Comments on the treaty of friendship, commerce, etc. btwn. U.S. & Haiti, 3.3.55 & Iran, 8/15/55, ACBNY, Co, on For. Law, 10p.

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Title:
Comments on the treaty of friendship, commerce, etc. btwn. U.S. & Haiti, 3.3.55 & Iran, 8/15/55, ACBNY, Co, on For. Law, 10p.
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Mixed Material
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NY, 1956?

Notes

General Note:
5-multi-jur-1956
General Note:
KF209 .P36 v.274

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University of Florida
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ILLMC
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280/56/1


The Association of the Bar
of the City of New York, o-w --&^ 4.
42 West 44th Street

COMMITTEE ON FOREIGN LAW
Comments on the Treaties of Friendship, Commerce and Navi-
gation between the United States of America and the Republic
of Haiti, of March 3, 1955, and Iran, of August 15, 1955.

The Committee on Foreign Law of The Association of the Bar of
the City of New York has, at its meetings in 1955-1956, engaged in
an analysis of certain of the provisions of the two recently signed
commercial treaties with Haiti and Iran. These comments are limited
to those provisions which apply to subjects with which the members of
the Committee feel qualified, on the basis of professional experience,
to express an informed opinion.

These two treaties were negotiated in pursuance of the De-
Partment of State's program of drafting up-to-date and comprehensive
commercial' treaties with as many nations as practicable, with the aim
of affording as much encouragement and protection to the carrying on
of trade with, and participation in investments in, the countries in-
VOlved. Such treaties are in the interest of American commercial and
investing interests, although since treaties with sovereign nations
are involved, they are necessarily cast in a reciprocal form. To
that end a so-called Model Draft Treaty was prepared by the Depart-
ment some years ago, and continuously improved on the basis of exper-
tence in recent treaty negotiations. The various treaties concluded
to date fall into a definite pattern, rather than each being negoti-
ated on a completely "ad hoc" basis. There are nevertheless, var-
ianes in the exact language.of the provisions of the two treaties
With Haiti and Iran, some of which may be of significance, and which
1J1 be commented on herein.

iThe comments which follow are not intended so much as specific
Citayisms of the particular treaty as it has been negotiated, or in
Yti Way as an indication that the Committee opposes their ratifica-
atio by the Senate. Their primary purpose is to be of constructive
the sance to the State Department in negotiating further treaties of
or isame type, as well as (if deemed necessary) negotiating protocols
coai81erpretory letters with regard to the particular treaties under
sieration.

SR OVISIONS CONCERNING ACCESS TO COURTS

V(1) The Haitian and Iranian treaties contain provisions in articles
diand u III (2) respectively (which, except for rather minor textual
erences, follow closely the provisions of the Draft Treaty) guar-











anteeing, on a mutual basis the right of nationals and companies of
either party to free access to the courts and administrative agencies
of the other, on both a national and a more favored nation basis. A
protocol to the Haitian treaty provides that the term "access" to
courts includes legal aid and security for costs and Jud-gment. No
such protocol has been made in connection with the Iranian treaty,
and, unless there are local circumstances peculiar to Iran and to
procedures in that country's courts, with which the Committee is not
familiar, it is felt that the precedent set in the case of the Hai-
tiantreaty should be followed in the case of the Iranian treaty.

It has been also suggested that it would be appropriate in this
connection to include provisions in commercial treaties for the
reciprocal rendering of judicial assistance, for instance, in the
taking of depositions. In the absence of such a treaty provision,
American practicing lawyers have run into serious practical diffi-
culties in obtaining testimony abroad, in such form as can be used in
American courts. However, international judicial assistance is the
subject of legislation now before Congress, which would appoint a
commission to examine the entire problem and, it is hoped, draft a
model treaty or protocol to existing treaties, which, taking the
complexities of the problem into account, will provide a means for
improving the situation on a reciprocal basis. It appears unlikely
that the State Department will participate in the negotiation of
Provisions in general commercial treaties covering this subject until
the proposed Commission has submitted its recommendations. The Com-
mittee,therefore, does not make any suggestions at this time in re-
gard to the desirability of including provisions in this regard in
the Haitian and Iranian treaties, except to point out that there is
a need for treaty arrangements in the field, which should be nego-
tiated, either in connection with commercial treaties, or in special
treaties in the field of reciprocal judicial assistance.

A somewhat similar problem exists in connection with the recip-
rocal enforcement of foreign judgments, although the Committee feels
that, here, conventions should be negotiated only with countries
Whose judicial systems and standards are such that we would have con-
cidence in the fairness of judgments rendered by that country's
COurts

2. ENFORCEMENT OF ARBITRATION AWARDS

I- Both the Haitian and Iranian treaties contain provisions concern-
In arbitration (Art. V(2) and III (3) respectively). The language
t the Haitian treaty is that of the so-called "draft" treaty, that
te Iranian treaty is brief and more general. The provisions of both
treaties concerning the enforceability of awards are couched in the
eg active (i.e. an award entered in a proceeding shall not be denied
et cement because of the alienage of one or more of the arbitrators
et ) instead of the positive, as in the case of the treaty with West











Germany of October 29, 1954 (Art. VI (2)) where such awards are de-
clared conclusive and enforceable (subject to certain qualifications).
The Committee prefers the provision contained in the West German
treaty especially in the case of treaties with more important trad-
ing nations.

3. CONSULAR PROTECTION OF THE RIGHTS OF NATIONALS

Both treaties contain provisions (Haiti Art. III; Iran Art. II
(4)) which are intended to insure protection to citizens of the coun-
tries involved, in case of their arrest by the authorities of the
other. The provisions in the Iranian treaty are couched in somewhat
more general terms than in the case of the Haitian treaty. Thus it is
provided that "on demand" of the arrested national, his diplomatic
or consular representative is to be notified "without unnecessary
delay" and that such representative have full opportunity to safe-
guard the interests of the arrested national (which would seem to be
a good provision). The corresponding provision in the Haitian
treaty (which follows the model treaty in this regard) requires that
the consul be notified "immediately" which is preferable. However
the Iranian treaty does add a desirable guarantee that the disposition
of the case be "prompt and impartial", Article XIX,dealing with the
powers of consuls, also authorizes the consul to arrange for legal
assistance. Unfortunately the sections of the Iranian treaty (Art.
XII XIX) which apply to consular rights are not quite as extensive
as some of our recent Consular Conventions (e.g. with Costa Rica)
which specifically guarantee, for example, the right of private ac-
cess by the consul to the arrested national, nor does the treaty re-
quire the government to notify the consul of the detention of a na-
tional of the country he represents, the consul's rights depending
SOlely on a prior "demand" on the part of the arrested national.
'Te "authorities" of the receiving state before whom the consul may
assist his nationals are not defined, so as to include the author-
ities of local political subdivisions (a possible loophole), and it
8s suggested that in addition the treaty should explicitly empower
a consul to confer in his official capacity with all authorities of
the receiving state concerning any criminal or civil proceedings to
which one of his nationals is a party.

S While the Committee does not believe, on the basis of the above
Comparison of the Iranian treaty with other commercial and consular
tenaties to which the U. S. is a party, that this particular treaty
eiltirely lacks teeth, so to speak, in affording protection to U. S.
abl"zens (indeed some of the language is an improvement over compar-
ale provisions in other treaties), it does believe that, except
Tere local conditions in Iran or elsewhere, such as the lack of
couable lawyers, suggest otherwise, the more specific provisions
thad in the other recent treaties are generally to be preferred, and
qi rif possible, a protocol be negotiated to cover the point of re-
ing the government to notify the consul whenever one of his na-











tionals is detained.


4. PROVISIONS WITH REGARD TO TAXATION

There is a serious question as to the advisability of including
provisions with regard to taxation in commercial treaties, other,
perhaps, than a general pledge of national and most favored treat-
ment. Tax laws and regulations throughout the world are complicated
and technical. It should be the policy of the United States to ne-
gotiate specific bilateral conventions to avoid double taxation with
as many countries as possible. Eighteen such conventions have been
ratified through March 30, 1955. This approach is preferable to the
rather broad language usually found in commercial treaties, and as is
found in both the Haitian and Iranian treaties.

Subject to the above general comment, it is noted that inevitably
there is somewhat of an inconsistency between the provisions of both
treaties, which in effect ban more burdensome taxes than those borne
by nationals of other countries, and the simultaneous existence of
treaties against double taxation which involve concessions to some
countries and not others.

In Article VI (3) of the Iranian treaty it is provided that
companies" (why not individuals or partnerships?) are not, in the
territory of the other country to be subject to taxes on any income
or capital not attributable to operations or investment within such
territory. This is all right as far as it goes, but the question of
When earnings are attributable to one country rather than another is
quite often the exact point at issue in any particular controversy,
and the treaty does not provide any solution. Would some form of
agreed arbitration of such a question be an acceptable answer to the
Problem?

5. CONSULAR PROVISIONS

The treaty with Iran contains (Articles XII to XIX) provisions
concerning the powers and immunities of consuls, which are often
found in separate consular conventions rather than in a general com-
mercial treaty.

In t is believed that these provisions are relatively "standard",
Sthe light of current and accepted international practice. They
Provide for the qualified immunity of consular premises, exemptions
from customs duties, tax exemption of official premises and official
'co~ensation, lack of jurisdiction of the receiving state over the
o Sults official acts and documents, and the right of a consul to
cnunicate with his fellow nationals.

d However, the consul's immunity from taxation is not absolute,
d he is subject to taxation on income from sources in the receiving


ii I











state, other than official compensation, on the ownership or occupa-
tion of immovable property, and on the passing of property at death,
nor do any exemptions apply if the consul is a national of or a law-
fully authorized immigrant in the receiving state.

It has been suggested (a) that a consul be wholly free of tax-
ation in the receiving state, and that the exceptions referred to
above are illogical, and (b) that there is no reason why a consul
should not, in the absence of a violation of the general national
interest of the sending state, be amenable to process from, and his
files subject to production before, the courts of the receiving
state. It is strongly suggested that such a modification of current
practice, along with a requirement that the consul officially repre-
sent the nationals of the sending state in legal proceedings in the
receiving state involving the status (e.g. marriage, divorce) of
such nationals, would greatly simplify the proof of many official acts
of foreign governments and generally modernize cumbersome problems of
jurisdiction in international transactions. The Committee feels that,
whatever merit there may be to these suggestions, they should be em-
bodied in a general renegotiation of consular conventions, and not in
the particular treaty with Iran which the Committee is considering.

6. PROVISIONS WITH REGARD TO OWNERSHIP OF PROPERTY

Both treaties contain broad provisions dealing with the right to
acquire property of various types in the territories of the other
Party, and for the protection of those rights. But, because of the
broad sweep of the language, which means that the phraseology is,
necessarily, imprecise, there are always loopholes through which the
foreigner's rights,which are seemingly so broadly protected, may be
eroded. On the other hand, the committee recognizes the difficulties
Of more precise drafting in this field, and the fact that, in a con-
troersy, especially where national feelings are aroused, broad pro-
Visions may be as effective to protect the interests of investors
abroad, at least as a foundation for diplomatic representations.

There are many differences in detail between the two treaties.
p Particular, the Iranian treaty has been drafted in more general
erms than the Haitian treaty, which follows more closely the language
Of the Model Draft Treaty. It will serve no useful purpose to review
tese differences in detail, other than to point out the following:

ca (a) The Haitian treaty (Art. IX) guarantees to nationals and
Companies of the other party the right to national treatment in leas-
to and occupying real property, and national and most favored nation
treatment in regard to purchasing or otherwise acquiring interests in
Personal property, subject to restrictions on alien ownership in cer-
t~i fields such as banking and exploration of natural resources. The
Eanian treaty (Art. V(1)) guarantees the right to lease, for suitable
Periods of time, real property needed for residence purposes or the


Il~r










conduct of activities under the treaty, together with the right to
purchase and dispose of personal property. In addition, most favored
nation treatment is assured (possibly as a qualification in the broad
sweep of the previous guarantees).

(b In regard to inventions and trade-marks the Iranian treaty
(Art. V(2)) guarantees, upon compliance with applicable laws concern-
ing registration etc. "effective protection" to nationals and compan-
ies of the other party in their exclusive use thereof. The Haitian
treaty (Art. X) promises national and most favored nation treatment
in these matters.

(c) So far as the rights to establish a business or to make an
investment are concerned, the Haitian treaty (Art. VII) follows
closely the provisions of the model treaty, which generally speaking
are favored by the Committee. National and most favored nation treat-
ment is pledged, although certain rights are reserved to limit the
rights of aliens generally in certain fields. The comparable pro-
vision of the Iranian treaty is far briefer and more limited. There
is no guarantee of the right to establish an enterprise. However,
once nationals or companies of the other party are permitted to
establish an enterprise, they are to be freely permitted to conduct
their activities in the host country "upon terms no less favorable
than other enterprises of whatever nationality engaged in similar
activities", including a guarantee of the right to continued control
and management of such enterprises. The Committee feels that the
omission in the case of Iran of the right to establish a business,
as in the "model" treaty upon which the Haitian and other recent
treaties are based, is a serious defect, although there may be good
reasons for such omission with which it is not familiar.

(d) There is a further omission in the Iranian treaty, which
he Committee feels should be corrected in a protocol. The provisions
Qith respect to conducting a business refer to nationals and companies
of the other country. No provision is made to protect the rights of
companies organized under local laws, in which nations or companies of
the other country have a controlling interest. In the Haitian treaty,
1thi right of investment in local companies is specifically recog-
tized in Article VII, and both national and most favored nation
treatment is guaranteed to such controlled enterprises. Further, in
Connection with the guarantee against expropriation of property with-
Out full and effective compensation, which is found in both treaties,
vi rotocol to the Haitian treaty specifically provides that such pro-
ta o extends to interests held "directly or indirectly" in property
aen within the territory of the host state.

the (e) Again, in connection with the right of individuals to enter
aot Country in order to engage in business, the provisions of the
POl treaty (and of the Haitian treaty) are more definite than, and
eferable to, those of the Iranian treaty. The right of entry in











order to "carry on trade" and to develop or direct an enterprise in
which such persons (or their employers) have invested is guaranteed
by Article II of the Haitian treaty (as supplemented by protocol).
In the case of Iran (Art. II (1) most favored nation treatment only
is promised, and there is no provision with regard to the rights of
employees of traders or investors to enter the country. Here again,
Iran seems to have reserved to itself the right to exclude American
businesses from its territory (although, to be sure, once admitted,
it does agree to furnish a certain amount of protection).

(f) Both treaties contain provisions against expropriation or
other taking of property, except for a public use, and only upon
prompt payment of full and effective compensation. In this regard,
the Committee, while in agreement that these provisions of the
treaty do accord with enlightened legal principles, and (within neces-
sary limitations as to the effectiveness of treaties) that they af-
ford considerable protection to U. S. investments in Haiti and Iran,
believes that definitions of the words "property" and "taken" might
be included, possibly by way of a supplemental protocol, which would

(1) conform the definition of "property" to that in
the post-war Treaties of Peace, so as to cover
all types of property, including intangibles
(cf. Art.78 par. 9(c) of the Peace Treaty with
Italy); and

(2) broaden the definition of "taking" so as to
include measures which, though falling just
short of a seizure of the full title to the
property, effectively deprive its owner of the
use and enjoyment thereof, for example, the ap-
pointment of a custodian.
7. PROVISIONS WITH REGARD TO WAIVER OF SOVEREIGN IMMUNITY AND STATE
TRADING

The provision in the Haitian and Iranian treaties dealing with
3overeign immunity are identical in the two treaties and reproduce the
Provisions in the Model Draft Treaty. It reads as follows (Haiti -
rt. XVIII (2); Iran Art. XI (4)>

"No enterprise of either High Contracting Party, in-
cluding corporations, associations, and government agencies
and instrumentalities, which is publicly owned or controlled
shall, if it engages in commercial, industrial shipping or
other business activities within the territories of the
Other High Contracting Party, claim or enjoy, either for it-
self or for its property, immunity therein from taxation,
suit, execution of judgment or other liability to which
Privately owned and controlled enterprises are subject
therein."










The principle embodied in this provision is in accord with for-
ward looking legal principles. It of course is consistent with the
position taken in the famous "Tate letter" of 1952, 26 Dept. State
Bull.984. It does not attempt a solution of the thorny problem of
distinguishing on the facts of a given situation whether a particular
activity of the State is an act jure gestionis or jure imperil. It
will still be for the courts to decide whether for example, purchas-
ing shoes for the army is a business or governmental activity. As
none of the many attempts to define the distinction has been wholly
successful, it is probably therefore best to leave the matter for
judicial interpretation. Given the terms of the treaty, it may be
expected that immunity will not be granted except in very clear cases
of activities of purely governmental character.

One difficulty is however posed by the Iranian treaty when one
compares the above quoted provisions in Article XI with Article XV
(2), which reads:

"Lands and buildings situated in the territories of either
High Contracting Party, of which the other High Contracting
Party is the legal or equitable owner and which are used
exclusively for governmental purposes by that owner, shall
be exempt from taxation of every kind, national, state,
provincial and municipal, other than assessments levied for
services or local improvements by which the premises are
benefited."

Assume that the Iranian Government establishes a government
aviation company which operates both commercial and governmental
Services, i.e. combines the functions of, let us say, both Pan Amer-
ican and Military Air Transport Service. The Company is a government
agency or instrumentality owned or controlled by the Iranian Govern-
Lent within the meaning of Article XI (4) of the Treaty with Iran.
The company does engage in commercial activities within the United
states. Under Article XI (4) its property, including lands and
buildings, is subject to taxation. But suppose one of these build-
I8s is used "exclusively for governmental purposes" within the mean-
ng of Article XV(2); it would then, under that article be immune
brom taxation. The difficulty is that Article XI is fundamentally
based on ownership and the nature of the owner's activities, while
Article -V (2) is based on the use to which the property is devoted.
the conflict between the two provisions is accentuated by the fact
hat Article XV refers to situations in which the State is either
the legal or equitable owner", which would seem to embrace various
.es of arrangements used for government agencies and instrumental-
es whether or not utilizing the corporate form.

In future treaties this inconsistency should be eliminated by
(4)- ing which would make it clear that the principle of Article XI
Prevails over that of Article XV (2). In other words, if the










agency or instrumentality does engage in business, all its property
is subject to taxation even though some of it be used for strictly
"governmental" purposes. It would also be advisable in redrafting
the text of Article XV (2) and Article XI (4), to make clear whether
property which under the former article is immune from taxation, is
also immune from execution.
Both treaties (Haiti Art. XVII, and Iran Art. XI (1)(2))also
contain provisions which are designed to insure, so far as can be,
competitive equality between the private enterprises owned by na-
tionals or companies of one country, on the one hand, and government
owned or controlled enterprises of the host country, on the other.
The Committee approves the purpose of these provisions, which follow
the Model Draft Treaty. It does suggest that the phrase "in accord-
ance with customary business practice" which qualifies the promise of
an "adequate opportunity to compete for participation in purchases
and salesby or to government controlled enterprises or monopolies"
be eliminated, because, in many areas of the world, such "practices
may well have the effect, if they are not deliberately so designed,
of discriminating against foreign enterprises. It is also noted that,
in the case of Iran, there is no guarantee of competitive equality in
the award of "concessions".

The Iranian treaty also contains a paragraph (Art. XI (3)) not
found in the Haitian treaty, based on Art. XVIII (2) of the Model
Draft Treaty, which pledges in quite general terms, and subject to
Several qualifications, "conditions of competitive equality" be-
tween publicly owned or controlled trading or manufacturing enter-
Prises, of the host country, and privately owned and controlled en-
terprises of nationals and companies of the other country. It is
doubtful how far this protection applies to locally organized com-
Panies controlled by a foreign investor.
8. PROVISIONS WITH REGARD TO THE EXERCISE OF LIBERAL PROFESSIONS

While it is recognized that it is within a country's jurisdic-
tion to enact rules and regulations for the general admission to
liberal professions, it should also be noted that a too restrictive
exercise of a country's prerogative in this field may impede the flow
of international trade and investments.

Closer attention should be given to the drafting of pertinent
clauses in the treaties, i.e. Article VIII (1) of the treaty with
Haiti, and Article IV (4) last sentence of the treaty with Iran. The
0Cmmittee observes, as to the main inadequacies of the language of
the respective clauses, the following:

It is too narrow to mention only "accountants and other techni-
cal experts", as is the case in the treaty with Haiti. To be sure,
the treaty with Iran lists some professions such as attorneys, but





10.


also omits architects, engineers, or scientists. An atomic physicist,
a geologist or an agricultural specialist may oppose being classified
as "technical expert".

The duration for which such experts are retained does not seem
to be a controlling factor. There is no reason why an American com-
pany may not engage permanently overseas auditors for its overseas
operations. Therefore the criterion in Article VII of the Haiti
treaty, that the employment shall be on "a temporary basis", is not
satisfactory.

Whether the expert is engaged to make reports or for some other
purpose, does not appear to be so important. He would not be engaged
unless his work were intended to benefit the operations of the per-
sons by whom he was retained. It is important, however, that the
foreign expert who is not admitted to practice in the foreign coun-
try emphasizes this fact and the restrictions to which he is subject,
just as the American counsellor at law in Paris will clearly indi-
cate: "not admitted to the bar of Paris".

The language in the Haiti treaty (identical in this respect with
that of Article VIII of the treaty with West Germany), is too con-
fined in that the expert must be retained either "by nationals and
companies in connection with the planning and operation of their en-
terprises, and enterprises in which they have a financial interest,
Within such territories." More often than not such experts will be
engaged for the purpose of reporting on the possible acquisition of a
future financial interest in such territory.

The Committee, in summary, believes that a treaty clause per-
mitting the employment of experts of one's own choice and nationality
regardless of qualifications in such foreign country, is highly de-
sirable and important, but that its precise wording merits careful
Consideration.

Willis L. M. Reese, Chairman Austin A. Laber
Paul O. Bleecker Andre Maximov
Peter Borie Charles P. Noyes
Martin Domke F. E. Oppenheimer
Phanor J. Eder Albert J. Parreno
Austin T. Foster Howard R. Patch, Jr.
Philip C. Jessup Otto C. Sommerich
Doris Jonas Robert F. Weissenstein


May 16, 1956