of Compania Pesquera de Coishco, S.A. that the Government of Peru may have available.

Nevertheless, it may be of interest to Your Excellency to note that in making its determinations as to the distribution of the total sum received pursuant to the agreement, the United States Government based its decisions with respect to the Star-Kist Corporation solely on its valuation of the fish meal production assets nationalized by the Government of Peru. No portion of the amount paid Star-Kist was in any way related to the assets devoted to the production of fish products for human consumption.

My Government is deeply concerned over the recent actions of the Attorney General of the Government of Peru, which appear to call into question certain aspects of the agreement between our two Governments of February 19, 1974, and of the negotiations which resulted in that agreement. We expect Your Excellency will bring to the attention of the appropriate officials of the Government of Peru the mutual understanding of our Governments concerning the agreement, and that, accordingly, immediate action will be taken to discontinue the proceedings against Star-Kist and its officers and employees. My Government further expects that any future actions the Government of Peru may determine to take with respect to the interests of the Star-Kist Corporation will be fully in accord with the laws of Peru, international law, and applicable agreements.

Dept. of State File No. P77 0019-412. On Jan. 6, 1977, Lima newspapers reported that the Supreme Court of Peru had confirmed a lower court's decision that no fraud against the Government had been committed and had ordered that the trial be halted and the accused declared innocent.

The Department of State announced, on September 23, 1976, that the United States had reached a satisfactory agreement with the Government of Peru on compensation for the assets of the Marcona Mining Company that were nationalized by the Government of Peru in July 1975,. The agreement was signed on September 22, 1976, and entered into force on October 21, 1976 (TIAS 8417; 27 UST). The Department's announcement described the agreement in general terms as follows:

The settlement consists of a cash payment to Marcona and a contract for sales of Peruvian iron ore in the United States that will increase Peru's foreign exchange earnings and provide Marcona with additional compensation. The aggregate value of this settlement constitutes just compensation within the meaning of the laws of both the United States and Peru.

. . In substance, the compensation consists of $37 million in cash and an ore sales contract at prices the Government of Peru estimates will provide Marcona an additional compensation of $22.44 million, but which, depending on market conditions, may ultimately produce more or less compensation than the valuation

amount. Finally, Marcona will receive approximately $2 million in compensation from a previously concluded shipping contract. This agreement will have a broad and positive impact. It removes an obstacle to the constructive relations to which both governments are committed. Because it demonstrates that fair and equitable treatment for foreign capital can be assured within the Peruvian revolutionary process, the settlement constitutes a point of departure for increased private as well as public cooperation, and practical progress on a wide variety of fronts.

Dept. of State Announcement, Sept. 23, 1976. The text of the agreement follows:

The Governments of the United States of America and Peru, with the objective of arriving at a definitive settlement concerning just compensation for the expropriated assets of the Marcona Mining Company, whose mining metallurgical complex in Peru was nationalized in accordance with the stipulations of Decree Law 21228, have decided to conclude the following agreement:

Article I

In view of the differences arising in the valuation of the properties of the North American firm, the Marcona Mining Company, subject to expropriation by the Government of Peru, the Government of the United States of America extended its good offices so that relations between the two countries would not be affected by certain aspects of a matter which is governed by the laws of the expropriating country and by principles of international law.

Within these principles and based on the reports of the Commissions designated by the Government of Peru for the valuation of the assets and liabilities and the determination of debts, the Government of Peru agrees to pay to the Marcona Mining Company as just compensation for its expropriated assets the sum of $61,440,000 (sixty-one million four hundred forty thousand U.S. dollars), in the following

manner:

A) $37 million (thirty-seven million U.S. dollars) in cash, by promissory note, which will be accepted by the Banco de la Nación in its capacity as financial agent of the State, and which will be paid on the date on which the necessary financing becomes available, under the terms and conditions fixed in the promissory note which reflects this obligation.

B) $22,440,000 (twenty-two million four hundred forty thousand U.S. dollars), as partial payment through the sale exclusively in the United States market of 3,740,000 long tons (three million seven hundred forty thousand) of iron ore in the form of pellets, and that is calculated on the basis of the $6 (six U.S. dollars) per ton that it is estimated Marcona, Inc. should obtain above the sale prices fixed in the contract it will conclude with Minero Peru Comercial, which are as follows: $18 (eighteen U.S. dollars) per ton for the first 1.1 million tons, $20 (twenty U.S. dollars) per ton for the succeeding two million tons and $23 (twenty-three U.Š. dollars) per ton for the final 640,000 tons.

C) $2,000,000 (two million U.S. dollars) derived from the freight contract concluded between the Compañía Peruana de Vapores and Marcona Carriers on December 11, 1975, which remains in force until March 31, 1977, under competitive conditions, and which results from calculating $1.00 (one U.S. dollar) per long ton in the rates established under said contract.

Article II

The Government of the United States confirms that with the payment of the $37 million (thirty-seven million U.S. dollars) cash through a promissory note and the fulfillment of the contractual obligations that the Government of Peru assumes, for implementation by its pertinent public entities, as stipulated in Article I, all the responsibilities and obligations of the Government of Peru toward the Marcona Corporation, its subsidiaries, branches or affiliates arising out of the nationalization by Peru of the Peruvian branch of the Marcona Mining Company, including all of the obligations resulting from the off-loading of the cargo of the SS ELIZABETH LYKES at the port of Callao on August 5, 1975, which passed to the ownership of Hierro-Peru, will be satisfied.

Article III

In view of the intergovernmental nature of this agreement, the Government of Peru declares that there no longer exist any liabilities for the payment of taxes, or any other charge or obligation, or legal action, civil or otherwise, against the Marcona Corporation or its subsidiaries, branches or affiliates, including the Marcona Mining Company, or against the present or former officials of any of them, regarding their activities as employees of Marcona Corporation, its subsidiaries, branches or affiliates, prior to the conclusion of this agreement. Nor will there be any claims or proceedings based on such taxes, charges, obligations, or legal actions affecting the natural or juridical persons referred to above.

Article IV

After the entry into force of this agreement, neither Government will present to the other, on its behalf or on behalf of natural or juridical persons of its nationality, any claim or demand arising out of the nationalization by the Government of Peru of Marcona Mining Company's mining-metallurgical complex in Peru or of the operations of the Marcona Mining Company or its subsidiaries. In the event that such claims are presented directly by nationals or juridical persons of one country to the Government of the other, such Government will refer them to the Government to which the national or juridical person belongs.

The preceding paragraph of this Article is subject to the payment of $37 million (thirty-seven U.S. million dollars) in cash and performance of the contractual obligations referred to in Article I of this agreement.

Article V

The Government of Peru affirms that in accordance with Article 12 of Decree Law 21228, Hierro-Peru has assumed, by subrogation, the outstanding obligations of the Peruvian branch of the Marcona Mining Company to suppliers and lending institutions, as well as the salaries and social benefits of its employees.

Article VI

It is the understanding of the Government of the United States of America that the Marcona Corporation recognizes that the undertakings of the Government of Peru specified in the present agreement, once implemented, constitute the full and final settlement of its claims resulting from the nationalization, and that it similarly accepts and promises to carry out fully and in good faith, the contracts with Minero Peru Comercial entered into relating to the sale of ore, and with Compania Peruana de Vapores relating to the freight contract dated December 11, 1975, until its expiration on March 31, 1977.

Article VII

The present agreement will enter into force upon its approval by the Government of Peru, and upon the signature and acceptance of the promissory note and ore sales contract referred to in this agreement. Done in Lima this 22nd day of September, 1976, in English and Spanish, both versions being equally authentic.

The United States and Fiji exchanged notes at Suva dated December 30, 1975, and January 9, 1976, relating to U.S. Government investment insurance and guaranties under the authority of section 237(a) of the Foreign Assistance Act of 1961, as amended (22 U.S.C. 2197(a)). The agreement entered into force on January 9, 1976 (TIAS 8281; 27 UST 1826).

The agreement sets forth certain procedural understandings between the two governments regarding the operation in Fiji of the private investment program administered by the Overseas Private

Investment Corporation (OPIC), a U.S. Government corporation which assists and encourages the investment of American private capital and know-how in less developed friendly countries.

In the event payment is made under an OPIC contract, the agreement recognizes the right of the U.S. Government to succeed to an insured party's rights upon payment of a claim; it establishes intergovernmental mechanisms, including third-party arbitration, for resolving certain disputes, and it stipulates that investment projects to be covered under the agreement must be approved by the host country.

U.S.-Oman

An investment guaranty agreement between the United States and Oman was effected by exchange of notes on September 9, 1976, to enter into force following approval by Oman. It applies the standard assurances relating to private investment to investment in the Sultanate of Oman. Differences between the two countries concerning interpretation of the agreement or claims arising under its coverage are to be settled by negotiations between the two Governments or, if such negotiations do not succeed, by an arbitral tribunal.

U.S.-Syria

An exchange of notes between the United States and Syria on August 9, 1976, constituted another in the series of investment guaranty agreements for operation of the U.S. overseas investment insurance and guaranty program. The agreement, which will enter into force following approval by the Syrian Government, provides the standard assurances with respect to subrogation and international arbitration of disputes. It identifies the "issuer" of coverage as OPIC or any other entity which may be legally distinct from the United States. The OPIC coverages offered comprise the investment insurance program and the investment guaranty program. Investment insurance offers protection against political risk including (a) the inability to convert into dollars local currency received by the investor as profits, earnings, or return of the original investment; (b) loss of the investment due to expropriation, nationalization or confiscation by action of the host government; and (c) loss due to war, revolution, or insurrection. The investment guaranty program provides guaranties by the U.S. Government of payment on medium and long term loans made by U.S. lenders to eligible projects.

85

National Legal Provision for
Protection of Foreign Investment

The Overseas Private Investment Corporation
Insurance for Letters of Credit

The Overseas Private Investment Corporation (OPIC), on July 7, 1976, announced that, to strengthen the position of U.S. contractors in competitive bidding for construction contracts abroad, it would offer U.S. businesses the additional coverage of political risk insurance for the letters of credit, known as bank guaranties, which are required by many governments, particularly in the Middle East. The OPIC Board of Directors had authorized issuance of such insurance on June 15, 1976. The announcement stated further:

The letters of credit vary in amount from two percent to 20 percent of the gross contract, provide for guaranty of performance by the contractor, and are treated as loans by the issuing banks. OPIC's insurance will remove the political risk inherent in these transactions, and will permit more U.S. firms to participate in the development of the Middle East.

Under its new program, OPIC will insure 90 percent of the letter of credit against an arbitrary drawing. As a result of OPIC's action, a number of surety companies have agreed to provide on-demand bonds to collateralize the commercial risk under the letters of credit, thus minimizing the issuing banks' risk and facilitating the issuance of the letters of credit.

OPIC will require that provision for a satisfactory dispute mechanism, specifying that an appropriate forum determine the reason for the drawing of a letter of credit, be contained in the underlying construction contract. If this forum finds that the drawing of funds was justified on the basis of a contractor's nonperformance, liability will lie with the surety company. However, if performance is judged adequate, the action of the host government will be considered expropriatory, and the risk of loss will lie with OPIC. A number of banks have agreed to provide bridge financing during the disputes period.

A September 27, 1976, ruling by the Comptroller of the Currency, which administers national banking regulations, stated that combined standby letters of credit covered by OPIC/Surety insurance will be ruled as exemptions from legal lending limits and allow banks to treat the letters of credit as a contingent liability rather than as a loan chargeable against the customer's line of credit.

OPIC News Releases TS/362, July 7, 1976, and TS/371, Oct. 6, 1976; OPIC Topics, Vol. 5, No. 4 July/Aug. 1976. OPIC also released the OPIC/Surety Proposal for Insuring Standby Letters of Credit for Bid, Performance, and Advance Payment Guaranties, available on request from the Office of Public Affairs, Overseas Private Investment Corporation, 1129 20th St., N.W., Washington, D.C. 20527.