the conduct of air transport services, the corresponding obligations of the parties being the admission of such conduct

For the purposes of the issue under discussion, there is a substantial difference between, on the one hand, an obligation of a state to grant to aliens

admitted to its territory a treatment corresponding to certain standards, and, on the other hand, an obligation of a state to admit the conduct of air transport services to, from and over its territory. In the latter case, owing to the very nature of international air transport services, there is no substitute for actually permitting the operation of such service, which could normally be regarded as providing an “equivalent result."

Case Concerning the Air Services Agreement of March 27, 1946, Arbitral Award of Dec. 9, 1978, pp. 30-33, Dept. of State File No. P78 0006-0219.

The United States had also argued that the rule of exhaustion of local remedies did not apply, because France had not shown that French administrative tribunals were empowered to overrule an interpretation of a treaty which had been given by the Minister of Foreign Affairs or the Minister in charge of the subject matter, or which (as in the instant case) had been urged by the French Government upon the Arbitral Tribunal. There was accordingly no effective local remedy in France.

For the decision of the Arbitration Tribunal Established Pursuant to the Arbitration Agreement signed at Paris on Jan. 22, 1963, between the United States and France, decided at Geneva on Dec. 22, 1963, see International Legal Materials, Vol. III (1964), p. 668.

The multilateral agreement (accord) on liquidation of German property in Switzerland, by exchange of "letters of understanding" (notes) between the United States, the United Kingdom, France, and Switzerland, dated at Washington, May 25, 1946 (the Washington Accord; entered into force June 27, 1946), and the supplemental agreement signed at Bern, Aug. 28, 1952 (entered into force Mar. 19, 1953), are at TIAS 5058, 5059; 13 UST 1118, 1131. An English translation of the Swiss note of May 25, 1946, was published at Dept. of State Bulletin, Vol. XIV, No. 365, June 30, 1946, p. 1121; see, also, ibid., p. 1101.

For the treaty of arbitration and conciliation between the United States and Switzerland, signed Feb. 16, 1931 (entered into force May 23, 1932), see TS 844; 11 Bevans 920.

For the Interhandel Case (United States v. Switzerland), Preliminary Objections, Judgment, dated Mar. 21, 1959, see I.C.J. Reports (1959), p. 6.

For a discussion of the Concorde controversy referred to, see, also, the 1977 Digest, pp. 653-657.

The Air Transport Services Agreement between the United States and France, signed Mar. 27, 1946, is at TIAS 1679; 61 Stat. 3445; 7 Bevans 1109 (entered into force Mar. 27, 1946). For extensions and amendments by subsequent exchanges of notes, dated June 23 and July 11, 1950, see TIAS 2106, 1 UST 593; dated Mar. 19, 1951, see TIAS 2257, 2 UST 1033; dated Mar. 19, 1951, see TIAS 2258, 2 UST 1037; dated Aug. 27, 1959, see TIAS 4336, 10 UST 1791; dated May 28 and 29, 1969, see TIAS 6727, 20 UST 2684. The Agreement Relating to the Air Transport Services Agreement of Mar. 27, 1946, by exchange of notes Apr. 5. 1960, covered the West Coast-Paris service; TIAS 5135; 13 UST 1860 (entered into force Apr. 5, 1960).

Denial of Claims

Currency Revaluation

An individual requested the Department of State to espouse a formal diplomatic claim against Mexico for losses sustained when the Mexican peso had been floated in September 1976 and the dollar equivalent

of the individual's peso investment in Mexico had consequently been reduced. In a letter to him, dated September 28, 1978, Fabian A. Kwiatek, Assistant Legal Adviser for Claims, explained why the Department could not espouse a formal claim in his behalf against the Mexican Government, saying in part:

*

The basic question raised by your letter and enclosures is whether losses sustained as a result of the floating of the peso by the Government of Mexico give rise to a valid claim against the Mexican Government under accepted principles of international law.

It is universally recognized that all matters pertaining to currency are inherent within the jurisdiction of the state. The Permanent Court of International Justice has stated that. "It is indeed a generally accepted principle that a state is entitled to regulate its own currency." (Serbian and Brazilian Loan Cases, P.C.I.J. Series A, Nos. 20/21 (1929) at 44.)

This rule has been followed by international commissions. The American-British Claims Commission decided cases on the theory that losses sustained from the depreciation of the dollar "do not constitute the basis of any valid claim." (3 Moore, International Arbitrations 3066, 3067 (1898).) Where a claim was presented by the holder of a German bank note for payment in gold, the Upper Silesian Arbitral Tribunal rejected it on the same general principle. (Mann, F.A.. The Legal Aspect of Money (1953) 5.)

The American-Mexican Claims Commission has held that, "It is elementary law that states are not responsible for losses caused by currency fluctuations." (American-Mexican Claims Commission, Report to the Department of State (1948), Decision 1B, 147, 149; Decision 38B/47D, 229-231; Decision 43D, 239-240; Decision 39B/ 48D, 333, 336.) Claims for losses resulting from the depreciation of Austro-Hungarian currency were disallowed by the Tripartite Claims Commission. (United States, Austria, and Hungary.)

International law recognizes two exceptions to this general rule. The first exception is founded on the theory of a denial of justice. Thus, where a state pursues a deliberate course of injuring and discriminating against foreigners, a violation of international law results. The second exception may be found in a provision in a treaty or other international agreement, or in a specific guarantee agreement between the state and a depositor.

A review of the facts and circumstances regarding the floating of the peso by the Mexican Government conclusively establishes that there is no agreement between the Governments of the United States and Mexico guaranteeing a specific rate of exchange between the peso and the dollar. There is also no evidence showing that you have a specific guarantee from the Mexican Government relating to a certain peso/dollar exchange rate. Nor can the Department conclude, based upon available evidence, that the Mexican Government pursued a deliberate course of injuring or discriminating against citizens of the United States. At the time the Government of Mexico decided to float the peso, the Government of the United States did not protest such action nor did other governments whose nationals

were similarly affected. It is the Department's considered judgment that the action taken by the Government of Mexico was economically desirable and was not tantamount to fraud. In this connection, the Mexican inflation rate in recent years has been almost double that of the United States, its major trading partner. As a result, major distortions occurred in the Mexican economy. The floating of the peso was designed to eliminate such distortions, while at the same time maintaining an open economic system.

....

Dept. of State File Nos. P79 0029-1606 and P79 0029-1603.

Blocked Accounts

Another individual asked Senator Lawton M. Chiles for assistance in obtaining funds on deposit in a Hungarian bank, which had been blocked. In a letter dated August 23, 1978, J. Brian Atwood, Acting Assistant Secretary for Congressional Relations, replied to Senator Chiles' inquiry on behalf of his constituent, as follows:

It is universally recognized that any country has the right, in the protection of its economy, to pass currency regulations and to prevent the flow of capital beyond its borders. American nationals, as well as aliens of other countries, who had or have funds abroad, especially in enemy controlled or occupied territory or Communist countries, came or now fall within the purview of these currency regulations. It is the view of the Department that claims based on the implementation of these regulations or directives are not valid under principles of international law unless the blocking was accompanied or followed by measures of nationalization, confiscation or other taking. In those instances where the account still exists, as in the case of Mr. . . ., there is no loss other than the one resulting from inaccessibility of the funds. The provisions or regulations bringing the funds under the control of the state authorities are legitimate restraints on the use of funds. These restraints may be imposed in times of peace as well as in times of war.

Dept. of State File No. P78 0134-1318.

Romanian Gold Lei Bonds

Senator Charles H. Percy was asked by a constituent to support, in connection with the pending renewal of most-favored-nation treatment for Romania, a precondition that Romania agree to redeem or make a settlement with respect to Romanian gold lei bonds issued prior to World War II. Douglas J. Bennet, Jr., Assistant Secretary of State for Congressional Relations, replied on July 17, 1978, tr Senator Percy's inquiry on behalf of his constituent, as follows:

*

The Governments of the United States and of Romania concluded an agreement dated March 30, 1960, concerning financial questions.

and claims of United States nationals against Romania. The Romanian Government completed its payment obligations in 1964.

Under section 303 (3), title III, of the International Claims Settlement Act of 1949, as amended [22 U.S.C. 1641b (3)], the Foreign Claims Settlement Commission of the United States was authorized to receive and determine, among other claims, those based on the failure of the Government of Romania to meet obligations expressed in currency of the United States arising out of contractual or other rights acquired by nationals of the United States prior to September 1, 1939, against Romania, which became payable prior to September 15, 1947. Under the Romanian Claims Program, the Commission allowed payments on bond contracts which were payable prior to September 15, 1947. Section 303 (3) did not include non-United States dollar bonds.

In general, with regard to foreign bonds, it has been the policy of the Government of the United States to consider them primarily matters for direct negotiation and settlement between the foreign debtors and the American bondholders or their representatives. American citizens who purchase such obligations do so upon their own responsibility and at their own risk. While the Department has always been ready to facilitate settlements in foreign bondholder cases when possible, it has refrained from intervening in the enforcement of such obligations save under exceptional circumstances, as, for example, when American nationals are discriminated against in connection with payments made by foreign governments on their obligations.

The Department does not believe that the enforcement of payment of Romanian gold lei bonds should be related to the consideration of extension of MFN to Romania by the Government of the United States.

Dept. of State File Nos. P78 0102-0304 and P78 0121-0808.

The Agreement Relating to Financial Questions between the United States and Romania with Respect to the Settlement of Claims and exchange of notes, signed Mar. 30, 1960, is at TIAS 4451; 11 UST 317; entered into force Mar. 30, 1960.

See, further, the 1975 Digest, pp. 485–486.

Political Questions

The plaintiff in Tesar v. Vance, No. 77 C 3451 (N.D., E.D., Ill., 1978), had received payment of about $1,655 against an award of $13,361, adjudicated in his favor by the Foreign Claims Settlement Commission under the Czechoslovakian Claims Program. He sued the Secretary of State, the Secretary of the Treasury, and the Chairman of the Commission for payment of the balance of the award, with interest, using gold held by the Tripartite Commission for the Restitution of Monetary Gold as "security" for such payment.

On April 13, 1978, Judge Nicholas J. Bua of the United States District Court for the Northern District of Illinois, Eastern Division, granted the defendants' motion to dismiss, on grounds that the case