An Overview

The complex of foreign investment and national economic policy envelops the particular cases of transfer of capital and development programs and their compatibility under different economic and political regimes. It is enveloped in the broader concepts of sovereignty, and hence involves potentials for Acts of State – eminent domain, expropriation, nationalization – as well as policies of economic expansion and the right and obligation of the State to protect its interests (nationals and vested interests). Our inquiry examines whether ideological accommodations between states have been facilitated by legal practices that promote economic intercourse through political risk insurance in capitalist regimes, through joint ventures in socialist regimes, and through arbitration agreements covering litigations between states and foreign nationals.


The 17th century economic and political expansion of Europe reflected European political, economic and legal phenomena. The most significant of these was the growing strength of a bourgeois merchant class in England and the Netherlands which, by certain successes in their conflict with the traditional monarchy, were setting the stage for modern times. For our purposes, we need to cite only one of their successes – the chartering of trade companies for overseas expansion: the British East India Company, 1600; the Dutch East India Company, 1602; the United East India Company (Dutch), 1602; the Dutch West India Company, 1621; and a number of others which had varying degrees of success depending on the territories they were targeting.

These chartered companies were colonial arms of the European powers, and their operations blurred the lines between commercially acquired rights and the political concept of sovereignty. In 1622, it was the British “merchants” who helped Persia take Hormuz back from the Portuguese and grant the East India Company trade privileges. It was the Dutch United East India Company which bought Manhattan Island for $24 in 1626. In 1717, the British East India Company, using gifts, bribes and, services, gained customs exemptions and other concessions in many of the territories in which it was operating in India. The company signed treaties of political significance into the 19th century, such as the Tripartite Treaty of 1838 with Ranjit Singh of Punjab and Shah Shuja, restoring the latter to the throne of Afghanistan.

By the second half of the 19th century, the colonial expansions of the bourgeois liberal economy were being transformed into nation-state imperialism. In 1858, the Crown took over the duties, obligations and rights of the British East India Company in India. (Notice that this date coincides with the Delhi uprising.) In 1867, the Straits Settlements became Crown colonies and the East India Company's rights and obligations passed to the government. As nation-states were consolidating in the West, they were also exporting their national consciousness to the areas they penetrated and, along with it, concepts of sovereign legality. The degree and actual manifestation of this consciousness differed according to cultural contexts. Where the western column had sufficiently embedded itself, as in Latin America, national consciousness was sooner formulated in terms of sovereign legality than in areas with predominantly non-Western cultures such as Southeast Asia.[2]  These variations were reflected in the development of international law by the West. A combination of criteria, mainly structured around concepts of race, religion, and economic growth, distinguished "civilized" nations from others. The “white man's burden” was that of the industrialized bourgeois Christian[3], who felt entitled to the exercise of sovereign legality but did not necessarily recognize it for some others. In some parts of India, for example, the East India Company was pushing for laws of succession which would pass the control of a region to the Company if the ruler had no male successor.

Revolutions by populations of Spanish stock in Latin America had the Christian and relatively white components but lacked the industrial economic dimensions. Movements for independence in Latin American countries brought investments from more developed countries for expansionist semi-colonial and imperial purposes. Political unrest often disrupted these capitalist expansions and prompted military interventions. But conflicts were also at times brought within the legal framework of the international law of "civilized" nations.

Where the criteria of international law of "civilized" nations applied, exercise of sovereign rights vs. foreign investments had been put to arbitration as early as the end of 18th century. One of the mixed arbitral commissions of the Jay's Treaty of 1794 between the United States and the United Kingdom was to deal with the settlement of debts to British creditors.

The growth of North American bourgeois capitalism free from traditional colonial imperialism had a long-term impact on the relationship between the industrial nations and other areas of the world. The Monroe Doctrine and “open door” policy were designed to replace colonial and territorial imperialism with economic and financial hegemony.[4]  These two concepts engendered the germinal contradiction between liberal economy and political sovereignty at different levels.

The spectrum of this contradiction ranges from the erosion of the independence of states penetrated by the British and Dutch Trade Companies in the 17th century, to the ultimate right of the sovereign states in the 20th century to nationalize economic enterprises within their jurisdiction, including those of aliens. Within this spectrum several concepts developed reflecting one or the other dimension of the dialectics. For example, Calvo clauses, introduced by Latin American countries in their contracts with alien investors aimed at subjecting the investor to the exclusive jurisdiction of the contracting state, thus contradicting the sovereign right of the investor's state to claim and to protect the rights of its nationals[5], or the concept of vested rights of aliens, in its extreme, would have implied that the state should not impair rights acquired by aliens within its sovereignty, thus limiting in effect the exercise of sovereignty. In the Chorzow Factory Case, the Permanent Court of International justice called on Poland to restitute some of the expropriated property of the German nationals in Upper Silesia.[6] These extremes have not usually gained broad credence within international law.


It should be added that beyond the motivations of imperium, the dialectics of sovereign rights and liberal economy may be ideologically justified. A liberal economy upholds the concept of the global movement of goods, services and capital and may find the sovereign rights of states to be artificial barriers created on the way toward an expansion which would create market mechanisms and competition ultimately beneficial to the greatest numbers. The sovereign right to nationalize and expropriate such free enterprise expansions stems from the concept of survival and avoidance of inequity and exploitation. The argument being that such foreign enterprises do not necessarily grow in harmony with the national economy of a given country and may disadvantage its people, exploiting them without adequate return.

The dialectical synthesis of these conflicting ideological positions has at times resulted in direct engagement of a sovereign state in implanting a particular alien enterprise within its jurisdiction, or procuring international public or private debts for its own development. The question arises as to whether that will constitute a sovereign commitment to respect the integrity of the implanted enterprise or the debt incurred. Which, in turn, begs the question as to whether a state should be held responsible to protect and indemnify alien property and funds even when it undergoes a change of regime. And conversely, whether a "sovereign" state's inability or unwillingness to assume such responsibility constitutes enough grounds for other states to intervene military. Here we are assuming that the delinquent state's sovereignty is recognized, as distinct from cases mentioned earlier where the economic dependence was used as reason to absorb a territory. There have been variations on the theme. The intervention of the combined French, British and Spanish forces in 1861 in Mexico after the Mexican government suspended payment on foreign debts was a step toward Napoleon's occupation of Mexico city in 1863 and the installation of Maximilian to the throne.

The nationalization of banks and industries in the Soviet Union after the October Revolution and the repudiation of national debts in 1918 constituted the watershed in the dialectics of sovereignty versus international finance. Expropriations had taken place before – the Mexican agrarian expropriations began in 1915. But they were not set within a totalitarian ideology. With the advent of the Soviet Union the very fabric of social organization, as the West had known it, was threatened. Soviet nationalizations, ideologically speaking, were not to be acts of state following the concept of sovereignty as had developed up to then. They were supposed to be steps taken by the dictatorship of the proletariat for the ultimate “withering away of the state.” But as the world-wide proletarian revolution did not follow, the Soviets had to hang on to the notion of the state in order to deal with other states. The West did what it could to get rid of the aberration it felt had befallen Russia. But the Soviet Union survived. The economic and financial difficulties that followed the First World War forced the ideological antagonists into compromise. The terms were still those of international law as developed in the West – but with a twist. In A. M. Luther v. James Sagor & Co. the Court of Appeal's judge, considering the decree of June 20, 1918, by which the Russian Socialist Federal Soviet Republic nationalized mechanical sawmills and woodworking establishments belonging to private or limited companies – thus taking over the plaintiff's investments in Russia – ruled that "Even if it was open to the Courts of this country to consider the morality or justice of the decree of June 20, 1918, I do not see how the Courts could treat this particular decree otherwise than as the expression by the de facto government of a civilized country of a policy which is considered to be in the best interests of that country.”[7] The twist, however, was that while the USSR was eventually recognized as the de jure government of the Soviet Union, it did not indemnify the nationalized industries as the international law would have had it, i.e., prompt, adequate and effective compensation for expropriated properties.[8]

Between the world wars, the Soviet Union, while having as its ultimate goal the edification of universal communism needed, for its own survival, to reach the Western level of economic and industrial development and hence needed Western technology and trade. The West was split: That part which eventually became the Axis aspired to statism using military power for expansion-which, as later events proved, was depasse-and developed methods of trade such as barter (to avoid fluctuations of foreign exchange and international finances) permitting notably German-Soviet trade. The free-enterprise democracies of the West were still grappling with the crises of passage from territorial imperialism to financial imperialism. This passage had already been sabotaged by several factors: the advent of communism in the East; financial difficulties, notably in Central Europe (the Dawes plan of 1924 and the moratorium of 1931); and eventually militant totalitarian regimes in Germany and Italy. Paradoxically free enterprise democracies needed all of them as partners to ward off economic and financial crises.

The inter-war period was a time of uneasy settlements and eventually ominous expectations. The Soviet Union, through communist parties in other countries, was striving to ward off an imperialist invasion and at the same time to prepare the grounds for proletarian revolutions. Western free enterprise democracies at some point entertained the illusion that Nazi virulence would provide the antidote for Soviet communism. In the meantime, the colonial and semi-colonial people were more and more exposed to Western concepts of sovereign rights but with differing signals: here, the Wilsonian concept of self-determination, there, the Marxist-Leninist ideology of revolution. Some even tried their hand at Western law and diplomacy to get rid of the exploitive grips of the industrialized free enterprise economies. Mexico expropriated the oil companies[9]  and Persia (Iran) tried to revoke the Anglo-Persian Oil Company's concession.[10] Iran was less successful than Mexico. Iran had to deal with Great Britain, which, after all, was still a colonial empire. Further, Iran was less "Western" than Mexico, and Mexico's timing, retrospectively observed, was better because negotiations dragged into 1939 with European conflicts looming on the horizon. Besides, Mexico was dealing mainly with the United States which, among free-enterprise democracies, was relatively free from the vestiges of colonial imperialism and had advanced further into the phase of financial imperialism.


The scenario of World War II was not played, as we now know, according to the West’s inter-war expectations – that of the confrontation of Nazi Germany and Communist USSR, resulting in the appeasement of the former and the demise of the latter. In the aftermath of WWII Europe lay devastated and vulnerable, with a vacuum in its midst and a victorious East with renewed ideological vigor and Stalinian intransigence.

While these realities emphasized the patterns which were emerging in our overview in the past pages, they also contributed to new approaches to international economy and commerce. All the states within the Soviet orbit proceeded with the nationalization of their economies and industries. In Western Europe, Britain, under a Labor government, nationalized the Bank of England and some basic industries such as coal. France nationalized Banks, a good number of insurance companies, coal, gas, electricity and some other industries. The role of governments in the control of the economy, even in what used to be traditionally free enterprise, was increasing – both to manage economic growth and to oversee the redistribution of wealth. Most Western European countries adopted some kind of national economic plan. 

The post-war efforts also called for close cooperation among nations. Benelux was created as early as 1944. Europe, however, needed more than cooperation. She needed help and could not pay for it. So, on June 5, 1947, in a speech at Harvard, George ' Marshall suggested what became the Marshall Plan, providing United States assistance to European recovery. It led to the creation of the Organization for European Economic Cooperation (OEEC) in 1948, within whose framework the European Payments Union was set up. The Soviet Union and other Eastern European countries declined the Marshall Plan. Stalin, while in need of investment, feared the financial hegemony of the West and used the resources of the Eastern European countries for Soviet development within her own imperium. The European Coal and Steel Community (ECC) was drawn up in 1951, and the Treaty of Rome for the creation of European Economic Community (Common Market) was signed in 1957, leading to economic, social and political integrations within the Common Market.

The Marshall Plan and the creation of international structures within Europe were developments beyond those evolving through the United Nations. In reality, they underscored the difficulties of the United Nations. The financial bodies of the United Nations – The International Bank for Reconstruction and Development (IBRD or World Bank) and the International Monetary Fund (IMF) which had been conceived in 1944, created in 1945 and brought into relationship with the United Nations in 1947 – had to faced the problems of the ideological rifts. As the Soviet Union and Eastern European socialist state-planned economies did not participate in those institutions, the latter managed to develop their operations according to more or less free-enterprise financial practices. Composed of Western developed countries and less developed countries of the Third World, these agencies aimed at multilateral financing of development and helping the coordination of international payments and exchanges. While their multilateral nature provided some security for the less developed countries (LDCs) against imperialist manipulation, that fact made them rather unattractive to the developed countries, which preferred to provide assistance through bilateral arrangements where they could retain control of their relationship with the recipient state.

Trends have, however, evolved somewhat. The structure of institutions such as the World Bank, which is not run according to the U.N. sovereign state voting system but on a weighted voting formula, has permitted control by the investor countries. Organizations like the World Bank and IMF also provide mechanisms which may not be feasible or acceptable within bilateral programs. For example, the Bank initiated the creation of the International Finance Corporation (IFC) in 1956 to stimulate private invest in developing countries and in 1960 set up the International Development Association (IDA) to provide virtually interest-free, long-term loans for the least developed countries which, with their meager resources, could not afford conventional loans. In 1969 the IMF instituted Special Drawing Rights (SDRs) to increase international liquidity in the absence of sufficient gold as reserve currency, and in 1975 it established a fund to help members which faced financial difficulties to buy oil. Some of these programs, such as the latter two, have been at times more helpful to the more affluent members of these organizations than others.[11]

Most investments and loans to the LDCs are, of course, provided through commercial banks and government agencies. But the relative success of institutions such as the World Bank, IMF, or regional banks like Inter-American Bank and Asian Development Bank becomes evident when compared to the array of assistance programs run by the United Nations, such as the Expanded Program of Technical Assistance (EFTA) created in 1949, the Special United Nations Fund for Economic Development (SUNFED), 1959; the United Nations Conference on Trade and Development (UNCTAD), 1964; the United Nations Development Program (UNDP), 1965, a merger of EPTA and SUNFED; or the United Nations Industrial Development Organization (UNIDO), 1967. The explanation for the active part played by the World Bank and similar institutions seems to be the extraordinary growth of international trade since 1945, no longer manageable within bilateral arrangements, and the fact that investor countries have had effective control. Indeed, these institutions have been accused of carrying on the financial imperialism of the capitalist systems.[12]  A multinational financial and industrial network now runs through the old imperial structures. Witness, for example, the existence of institutions such as the General Agreement on Tariffs and Trade (GATT), established in 1947, which has favored the lowering of trade barriers among the developed countries rather than world wide, or the transformation in 1960 of the Organization for European Economic Cooperation (OEEC) into the Organization for Economic Cooperation and Development (OECD) with its "Group of Ten" composed of the larger industrial capitalist powers which, although no longer formally constituted, is still steering the affairs of OECD and IMF. 

This network is by no means homogeneous and has its contradictions both internally and in its relations with the Third World and socialist state-planned economies. Some of the earlier symptoms of these contradictions were the handling of nationalization of the Anglo-Iranian Oil Company by Iran in 1951-53, and the nationalization of the Suez Canal by Egypt in 1956. In the Anglo-Iranian case, although gunboat diplomacy did not pay off, attempts at economic strangulation and international subversion as imperialist methods eventually succeeded – partly because of the Stalinian policy not to support bourgeois national revolutions. In the Anglo-Iranian conflict, we further witness the adjustments made from the colonial to the financial and multinational empire. In the final solution it was not the Anglo-Iranian Oil Company which returned solely to the  but a multinational consortium of oil companies reflecting American ascendancy. The Suez Canal nationalization in 1956 was a more flagrant example of the failure of gunboat diplomacy. It coincided with deStalinization by Khrushchev in the Soviet Union and that country's broader support of national movements outside its own orbit. It also coincided with the United States' desire to maintain peace in the Middle East and to keep the canal open (supertankers were not yet the order of the day). Nasser managed to steer between the contradictions of Western powers and the East-West conflict. Less than six months after the Israeli-Anglo-French military operations the occupied territories were returned to Egypt, the Canal was cleared under U.N. auspices and reopened, and Egypt imposed her regime for running the nationalized Canal. By 1958 the Egyptian government and the Suez Canal Company agreed on the final settlement and compensation for the nationalization of the Canal.[13]

The Third World – the non-aligned, the LDCs – with their spectrum of variations and contradictions, were an identifiable and distinct area overlapping and interacting with the free enterprise financial network and socialist state-controlled economies. Political East and West had to reckon with the national, ethnic, economic and political consciousness of the Third World. They represented a volatile mass whose future course could in effect decide the outcome of ideological rivalries. Both East and West were interested in the economic development of the Third World, but for different reasons. 

The West, by providing economic assistance, aimed at raising the national per capita income of LDCs which would in turn increase the bulk of the bourgeoisie amenable to reform, democracy and free enterprise The East was placing its bet in aiding the LDCs on the growth, together with that of the bourgeoisie, of a proletariat to serve as a springboard for a revolution. Neither model developed in a simple form. More complex cultural fibers were at work. The changes in economic structures did not always bring about changes in social structures. In many developing countries a small caste of the upper class held the control and wealth did not easily seep down to other classes. Social upheavals took unpredicted turns. In Iran, the bourgeoisie and the proletariat had to submit to an Islamic revolution. In El Salvador it was in part through U.S. pressure that the government recently announced the nationalization of banks and large land holdings. The dynamics of change are still at work. 

Immediately after World War II, the socialist state economies – mainly USSR – were not economically in a position to provide much material help to the LDCs. Their approach was at first prewar propaganda style. The first significant economic development aids were those of the USSR to China under Stalin, disrupted by the USSR-China conflict in the '50s which revealed the heterogeneity of the socialist camp, later developing into rivalries between the USSR (and her more aligned nations) and China in helping the developing countries. 

The Western free-enterprise economies too – except for the United States – were not in a position to help the LDCs at the outset. The problem was not only economic but also political. Powers such as the UK, France, or the Netherlands were still thinking in the old colonial terms, looking at their colonies as sinecures for their ailing economies and, by their inflexibility, causing the colonial wars of Indonesia, Algeria and Indochina, and long-lasting antagonisms. Western investments, when they began, reflected further imperialistic characteristics. They were geared to an interdependence with the LDCs complementing Western industries. The LDCs’ early approaches to the West of heavy industry were usually unsuccessful, partly because of this and partly because of the sincere belief of Western industries that the logistics for heavy industry were not as yet developed in LDCs. Since Krupp did not heed  the Iranian offer to build a steel mill in Iran, the Shah turned to the Russians, who built him one. The willingness of the socialist camp to oblige – although it produced some major industrial fiascos – forced the hand of free-enterprise economies to provide more basic industries to LDCs. The process speeded the transfer of capital and sharpened the awareness of the international financial network about the availability of cheap manpower and production potentials in the Third World, accelerating the transformation of the Western world to the post-industrial financial, technological, and managerial power and increasing its potentials of exposure to the hazards of nationalization, revolution and war. This called for new arrangements which, in the absence of possibilities for gunboat diplomacy, had to depend on social, political and legal factors. Most of these arrangements had antecedents in the developments so far reviewed. What was significant about them was their growing magnitude and combination. We shall examine them within the three overlapping areas of: (1) guaranty and insurance; (2) conflict resolution and arbitration; and (3) economic cooperation and joint ventures.


In 1924, in Sokolov v. National City Bank, Justice Cardozo stated that "courts of high repute have held that confiscation by a government to which recognition has been refused has no other effect in law than seizure by bandits or other lawless bodies . . . . Everything in Russia might have been destroyed by fire or flood, by war or revolution, and still the defendant would have remained bound by its engagement.''[14] The message was: If you insure against the dangers of theft, fire and flood, why not insure against the dangers of confiscation, wars and revolution? It took some time before commercial practices were applied to political risks instead of sending in the Marines to collect. It was after World War II, when American investors were to contribute to overseas economic recovery along with the U.S. government that political risks became handicaps that coercion could not resolve, thus discouraging private enterprise. 

The idea of an investment guaranty was developed by a committee of the American Bar Association.[15]  The early guarantees covered the convertibility of currencies. To facilitate and maximize the use of private channels of trade to supplement the Marshall Plan in Europe, the Economic Cooperation Act of 1948 provided guarantees for the transfer into United States dollars of other currencies, or credits in such currencies, received as income or repayment of investments under the Economic Cooperation Program. A fee was to be charged for each guaranty, and all fees collected were to be used to discharge liabilities. Where the liabilities exceeded the fees charged, the ECA administrator was authorized to issue notes for purchase by the Secretary of the Treasury for allocating funds to the Export-Import Bank (Eximbank) to meet the liabilities arising under the guarantees. The Eximbank was to become the agent for the agencies administering the Foreign Assistance Act (FAA).[16]  The role assigned to the Eximbank indicated the early intent of the law to keep the guaranty program close to the free enterprise market mechanism. 

The Eximbank was created by a presidential Executive Order in 1934 and established on a statutory basis in 1945. Although the U.S. Treasury is its exclusive shareholder, its charter clearly requires it to run on sound and general banking principles. While the convertibility guaranty may have been construed as a security against the precarious European economic situation, which could have caused foreign exchange shortages and hence the involuntary inconvertibility of a country's currency, it could also cover inconvertibilities caused by new legal restrictions a country might deliberately impose. 

The 1949 Congressional Committee on Foreign Affairs, reviewing the meager results of convertibility provisions of the 1948 ECA in stimulating private enterprise, concluded that the ..“obstacles to expanded investment in Western Europe lie primarily in the uncertain political and economic conditions and the lack of opportunity to make a greater profit than can be made, with less risk, in the United States.”[17]  It was suggested that the situation be remedied “By broadening the scope of the guaranty of convertibility of return to include not only the dollar value of the original investment but also actual earnings to the extent provided by the contract of guaranty . . .” and “to include not only convertibility of currency on realized investment but also losses on the investment resulting from seizure, confiscation, or expropriation destruction by riot, revolution, or war.”[18] War was not added until 1950, and guarantees for revolution and insurrection until 1961. The amended ECA of 1950 reads:

...the term ‘investment’ includes (A) any contribution of capital goods, materials, equipment, services, patents, processes, or techniques by any person in the form of a loan or loans to any enterprise to be conducted within a participating country, (B) the purchase of a share of ownership in any such enterprise, (C) participation in royalties, earnings, or profits of any such enterprise, and (D) the furnishing of capital goods items and related services pursuant to a contract proving for payment in whole or in part after the end of the fiscal year in which the guaranty of such investment is made;
...the guaranty to any person shall be limited to assuring one or both of the following: (1) The transfer into United States dollars of other currencies, or credits in such currencies received by such person, as earnings or profits from the approved project, as repayment or return of the investment therein, in whole or in part, or as compensation for the sale or disposition of all or any part thereof ; and (2) the compensation in United States dollars for loss of all or any part of the investment in the approved project which shall be found by the Administrator to have been lost to such person by reason of expropriation or confiscation by action of the government of a participating country. When any payment is made to any person pursuant to a guaranty as hereinbefore described, the currency, credits, asset, or investment on account of which such payment is made shall become the property of the United States Government, and the United States Government shall be subrogated to any right, title, claim, or cause of action existing in connection therewith.

In 1951, the Economic Cooperation Act was incorporated in the Mutual Security Act, which extended the investment guarantees covering Europe to friendly countries in other parts of the world. The Mutual Security Act was comprehensively codified in 1954.[19]  In 1959, as Europe had by and large recovered and was on its way to becoming a competitor, economically developed countries were excluded from the International Guaranty Program[20]

The trend toward aligning political risk management with free enterprise practices led to the creation of the Foreign Credit Insurance Association (FCIA) in 1981, under the auspices of the Eximbank. An association of some 50 insurance companies in the United States, FCIA provides coverage for commercial credit risks and political risks – inconvertibility, expropriation, civil war, revolution and loss of import license.[21]  The political risk part of the insurance is underwritten by the Eximbank.

By 1961, as the part of the guaranties for political risk insurance provided by the Eximbank under the Mutual Security Acts of the 1950's were turned over to FCIA, the part covering investments in less developed friendly countries devolved to the Agency for International Development (AID).[22] The AID investment guarantees covered risks of inconvertibility, expropriation or confiscation, and loss due to war, revolution or insurrection. AID's financial liabilities for those guaranties were met out of fees collected in connection with the guaranties, payments made to discharge liabilities, and notes issued by the Treasury Department.[23] Here again we witness the lawmakers’ continued desire to involve private enterprise, both by encouraging private investment to eventually replace the aid program run by the government and financed by taxes, and by turning over the Investment Guaranty Program to private enterprise.[24] The creation in 1969 of the Overseas Private Investment Corporation (OPIC) showed this tendency.[25]  In 1971 OPIC, as an agency of the United States under the policy guidance of the Secretary of State, took over the private investment guaranty operations of AID.

OPIC's financial operations were to be self-sustaining. It was to utilize private credit and investment institutions and to broaden private participation by revolving its funds through sale of its direct investments to private investors.[26]  By 1974 the Congress set a schedule for the transfer of OPIC's insurance operations to private insurers.[27]  For the implementation of this law OPIC created the Overseas Investment Group (OIIG) in cooperation with some U.S. and foreign companies – notably Lloyd's of London – to cover inconvertibility and expropriations (private insurers were reluctant to cover war risks). U.S. private insurers accepted only a limited amount of risk on yearly renewable commitments and required OPIC to retain most of its underwriting liabilities. The prospects for private insurance against the political risks of investments in LDCs did not seem very bright. Congress recognized this fact in 1978 by relieving OPIC of its mandate to transfer its functions to private insurers[28]

The evolution of the foreign investment insurance program has brought some new dimensions to the sketch developed in the earlier parts of this paper. Looking at it from a purely economic point of view, we may assume that investment insurance for political risks, if managed according to sound insurance practices, could eliminate altogether conflicts between states. When merchants contract to cover fire damage, their premium is based on the frequency of possible risks among the insured, so that when the calculated percentage is lost, all insured chip in to replace the loss. Similarly, when an investment is lost through an insurrection in another country, the overseas investment insurance should have calculated the frequency of the risks and distributed it among the insured adequately to cover the loss and close the books. Compensation of damages resulting from insurgency is indeed a debatable item of international law.[29]  Of course, in the case of fire damage, if the fire were caused by arson or negligence, the insurance company would go after the responsible party to press for damages. In the case of political risks, responsibility is usually not hard to locate.

Provisions made by laws covering investment guaranties since 1948 for the subrogation of currencies, rights, titles, claims, or cause of action to the United States government in case of indemnified investments are intended to permit the U.S. government to approach the government responsible for the damages. These provisions are made by U.S. public laws. At the level of international law, they present the long debated problem of one sovereign state’s acquiring rights within the sovereignty of another because the former’s nationals are implanted there – the Anglo-Iranian Oil Company case comes to mind. The United States government has concluded bilateral agreements with countries receiving economic assistance to help settle questions that may arise as a consequence of Investment Guaranty Programs. The variations in the language of these agreements show the range of relationships between industrially developed free-enterprise countries and LDCs. For example, the April 2, 1953 agreement between the United States and Haiti provides that 

If the Government of the United States of America makes payment in United States dollars to any person under any such guaranty, the Government of Haiti will recognize the transfer to the United States of America of any right, title or interest of such person in assets, currency, credits or other property on account’ of which such payment was made and the subrogation of the United States of America. to any claim or cause of action of such person arising in connection therewith.

On the other hand, the February 6, 1965 agreement with Brazil – acknowledging that it is undesirable for one government to hold property rights, titles and claims within the jurisdiction of another – provided for the subrogation of the investor's rights by an entity entitled to own such rights under Brazilian law. Bilateral agreements recognizing the United States government’s subrogation of U.S. nationals’ rights under the Investment Guaranty Program can in effect subdue certain premises of international law, such as the exhaustion of local remedies by an alien before its case can be presented by the state of which it is a national. The United States, by indemnifying an investor, will thus pass judgment unilaterally on the nature of the measures taken by the other government.[30]  The Investment Guaranty Program, probably because of these facts, has had some effect making foreign governments amenable to settle with U.S. investors and avoid confrontation with U.S. government agencies.[31]  Mention was made earlier that such arrangements bring the Anglo-Iranian Oil Company case to mind. It must be added, however, that the long history of the United States’ policy of promoting international free enterprise does not lend itself entirely to comparison with that case. No doubt there is intent of financial imperium, but as far as possible within the framework of free enterprise practices. The concern of Congress to make the risk-management programs run by U.S. agencies follow the private-market mechanism has created singular situations where United States agencies have challenged U.S. investors’ claims of discrimination by another government in arbitration courts.[32]   In the AID/Valentine Petroleum Case, the arbitrators noted:

It is perhaps anomalous that the foreign government whose acts have given rise to the claim involved in this proceeding is not before us to present its case. It is more paradoxical that the government of the United States appears in the position of attempting to justify the acts of a foreign government against its own national. But this is the inevitable consequence of the intent and design of the Program, placing AID as a shield and sword between the investor and the foreign government.

Providing for insurance coverage of overseas investments and modeling agencies in charge of them on free-enterprise principles (such as OPIC) or creating private institutions to handle them (such as FCIA underwriting political risks covered by Eximbank) has made international law run smoother. Beyond acting as sword and shield, taking their investor to arbitration if they find its claim unjustified, or, taking the host country to arbitration where they acquire subrogated rights, these U.S. agencies form part of a network of international bodies (and behaviors) at times interlocking, other times cleft. An officer of Eximbank, after elaborating a detailed scheme of the steps to be taken to collect claims from a foreign government for a subrogated right under FCIA political risk, added, "and they will be reminded of the obligations imposed by the Berne Union on its members,” implying that the credit of that government for doing international trade would be tarnished if it did not follow certain patterns of behavior accepted by international finance.[33]  These interdependencies have further contributed to the creation and development of international organizations and mechanisms for conflict resolution and arbitration.


Arbitration is one of the oldest methods of international settlement in international law.[34]  Generally, in a case of litigation (we are concerned here only with litigation over the damage a government may cause to an alien investment) the alien’s state presents the claim of its national to the host state. Questions of exclusive jurisdiction of the host country and exhaustion of local remedies can and usually do arise. Where the states agree to proceed with peaceful settlement of the case, among other methods of dispute settlement, conciliation and arbitration have been used. Provisions for arbitration between states and foreign private persons are sometimes included in agreements between such parties, but when litigation arises, the host country rejects arbitration on the grounds of sovereign rights and exclusive jurisdiction.[35]

Since World War II, the international developments mentioned earlier have both required, and to some extent provided, new variations in the processes and frameworks for conflict resolution. International organizations, regional and universal, specialized and general, have served as contexts for conflict resolution.[36]  Insofar as investments are concerned, the World Bank has had direct involvement and vested interests in settling international disputes: It is, therefore, understandable that it would take initiative to develop effective arbitral processes between states and foreign private enterprise. The World Bank's initiative produced the Convention on the Settlement of Investment Disputes between States and Nationals of Other States which took effect on October 14, 1966, and for the implementation of which the International Centre for Settlement of Investment Disputes (ICSID) was created.[37]  ICSID provides for an international framework within which states party to the Convention – 83 in number as of November 1979 – and investors nationals of other states can seek conciliation and/or arbitration for their legal disputes. According to Article 25(1) of the Convention: 

The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State... and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre. When the parties have been given their consent, no party may withdraw its consent unilaterally.

The Convention thus serves to inhibit states which may not respect their prior agreement with foreign private investors to put to conciliation or arbitration their legal disputes when such disputes arise.[38]  The case of Alcoa Minerals of Jamaica Inc. v. Government of Jamaica put this potential of ICSID to the test.[39]  Constituted on the basis of articles 37(b) and 38 of the convention – which set the procedure for constituting tribunal’s where the parties do not agree (in this case Jamaica refused to recognize ICSID's jurisdiction or to appear) – the tribunal decided that ICSID had jurisdiction to arbitrate. During 1976, the claimant requested an extension of time on the grounds that the parties were engaged in active negotiations and hoped to arrive at an amicable settlement.[40]  On February 27, 1977, the arbitral tribunal issued a procedural order, pursuant to Arbitration Rule 43(1), noting the discontinuance of the proceedings at the joint request of the parties.[41]

The actual arbitral effectiveness of ICSID has yet to develop. Few cases have been put before it, and their progress has been slow;[42]  and all but one were withdrawn before an award. This fact may, of course, vouch for the efficiency of ICSID – or at least its existence as a deterrent to obstinate and uncompromising parties. Only time will tell. ICSID does suffer from the stigmas and suspicions tainting the relationships of LDCs and the Western free enterprise international financial network.[43]  Broadly speaking, the success of ICSID will depend on two factors. One of those is idealistic, namely, the evolution, in the long run, of greater mutual understanding, trust and respect between LDCs and international finance – the kind of attitude which, as we saw in the last section, made FCIA work and the absence of which made OIIG fail. The other factor is the reality that makes laws of subrogation of rights or arbitration work, that is, the interdependence and mutual need of the partners. Laws work not only because there are sanctions attached to them but because they meet needs of those who make them and those who abide by them. They reflect power relationships. LDCs that need investment compromise with the World Bank, which creates ICSID and asks for a legal framework within which financial transactions can be given some security.

The need for investments and the need for a legal framework are general rules of international intercourse. They take different forms depending on the nature of the parties involved. In the last decade, the transactions between free-enterprise economies and Socialist state-run economies have also taken new turns that deserve scrutiny.


We noticed earlier that the Stalinian Soviet Union, both to consolidate its own Empire in Eastern Europe and to avoid becoming subject to the Western hegemony, refused to participate – nor did it let other Eastern European countries to do so – in the immediate post-World War II economic recovery plans devised by the West, such as the Marshall Plan, the World Bank and IMF. By the end of the 50’s and into 60’s, however, the Soviet Union had developed an economic network within Eastern Europe with considerable growth potential. The Council for Mutual Economic Assistance (COMECON or CMEA), created in 1949 in reaction to Marshall Plan, underwent transformations in 1959 and 1962 to counter-balance developments in the West, such as the European Common Market and OECD. The expanding economies of COMECON warranted the creation of investment and monetary institutions. The International Bank for Economic Cooperation (IBEC) was established in 1964 to handle a system of multilateral settlement in transferable rubles. It also arranged some accounts between its Easter European members and Western countries. The International Investment Bank (IIB) began its operations in 1971 to finance the development of national resources and heavy industry in its member countries. Its financial resources included paid-in capital and deposits and floating loans on international money markets, mainly in Western Europe. 

Together with economic growth came the post-Stalin liberalizations permitting Eastern European countries to chose – within limits – their particular road to socialism. This included possibilities of developing economic relations with Western economies for access to new technologies, capital and markets. Western economies, particularly Western Europe, were equally eager to expand their market in the East, as was reflected in the gradual relaxation of restrictions on trade with communist countries, notably in the reduction of the items on COCOM list.[44]  The initial increase in East-West trade in the 60’s covered the traditional import and export of goods and commodities. The transfer of technology was inhibited by fears of contributing to the combativeness of the ideological adversary, and the transfer of capital was handicapped because of the incompatibilities of the capitalist and Marxist-Leninist economic doctrines. The need for economic relations, however, has been strong enough to inspire arrangements permitting intercourse.[45]

The East has offered a range of methods including barter, switch, counter-purchase and joint ventures, some reflecting the Marxist-Leninist ideology, others comprising it. Barter may be considered the nearest to a non-capitalist method of trade, as it consists of the direct exchange of goods of equal value.[46]  Switch refers to a multilateral process of clearing which permits a country to export to another country in exchange for clearing rights-possibly acquired through barter-held by the importing country against a third country. Counter-purchase agreements connect Western transfer of technology, plants or equipment to counterdeliveries of goods not derived from the transfer. It has the characteristics of commercial trade locked into a barter arrangement. In the buyback or compensation transactions, the Eastern country repays the imported technology, plant or equipment with its resultant product. joint ventures are a capitalist compromise. They provide for the long-term investment of Western capital, management and technology in socialist planned economies with actual ownership rights in a joint company to develop an industry with possibilities of profit, access to products and markets, and repatriation of the contributed capital and income.[47]

Understandably enough, the country that has been most reluctant to get involved in joint ventures is the Soviet Union, which has been longest divorced from free-enterprise market experience and more attached to the principles of state-controlled economy. Countries that have passed laws for joint ventures such as Romania (1971), Hungary (1972), and more recently – and more cautiously – Bulgaria (1974) and Poland (1975), have still among their cadres those who may have been familiar with pre-World War II free-trade mechanisms. The laws on joint venture generally provide for majority share-holding by the host country's government agencies involved, although there have been exceptions. For example, the Hungarian Decree No. 7 of May, 1977, provides for foreign majority control of the joint company’s shares in banking and service fields, subject to approval by the Minister of Finance.[48]

Western finance and free enterprise have also been adapting their commercial methods in their business with socialist state-controlled economies. The traditional imperialist cliché has been the penetration into an underdeveloped area by capitalist industries to exploit its natural resources and cheap labor. Yet in their turnkey countertrade, buyback projects and joint venture proposals, private businesses have risked marginal and competitive calculations to penetrate state-controlled markets in which, not long ago, private enterprise was nationalized. Western flee enterprise now calculates its transfer of capital goods to the socialist planned economies not as an open-ended proposition drawing indefinitely on the foreign labor and resources but as a long-term export which will return the invested capital plus some profit within a deed period of time in form of payment or buyback compensation. Such projects are mostly financed by long-term, low-interest credits advanced by the West. Western financing agencies compete to win Eastern European markets and in their zeal at times turn projects into what amounts to an exploitation of Western capital, management and technology by socialist state controlled economies.[49]

East-West business does present a lopsided picture. Western capital, equipment, and technology flow East and fall under the jurisdiction of states which control their economy, while at the same time Eastern European debts to Western government and commercial banks grow – exceeding 50 billion dollars by 1979. Yet Eastern European countries generally enjoy good credit ratings with most Western commercial institutions.[50]  The whole of East-West trade proceeds within an intertwined network whose disturbance can have undesirable consequences. 

The internationalization of conflict resolution processes between Eastern European states and Western businesses bears witness to the functionality of this network and the intent of those involved to keep it credible. For example, while in their earlier transactions Soviet Foreign Trade Organizations (FTOs) insisted on contract clauses stipulating that litigations between FTOs and Western private enterprises should be handled by Soviet Foreign Trade Arbitration Commission in Moscow, in recent years, third country arbitration for commercial disputes has become a standard clause in contracts between Soviet FTOs and American business.[51]  According to this clause, in case of dispute, Stockholm, Sweden, is proposed as the arbitration site, either with Swedish substantive law governing or with Swedish conflict principles invoked to determine the governing law. The U.S.A., the U.S.S.R. and Sweden are signatories to the 1858 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), which binds them to enforce an award made in another member country. The move towards third country arbitration may have two implications. If we emphasize the governmental nature of FTOs, the move is a further step in the direction of acceptance of binding third party arbitration in litigations between the agencies of a sovereign state and foreign private investors. On the other hand, the acceptance of third country arbitration may indicate the tendency of the Soviet State to deëmphasize the governmental nature of FTOs in their international business dealings, putting them on a par with international private corporations.

The economic interdependence of East, West and the Third World has superceded “sound” practices of some ideologies; certainly those of Western financial imperialism. But it is also not likely that the socialist state economies would disrupt this interdependence and the flow of Western capital and technology by nationalizing their $50 billion of international debt. The Soviet FTO negotiators have very probably read Lenin's Imperialism : The Highest Stage of Capitalism. That many of their Western counterparts read it is doubtful. It rings true enough in its description of "The Export of Capital" and "The Parasitism and decay of Capitalism" to make Hegel's historical determinism a prophecy. As for the Third World countries, it is doubtful that they will, in any foreseeable future, pay their debt of over $340 billion ; they may default, they do default; and at times they do expropriate foreign investments. Adam Smith's “invisible hand” seems to be at work internationally, bringing capitalism with its competitions and contradictions to the aid of development. 

In the light of these realities, the international law of investment is no longer definable by simple monetary yardsticks. Where international finance provides funds to indebted international customers to further acquire capital goods and technology from international corporations, the whole complex should be explored in the broader context of the need of the peoples to interact with their natural and human environment in order to produce, to keep busy and to exchange; adjusting, as they go, such abstractions as balances of trade and payment to make production, employment and exchange possible. If we managed not to blow ourselves up in a nuclear holocaust, we shall, after some international trials and tribulations, to be sure, witness the development of international economic patterns by financial and industrial managers, whether of international banks, multinational corporations or state-run economies, beyond the concepts of sovereignty or traditional nation-state balances of payment and trade.

A. Khoshkish


[1]. This article was published in World Policy, 1983, No.1.
[2]. The two great figures of the Latin American wars of independence were well acquainted with European cultures and institutions. Simon Bolivar was well read in French philosophy and had traveled extensively in Europe Jose de San Martin had served in the Spanish army in Portugal, Spain and Africa.
[3]. By the end of 19th century a rather well rounded body of literature had grown in support of the imperial concept. See, for example, Thomas Carlyle: Occasional Discourse on the Nigger Question (1849); John Westlake: Chapters on the Principles of International Law (1894), notably chapter IX; Benjamin Kidd, The Control of the Tropics (1898) ; Jules Harmond: Domination et Civilization (1910) ; Frederick D. Lugard, The Dual Mandate in British Tropical Africa (London, 1922), and Louis Vignon : L'exploitation de notre empire colonial(1900).
[4]. J. Gallagher and R. Robinson,“The Imperialism of Free Trade”, Economic History Review 6 (2nd Series), at 1-15, 1953.
[5]. See Alwyn V. Freeman, "Recent Aspects of the Calvo Doctrine and the Challenge to International Law" in American Journal of International Law, 40 (1946), at 121-147.
[6]. German Interests in Polish Upper Silesia Case (Chorzow case) (P.C.I.J. 1926 Series A. No. 9 and No. 13 ; 1928 Series A. No. 17).
[7]. Great Britain, Court of Appeal (1921) 1 K.B. 456, 471 (1921), 3 K .B. 532; see also Wulfson v. Russian Socialist Federal Soviet Republic, U.S. Court of Appeals of New York (1923), 234 N.Y. 372, 138 N.E. 24). [8]. See Dawson and Western "Prompt, Adequate and Effective: A Universal Standard of Compensation?" 30, Ford ham Law Review F2F (1962).
[9]. On February 19, 1918, a decree was issued declaring oil an inalienable national resource; on November 23, 1936 an expropriation law was passed empowering the government to nationalize property and resources for public and social welfare; on November 1, 1937 the subsoil rights of oil companies (American and British) were nationalized; on March 18, 1938 American and British oil companies were taken over. See Josef L. Kunz, The Mexican Expropriation (New York: New York University Contemporary Law Pamphlets, 1940) ; also the Exchange of Notes between the U.S.A. and Mexico, September 25 and 29; 1943 on Payment for Expropriated Petroleum Properties, in U.S. Agreements Series 419.
[10]. November 26, 1932. The case was brought before the League of Nations which asked the parties to negotiate directly. With some British intimidation the Anglo-Persian Oil Co. and Persia eventually agreed upon a new concession. See the Anglo-Persian Oil Company's Convention of 1933 in the League of Nations Official journal, 1933, Annex 1467, at 1653.
[11]. Marjorie M. Milbourn and Mildred Weiss, "Statistical Annexes," The United States and the Developing World: Agenda for Action 1973 (Washington, D.C.: Overseas Development Council, 1973), Annex B-7, at 132.
[12]. Cheryl Payer, “ The Perpetuation of Dependence: The IMF and the Third World,” in Monthly Review (September 1971), at 23-24. [13]. Lauterpacht, ed., “The Suez Canal – A Selection of Documents Relating to the International Status of the Suez Canal and the position of the Suez Canal Company,” supplement to The International and Comparative Law Quarterly, September 1956; E. Lauterpacht, ed., The Suez Canal Settlement (New York Praeger, 1960); Robert R. Bowie, International Crises and the Role of Law: Suez 1956 (New York: Oxford University Press, 1974).
[14]. U.S. Court of Appeals of New York, 239 N.Y. 158, 145 N.E. 917.
[15]. B. E. Clubb and V. W. Vance, Jr., "Incentives to Private U.S. Investment Abroad Under the Foreign Assistance Program," The Yale Law Journal, 72:457 (1963) at 488.
[16]. U.S.P.L. 80-472, 111 (6) (3), 62 Stat. 143-146 (1948) See Adams W.T., “ The Emerging Law of Dispute Settlement under the United States Investment Insurance Program,” Law and Policy in International Business, 3:101 (1971) at 101-156, notably Footnote 6 for the chronology of different agencies of FAA.
[17]. House Report No. 323, 81st Congress, 1st session, at 20.
[18]. Ibid., at 21.
[19]. U.S.P.L. 68 Stat. 861 (1954).
[20]. U.S.P.L. 73 Stat. 251 (1959), para. 205 (m). For an earlier discussion of Investment Guaranty legislation see M. Whitman. The United States Investment Guaranty Program and Private Foreign Investment (Princeton: Princeton Studies in International Finance, No. 9 (1959) ; and A. Fatouros, Government Guaranties to Foreign Investors (New York: Columbia University Press, 1962).
[21]. J. Rendell, “Export Financing and the Role of the Export-Import Bank of the United States,” Journal of International Law and Economics, Vol. 11. 1976.
[22]. U.S.P.L. 87-195, 87th Congress, 1st session, section 221 (b) (1).
[23]. Id., sec. 222.
[24]. On the diverging views of the Congress and the Administration on the running of the program see L.A. Collins and A. Etra, "Policy, Politics, International Law and the United States Investment Guaranty Program," Columbia Journal of Transnational Law, 4:240 (1966).
[25]. U.S.P.L. 91-175, 83 Stat. 805 (1969).
[26]. Id., Title IV, sec. 231.
[27]. U.S.P.L. 93-390.
[28]. U.S.P.L. 96-268 ; see also Law and Policy in International Business, 11:277 (1979) ; and T. Meron, “OPIC Investment Insurance Is Alive and Well,” in The American Journal of International Law, 73:104 (1979).
[29]. See, for example, United States-Salvador Claims Arbitration, 1902 (Rosa Gelbtrunk Case) ; Italy-Venezuela Claims Arbitration, 1903 (Sambiaggio Case).
[30]. Fatouros,op. cit. at 118 et seq.
[31]. T. Meron, op. cit. at 105 ; also P. R. Gilbert, “Expropriation and the Overseas Private Investment Corporation,” in Law and Policy in International Business, 9:2 (1977).
[32]. Arbitration cases: Valentine Petroleum Chemical Corporation and Agency for International Development, 1967 ; International Bank and OPIC, American Arbitration Association (AAA) case No. 16 10 0041 71, 1972 ; The Anaconda Co. and Chile Copper Co. and OPIC, AAA Case No. 16 10 0071 72, 1975 ; International Telephone and Telegraph Corp., Sud America (ITTSA) and OPIC, AAA Case No. 16 10 0038 73, 1974 ; and Revere Copper and Brass, Inc. and OPIC, AAA Case No. 16 10 0137 76, 1978.
[33]. Interview of the author with Mr. George Bogdanoff, Eximbank vice-president, Dec. 20, 1979. The International Union of Credit Investment Insurers (Berne Union) is a group of public and private export credit and investment insurers of leading industrial countries. It was created in 1934 to facilitate the exchange of information and ideas among its members, who frequently contact each other for advice and feedback on defaults, claims and the standing of their clients. Eximbank, FCIA and OPIC are members of the Berne Union.
[34]. J. H. Ralston, International Arbitration from Athens to Locarno (Stanford, Stanford University Press, 1929).
[35]. Recent cases are the Anglo-Iranian Oil Co. Case, Sapphire International Petroleum Ltd. v. National Iranian Oil Co.; Société Européenne d'Etudes et d'Entreprises v. P.F.R. of Yugoslavia, and British Petroleum Exploration Co. Ltd. v. Libyan Arab Republic.
[36]. E. Lauterpacht, "The World Bank Convention on the Settlement of International Investment Disputes," Recueil d'Etudes de Droit International en Hommage à Paul Guggenheim (Geneva, Graduate Institute of International Studies. 1968) at 642-3.
[37]. For a discussion of the Convention and ICSID see, for example, Lauterpacht, op. cit.; A. Broches, “The Convention on the Settlement of Investment Disputes between States and Nationals of Other States,”, in Recueil des cours, Vol. 2:331-410 (1972), Academy of International Law, The Hague; G. Delaume. “Convention on the Settlement of Investment Disputes between States and Nationals of Other States,” in The International Lawyer, 1:64-80 (1966) ; G. Delaume, “Institutional Arbitration: The Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention)” in Transnational Contracts-Applicable Law and Settlement of Disputes, Vol. II; paras 14.04 –14.07 (New York: Oceana Publications, 1975); C.F. Amerasinghe, “The International Centre for the Settlement of Investment Disputes and Development Through the Multinational Corporation,” in Vanderbilt Journal of Transnational Law, 9:793 (1976).
[38]. States may, however, exclude class or classes of disputes from the jurisdiction of the Center (Article 25 - 4), or require the exhaustion of local administrative or judicial remedies as a condition of their consent to arbitration (Article 26).
[39]. ICSID ARB 74/2 (1975) ; for a discussion of the case see J. T. Schmidt, “Arbitration Under the Auspices of the International Centre for Settlement of Investment Disputes (ICSID): Implications of the Decision on jurisdiction in Alcoa Minerals of Jamaica, Inc. v. Government of Jamaica, Harvard International Law Journal, 17:90-109 (1976).
[40]. Statement by Mr. A. Broches, Secretary-General of ICSID, at the Tenth Annual Meeting of the Administrative Council, October 7, 1976, at 3.
[41]. ICSID Eleventh Annual Report 1976/77 at 4.
[42]. Holiday Inns/Occidental Petroleum v. Government of Morocco (1972), proceedings terminated in 1978 after all parties settled the dispute amicably ; Adriano Gardella SpA v. Government of Ivory Coast (1974), a unanimous award rendered by the tribunal in 1977 ; Alcoa Minerals of Jamaica, Inc. v. Government of Jamaica (1974) ; Kaiser Bauxite Co. v. Government of Jamaica (1974) ; Reynolds Jamaica Mines Ltd. and Reynolds Metals Co. v. Government of Jamaica (1974), all three terminated at the request of the claimants in 1977 ; Government of Gabon v. Société Serete S.A. (1976), discontinued at the joint request of the parties in 1978 ; AGIP SpA v. Government of the People's Republic of the Congo (1977), pending; Société Ltd Benvenuti and Bonfant srl v. Government of People's Republic of the Congo (1977), tribunal’s action was postponed allowing parties to reach an amicable settlement in August 1979 ; Guadalupe Gas Products Corporation v. The Federal Military Government of Nigeria (1978), pending – October 1979.
[43]. In Holiday Inn/Occidental Petroleum v. Government of Morocco, for example, the case had to be delayed in 1976, because the arbitrator designated by the claimants resigned to become the director of one of them (Occidental Petroleum), a development which the president of the tribunal and ICSID Secretary-General considered inconsistent with the letter and spirit of the Convention and the integrity and impartiality of arbitral proceedings.
[44]. Coordinating Committee on Export Controls (COCOM) was established by NATO in 1949 and includes today all NATO members except Iceland, plus Japan. It establishes a list of items which cannot be exported to communist countries.
[45]. The Brookings Institution, Economic Relations Between East and West: Prospects and Problems, 4 (1978).
[46]. For a discussion of these methods, see P. Verzariu, S. Bozek and J. Matheson, East-West Countertrade Practices ; An Introductory Guide for Business; Washington: U.S. Department of Commerce, 1978.
[47]. P. Verzariu and J. A. Burgess, “ The Development of Joint Economic and Industrial Cooperation in East-West Trade;” Paper extracted from the joint Economic Committee’s Compendium of Papers on East European Economies Post-Helsinki, August 25, 1977.
[48]. Id. at 1233. See also G. G. Lorinczi and T. F. Dorian, “U.S.-Hungarian Joint Ventures: Prospects and Problems,” Law and Policy in International Business, 10 (1978) at 1222.
[49]. Credit and financing agencies created by industrial free enterprise countries like La Compagnie Française d'Assurance pour le commerce Extérieure (COFACE) in France, the Export Credits Guarantee Department (ECGD) in the United Kingdom, HERMES in the German Federal Republic, the Eximbank of Japan or the U.S. Eximbank, compete with each other in offering lower interest rates and favorable terms to their exporters and foreign buyers. Credit agencies in other countries are supported by their governments and can outbid offers on the open market. The Eximbank receives no appropriations from the Congress and procures its funds at the market rate. Not being able to compete, the Eximbank-and the U.S. Treasury Department-have tried and to some extent succeeded in recent years to reduce competition by international negotiations and agreements to limit the export credit support of other governments. An International Arrangement on Officially-Supported Export Credit is in effect since April 1978 among the competing nations to fix interest rate minimums and repayment term maximums. This International Arrangement, however, leaves a good amount of loopholes such as cost inflation and exchange risk insurance which could be used for unfair export competition. Law and Policy in International Business, Vol. 11 (1979) at 371, et seq.
[50]. M. T. Yelenick, “Imports, Exports and Related Matters,” Law and Policy in International Business, 11 (1979) at 43.
[51]. W. T. Hoya and D. C. Stein, “Drafting Contracts in U.S. - Soviet Trade,” Law and Policy in International Business, Vol. 7 (1975) at 1098 et. seq.

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