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This is so ridden with ambiguity that at the moment I would say that no greater disservice can be done to foreign commerce than to pass the bill in its present form.
Mr. Poff. It is not necessary, in order to give precision and specificity to the statute, to transfer its enforcement from one agency of Justice to another?
Mr. SONNETT. I would not think so.
Mr. Poff. The opinion you expressed was your own and not that of the chamber of commerce?
Mr. SONNETT. Yes, sir. I am afraid I may have been a little influenced by my own years of experience in Justice and the unspoken recognition that the Criminal Division has a lot more personnel than Internal Security has.
If this amendment is passed, the work of the Department of Justice in this area is going to rise very, very substantially.
Mr. Wilis. Conversely, pardon me, my idea is that I do not want to do away with or dilute the Internal Security Division of the Department of Justice.
Mr. SONNETT. I would not have thought so, Mr. Chairman, but I would think they have got enough to do dealing with real security problems, which is a concern we all share, but the problem of American business talking to its Congressman or executive branch about getting their help or guidance on matters of foreign commerce is far, I think, from being an internal security problem.
Mr. POFF. By way of preface to the question I am going to ask, I think it is important to say for the record that the amendment you propose is in the nature of a proviso and is supplemental to, rather than in substitution of, language that has already passed the Senate.
Mr. SONNETT. Yes, sir.
Mr. POFF. I am a little troubled by a definition of some of your words. In subsection (i), second line, I find the words "controlled by" and I do not know what that means.
Mr. SONNETT. Well, I think certainly there is a body of judicial language in terms of the concept of control to which recourse could be had. I suppose it really means the power to compel compliance in a practical way:
Mr. POFF. Does this mean 51 percent of the voting stock?
Mr. SONNETT. I would not say so. Certainly there can be conttrol at times in a given situation with far less than 51, depending on how widely held the balance may be.
Mr. POFF. As a layman, and I am certainly that in this field, “controlled by” remains a pretty vague expression. Now let me ask you if you are satisfied with the meaning of that phrase. What does “indirectly controlled by” mean?
Mr. SONNETT. I would suppose exercising the actual power of control through some intermediate or dummy arrangement-I don't mean dummy in any invidious sense or intermediate instrumentality. Mind you, Mr. Poff, we do not have any great pride of authorship.
We have studied the history of this and the chamber has been active on the matter for some time. We have tried to come up with what we thought might be a feasible suggestion for you to consider.
We do not insist on the last proviso about the stock being publicly distributed in the United States. Theoretically, I do not think it matters if you have a bona fide American business, whether a parent or
a subsidiary. We say that American business should be free to go to its Congressmen, its Senators, its representatives in the executive branch and
say, “I have a problem in connection with my overseas business. Here it is and what is your policy on this? Are you going to have a new policy on that?” without having to register as a foreign agent.
Mr. POFF. I agree with that, and I am sure you agree with me that the words "controlled by" are key words.
Mr. SONNETT. Yes.
Mr. POFF. I want to know what they mean. I want to be satisfied with the explanation that I get.
Mr. SONNETT. I would certainly be happy to submit to counsel a brief for discussion of the law on the subject of control. I do think there is a very substantial judicial history that you can turn to.
Mr. WILLIS. Do you think the same of "indirectly controlled by”?
Mr. SONNETT. We want all the help that we can get and particularly
Mr. Poff. I found a little difficulty in the word "substantial.” Do you have some explanation of that word as it is used in both of those clauses?
Mr. SONNETT. I suppose what really we are trying to do in terms of substantiality, we are trying to say that under no circumstances would we want Congress to put its blessing on any statutory scheme where the mere form of something was a complete defense. Clandestine operations should be forbidden or at least there should be required disclosure under this statute. “Substantial,” I suppose it is a question of fact. If I can recall espionage cases early in the war where the spy in question purported to be running a little camera shop or something, this would not be a substantial business. It is a cover. But take the American subsidiary of a large worldwide company which has plants here and thousands of employees and pays taxes and so on. That is obviously substantial.
I I suppose it is a question of fact in every case.
Mr. POFF. I do not want to be facetious, but would it mean a mailorder house located in one city in the United States?
Mr. SONNETT. I wouldn't think so. I think as a question of fact it would not be substantial.
Mr. POFF. These questions are not designed to embarrass you.
Mr. Poff. They are designed to illustrate the fact that your criticism of a lack of preciseness and clarity comes with a little of a surprise when your own language should be subject to the same criticism.
Mr. SONNETT. I am sure that we can always improve it if you give us some time and give us some reason to think we might be doing something worthwhile if we tried to. We would be happy to.
Mr. POFF. I am in sympathy with the purpose you are trying to achieve. I recognize the danger that you have very delicately defined. I want to be helpful. I do not want, to use one of your phrases again, to "throw the baby out with the bath water.” If we can get some agreement about this language, and what it means, or if we can get some language that might accomplish the purpose with more clarity and precision, I think we will have benefited each other.
Mr. SONNETT. I am sure that is so, Mr. Poff. We are at the disposal of counsel at any time.
(The appendix to Mr. Sonnett's statement follows:)
APPENDIX SUGGESTED CHANGES IN S. 693, TO AMEND THE FOREIGN AGENTS REGISTRATION ACT
Amend section 1(1) of S. 693 (which sets forth the definition of the term "foreign principal") by changing the period at the end thereof (line 9, p. 2) to a semicolon, and adding thereafter the following: "Provided, however, That the term “foreign principal" does not include any bona fide business corporation or other similar association or organization engaged in bona fide trade or commerce if either
“(i) such person is directly or indirectly owned or controlled by one or more corporations organized under or created by the laws of the United States or of any state or other place subject to the jurisdiction of the United States, having its or their principal places of business within the United States, and regularly engaged in substantial bona fide commercial, industrial or financial activities within the United States, or
"(ii) such person directly or indirectly owns or controls one or more corporations organized under or created by the laws of the United States or of any state or other place subject to the jurisdiction of the United States, having its or their principal places of business within the United States, and regularly engaged in substantial bona fide commercial, industrial or financial activities within the United States, and no substantial portion of the activities of such person are directly or indirectly supervised, directed, controlled, financed or subsidized in whole or in major part by a government of a foreign
country or a foreign political party, and the voting stock of such person, or of the corporation or corporations owning or controlling such person, is registered under the Securities Exchange Act of 1934 or traded on a national securities exchange registered thereunder, or regularly quoted in an over-the-counter market by two or more members of a national or affiliated securities association registered thereunder.”
Mr. POFF. I think, Mr. Chairman, that is all I have right now.
Mr. WILLIS. Mr. Maw, we are glad to have you. Please identify yourself and the capacity in which you appear.
STATEMENT OF CARLYLE E. MAW, REPRESENTING THE ASSOCIA
TION OF THE BAR OF THE CITY OF NEW YORK Mr. Maw. Mr. Chairman and members of the subcommittee, my name is Carlyle E. Maw. I am a partner in the law firm of Cravath, Swaine & Moore, 1 Chase Manhattan Plaza, New York City, and I am chairman of the Committee on International Law of the Association of the Bar of the City of New York. I am here today on behalf of that association to present a joint report of its committees on international law and Federal legislation regarding the proposed amendments to the Foreign Agents Registration Act of 1938.
Mr. WILLIS. Off the record. (Discussion off the record.)
Àr. WILLIS. The subcommittee will stand in recess until Monday at 10 o'clock.
(Whereupon, at 4:25 p.m., the subcommittee recessed, to reconvene at 10 a.m., Monday, August 2, 1965.)
FOREIGN AGENTS REGISTRATION ACT AMENDMENTS
MONDAY, AUGUST 2, 1965
SUBCOMMITTEE No. 3 OF THE
Washington, D.C. The subcommittee met, pursuant to recess, at 10 a.m., in room 2226, Rayburn House Office Building. Present: Hon. Edwin E. Willis (chairman of the subcommittee) presiding, and Messrs. St. Onge, Edwards of California, Tenzer, and Poff. Also present, Herbert Fuchs, counsel and Allan Cors, associate counsel.
Mr. WILLIS. The committee will come to order.
We will resume the hearings on the Foreign Agents Registration Act, as amended, the bills involved being S. 693 and H.R. 290.
Mr. Maw, you were interrupted last Wednesday. We shall be pleased to have you resume.
STATEMENT OF CARLYLE E. MAW, REPRESENTING THE ASSOCIA
TION OF THE BAR OF THE CITY OF NEW YORK-Resumed
Mr. Maw. Thank you, Mr. Chairman.
Members of the committee, pursuant to the permission which you so kindly gave me last week, I have revised slightly my prepared statement, and I would like, therefore, to submit the revised version and withdraw the prior statement.
Mr. WILLIS. The revised statement will be the basis of your testimony. Do you wish to insert it in full at this time?
Mr. MAW. I would like to proceed from it.
Mr. Maw. I am here, gentlemen, on behalf of the Association of the Bar of the City of New York to present a unanimous report of their Committees on International Law and Federal Legislation regarding the proposed amendments to the Foreign Agents Registration Act of 1938.
The report of our committees is set forth in the association's legislative Bulletin for June, copies of which you have before you. It begins at page 75. The report is also set forth in the June issue of the record of the association, to which reference has been made by other witnesses. As the report contains a fairly complete statement of the background of the amendments and of the act, I would like to suggest that it be included in the record at the hearing.