Foreign Relations of the United States Diplomatic Papers, 1939, The American Republics, Volume V

824.6363 St 2/394

The Under Secretary of State (Welles) to the Bolivian Minister (Guachalla)

undated

Draft Proposed Agreement Between the Bolivian Government and the Standard Oil Company of Bolivia³⁴

Whereas differences have arisen between the Bolivian Government and the Standard Oil Company of Bolivia growing out of the cancellation on March 13, 1937, by the Government of the concession contract dated July 27, 1922, under which the company was operating in Bolivia, and the losses sustained by the company in eon-sequence thereof; and

Whereas the parties desire to put an end to these differences;

1. The Government of Bolivia, duly represented by . . . . . . . . . . . . , and the Standard Oil Company of Bolivia, duly represented by . . . . . . . . . . . . , freely agree in approving the present terms of settlement.

2. By the present agreement the Government of Bolivia recognizes that the Standard Oil Company of Bolivia should in equity be paid full compensation for its property, rights and interests as of March 12, 1937, and for its expenses incurred in establishing the petroleum industry in Bolivia. The amount and terms of payment of such compensation shall be determined as provided for in paragraph 4 of this agreement.

3. On its part, the Standard Oil Company of Bolivia, upon the payment to it of the amount of compensation referred to in paragraph 2, will recognize as the definitive property of the Bolivian State the right to exploit the petroleum deposits legally conceded by the contract of March 2, 1920, as modified by the contract of July 27, 1922, as well as other property, rights and interests acquired by the company in connection therewith.

4. In order to fix the equitable compensation to be paid the company by the Bolivian Government, there shall be established a board consisting of three members, one to be designated by each party within thirty days following the signature of this agreement, and the third member to be a geologist or petroleum engineer of outstanding ability, who shall preside and who shall not be a national of either Bolivia or the United States. The third member shall be selected by mutual agreement between the parties; provided, however, that if the parties shall fail to agree upon the selection of the third member within thirty days from the date of the signature of this agreement, the selection shall be left to the President of the Geological Society of London, referred to in Article 17 of the concession contract between the Government and the company, dated July 27, 1922, who shall make the selection within thirty days from the date upon which either the Government of Bolivia or the company shall notify him of their disagreement. The procedure of the board shall be as follows:

(a) Within sixty days from the date of the selection of the third member the board shall convene at Buenos Aires or at such other place as it may find appropriate and shall within an additional period of 120 days make a fair and impartial determination of the amount of compensation which in equity should be paid to the company for its property, rights and interests in Bolivia as of March 12, 1937, and for its expenses in establishing the petroleum industry in Bolivia. It is the intention of the parties to this agreement that the board shall not consider or question the validity of the company’s concession contract or the validity of the Government’s cancellation decree of March 13, 1937.

(b) Each party shall submit to the board within ninety days from the date of signature of this agreement a complete statement of its estimate regarding the amount of the compensation referred to, including the evidence relied upon in reaching such estimate. No further statement or evidence shall be submitted by either party unless requested by the board; and any such request made by the board for additional statements or evidence shall be communicated to both parties and each shall have an opportunity to respond to the request;

(c) Each party shall pay the honorarium and expenses of the member of the board designated by it and shall bear its own expenses. The expenses of the tribunal, including the honorarium of the third member, shall be borne in equal moieties by the two parties;

(d) The decision of the board shall be by majority vote and shall be accepted by both parties as final and binding;

(e) The Bolivian Government shall, within . . . . . months from the date of the decision of the board, pay to the company in cash, in United States currency or its equivalent in sound free exchange currency, the total amount determined by the board to be proper compensation.

5. The Government of Bolivia and the Standard Oil Company of Bolivia declare that, upon the payment of the amount referred to in paragraph 4(e), no issue will remain pending between them and that there will be no occasion, on the one or the other part, for any subsequent claims or counter-claims of whatsoever character, since the fulfillment of the present agreement, which has been freely entered into, shall be regarded as having terminated satisfactorily and amicably the controversy raised by the Decree of March 13, 1937. If all the terms of this agreement are not duly fulfilled by either party, it is understood that the status quo ante as of the date of this agreement shall be deemed restored at the option of the aggrieved party.

6. In faith of which, etc. etc.

(Place and date of signature)

34. In transmitting a copy of this draft proposal to the Minister in Bolivia with instruction No. 159, June 29, the Under Secretary of State stated that the Department had been informed by representatives of the Standard Oil Company that the terms of the suggested agreement were acceptable to that company.