Since our letter of February 24, 1960, we have been advised by the Department of Justice that certain funding problems have arisen. Thus at the present time there do not appear to be any funds left in the Bulgarian account with which to pay claims under this measure.

The Department has been informed by the Bureau of the Budget that from the standpoint of the Administration's program there is no objection to the submisof this report.

Sincerely yours,

DOUGLAS MACARTHUR II,

Assistant Secretary for Congressional Relations.

FEBRUARY 24, 1960.

Hon. J. W. FULBRIGHT,

Chairman, Committee on Foreign Relations, U.S. Senate.

DEAR MR. CHAIRMAN: I refer to your letter of September 10, 1959 requesting the Department's comments on S. 2634 "To amend the International Claims Settlement Act of 1949, as amended, relative to the return of certain alien property interests."

The purpose of this bill is to eliminate certain disparities in treatment as between persons having certain interests in assets which were vested under the Trading with the Enemy Act and persons having similar interests in assets which were vested under Title II of the International Claims Settlement Act. In particular, the bill seeks to adjust certain inequities as regards the return to persecutees and non-enemy nationals of their proportionate share in the vested assets of certain enemy corporations in which they held interests.

Under section 32(a)(2) (C) and (D) of the Trading With the Enemy Act, vested property may be returned to individuals who were persecutees of former enemy countries, including Bulgaria, Hungary and Rumania. The Trading With the Enemy Act does not, however, provide for the return to such persecutees or to non-enemy nationals of their proportionate share in the vested assets of enemy corporations in which they had an interest. Under section 207 (c) of Title II, of the International Claims Settlement Act, on the other hand, persons who are not nationals of Bulgaria, Hungary or Rumania may receive returns of their proportionate share of assets of enemy corporations vested under Title II of the International Claims Settlement Act if twenty five per cent or more of the outstanding stock or other proprietary interest in the enemy corporation was owned at the date of vesting by such persons. Section 207 (c), however, makes no similar provisions in the case of stock in such corporations owned by persecutees. There appears to be no valid reason for these differences in treatment by the International Claims Settlement Act of persons who have interests in corporations whose assets were vested under that act and those who had interests in the same corporations whose assets were vested under the Trading With the Enemy Act.

The first provision of the amendment makes former nationals of Bulgaria, Hungary, and Rumania who were persecuted by these Governments during World War II eligible to claim their proportionate shares in properties of corporations organized under the laws of those countries if at least twenty five per cent of the stock in such corporations was owned by non-enemies and persecutees, or if the corporation was treated as an enemy corporation under the laws of such countries.

The second provision provides persecutees having interests in property vested under the Trading With the Enemy Act as the property of Bulgarian, Hungarian, and Rumanian corporations the same benefits if timely claim has been filed under the Trading With the Enemy Act. In the event such property has been transferred out of the account in which it was carried on the books of the Attorney General, and put into the appropriate claims fund in the Treasury, he is authorized to use any other Bulgarian, Hungarian or Rumanian funds and properties vested and held by him for the purpose of making the returns provided for by this amendment.

The Department believes that an amendment along the lines of S. 2634 and carrying out its purpose would promote fair and effective administration of the International Claims Settlement Act of 1949, as amended. The Department therefore has no objection to the enactment of legislation of this general nature.

The Department believes, however, that several drafting changes in S. 2634 are desirable in order that its purpose be realized in an orderly manner.

In the first place, the Department suggests that the amendment be by way of the addition of a new section 216 at the end of Title II of the International Claims Settlement Act, as amended, rather than by way of additions to section 207 of that act. Amendment by way of addition of an entirely new section would, in our view, facilitate the logical presentation and interpretation of both the new amendment and the act as a whole. Section 207 (c) would in such case be amended only by inserting a cross-reference to the new section 216 in order to call attention to the new material.

Secondly, the Department suggests that the last sentence of the new subsection (c) contained in section (b) of S. 2634 be revised. The Department considers that in the event any interest in property vested under the Trading With the Enemy Act, as amended, which is subject to return under the amendment, has been liquidated and the net proceeds transferred to one of the three Claims Funds, only the net proceeds of other interests transferable but not yet transferred to the same country's Claims Fund be used for the purpose of making a return. As the last sentence now reads, untransferred funds held by the Office of Alien Property for future transfer, for example, to the Hungarian Claims Fund may be drawn upon for the purpose of making a return, for example, to a Rumanian persecutee. The Department considers it is most reasonable and equitable that in the event a return is to be made to a persecutee of one country, only funds transferable to that country's Claims Fund should be drawn upon.

In this connection, the Department suggests also that the phrase "or any national thereof" in this sentence be deleted, since this phrase may possibly give rise to interpretative difficulties when read in conjunction with section 202(b) of the International Claims Settlement Act, as amended, which provides for divesting of the proceeds of property directly owned by a natural person at the date of vesting under the Trading With the Enemy Act.

A draft revision of S. 2634 incorporating the Department's suggestions, as well as additional minor drafting changes, is enclosed. The Department has worked in conjunction with attorneys of the Office of Alien Property, Department of Justice in preparing these comments and the suggested draft revision. The Department has been informed by the Bureau of the Budget that there is no objection to the submission of this report.

Sincerely yours,

WILLIAM B. MACOMBER, Jr.,

Assistant Secretary, (For the Secretary of State.)

Mrs. KELLY. We will begin by taking testimony on S. 1935. Our leadoff witness is Mr. Andrew T. McGuire, General Counsel of the Foreign Claims Settlement Commission, who is here on behalf of Dr. Edward D. Re, Chairman of the Commission.

Mr. McGuire, I notice that you have a lengthy and detailed statement before you. A copy of your statement will be placed in the record at this point. Will you please proceed to summarize it for us orally in 5 or 10 minutes.

After your summary, we will try to develop the subject further through questions from the subcommittee members. I believe this is the most appropriate procedure for us to follow since there are a a large number of witnesses present in the room and we would like to give each of them an opportunity to speak on the bills before us. Mr. McGuire, please proceed.

STATEMENT OF MR. ANDREW T. MCGUIRE, GENERAL COUNSEL, FOREIGN CLAIMS SETTLEMENT COMMISSION

Mr. MCGUIRE. Thank you, Madam Chairman.

First of all, let me express Dr. Re's regret for being unable to be with you this morning. He has asked me to present his statement in his behalf.

Mrs. KELLY. Without objection, Dr. Re's statement will be made a part of the record at this point.

(The statement referred to is as follows:)

STATEMENT OF DR. EDWARD D. RE, CHAIRMAN, FOREIGN CLAIMS SETTLEMENT COMMISSION

Madam Chairman and members of the subcommittee, it is a pleasure and a privilege to appear before you today as the Chairman of the Foreign Claims Settlement Commission in support of S. 1935 entitled, "A Bill to provide for the timely determination of certain claims of American nationals settled by the United States-Polish Claims Agreement of July 16, 1960, and for other purposes."

GENERAL SCOPE OF S. 1935

The bill, S. 1935, proposes amendments to Titles I and III of the International Claims Settlement Act of 1949, as amended, which directly affect the activities of the Foreign Claims Settlement Commission.

This bill is similar to S. 1987 and H.R. 10712 in the 87th Congress and S. 947 in the 88th Congress, none of which were enacted. With the exception of new Bulgarian, Rumanian, Yugoslav and Italian claims, S. 1935 is workaday legislation that does not engender much appeal. It involves technicalities designed principally to put the business of the Commission in order and constitutes good administration.

The bill, if enacted, would provide further compensation for Americans who have received only partial payments on their awards, provides for the filing of new claims by citizens whose losses occurred after the execution of international agreements or enactment of enabling legislation, and provides compensation for a small group found to have been excluded from coverage under treaties and statutes.

These potential claimants have been corresponding, individually and through their Senators and Congressmen, with the Commission constantly during the past five or more years, urging that the executive as well as the legislative branch support enactment of legislation included in S. 1935.

For the most part, this bill would update the International Claims Settlement Act of 1949, as amended, in light of the recent claims agreements which have been concluded between the United States and the Governments of Poland, Bulgaria, Rumania and Yugoslavia, and, to a certain extent, would reopen the Italian claims program as provided under Title III of the Act.

POLISH CLAIMS PROGRAM

Under the Polish Claims Agreement of July 16, 1960, the Governments of the United States and the Polish People's Republic entered into an en bloc settlement of claims of nationals of the United States against Poland for the nationalization or other taking by Poland of property and rights or interests therein; the deprivation of use or enjoyment of property; and debts of nationalized enterprises. Under this agreement the Polish Government agreed to pay to the United States Government an aggregate of $40 million in twenty equal installments. $12 million have been paid thus far. The next installment of $2 million is due January 10, 1967.

The Commission commenced the Polish claims program on September 1, 1960, under the provisions of Title I of the International Claims Settlement Act of 1949, as amended, which established the procedures for the administration of such a program by the Foreign Claims Settlement Commission.

Section 4 of Title I of this statute authorizes the Commission to receive. examine, and adjudicate claims immediately upon the signing of a claims agreement with any government with which the United States Government was not at war during World War II. In determining such claims the Commission is directed to apply the provisions of the claims settlement agreement and the applicable principles of international law, justice, and equity. However, the time limitations, as contained under this title of the statute, with respect to the completion date of the programs authorized, applied only to claims under the Yugoslav Claims Agreement of 1948. Pursuant to such limitations, that claims program was completed on December 31, 1954.

In

A total of 10,169 formal claims were filed under the Polish program. relation to programs previously administered by the Commission this one is more than six times the size of the Yugoslav program, equal to the size of the program under Title III, which provided for certain claims against the Governments of Bulgaria, Hungary, Italy, Rumania and the Soviet Union, and more than twice the size of the Czechoslovakian program under Title IV of the Act. Four years were allowed for the completion of each of those programs. Accordingly, the Commission proposed that the period for processing claims against Poland be no greater than four years from the last day for filing timely claims, which was March 31, 1962.

The bill as originally presented to the Congress in draft form, contained the proposal that the Commission complete its affairs in connection with the program on March 31, 1966 which was, in fact, accomplished on schedule. The bill, however, was amended by the Senate to extend the completion date for an additional 2 years until March 31, 1968.

The Senate amendment, of course, would have the effect of reopening and continuing the program until March 31, 1968. The Commission has committed itself, over the years, both to the Bureau of the Budget and to the Congress through the Appropriations Committees of both Houses, and, through the Foreign Relations and Foreign Affairs Committees in the form of legislative proposals, to close out and terminate this program by March 31, 1966. Accordingly, appropriations, staffing and scheduling were geared to that date.

The Polish claims program was initiated with the signing of the Polish Agreement on July 16, 1960. The Commission extended the original deadline filing date of September 30, 1961 until March 31, 1962 because for varied reasons many potential claimants had not filed claims within the allotted time. For additional compelling reasons, which would excuse the failure to file within the time limit, the Commission further permitted the filing of claims until January 31, 1965 provided that appropriate information and evidence establishing the validity of claims be filed not later than sixty days after such date.

Of the 5,155 claims which were denied, approximately 3,000 claims were denied wholly or in part for failure to meet the burden of proof in support of such claims. The Commission permitted claimants to submit the necessary evidence to establish a claim until December 31, 1965.

These denials were the subject of public testimony before the Committee on Foreign Relations in connection with the consideration of S. 1935 before that Committee. During the course of these hearings testimony was received from a practicing lawyer indicating the need for the extension of the Polish program. It was stated that additional time was required by certain claimants to acquire evidence from the Polish authorities in support of their claims.

Because of the vastly extensive property damage in Poland during World War II, the obliteration of 60 percent of the land records, and the removal of large segments of former residents from given areas, it is impossible for the Polish authorities to furnish some of the information sought by the claimants. The retention of the amendment under S. 1935, by extending the program until March 31, 1968, would not, in the Commission's opinion, warrant the expense and time which would be required to reopen and continue the program for an additional period.

Moreover, the extension of this program would place the new award-holders on a par with those claimants who diligently pursued their claims within the time allotted, and will enable them to share equally in the amounts paid into the Polish Claims Fund in accordance with the payments provisions as contained under section 8(c) of the International Claims Settlement Act of 1949, as amended.

The principal amount of the 5,014 proposed awards, as determined by the Commission at the close of the program on March 31, 1966, was $100,736,781.63 plus $51,051,579.75 interest for a cumulative total of $151,788,361.38, against a fund which will ultimately consist of $40 million. This, of course, assumes that the Polish Government continues to make its annual installment payments of $2 million under the Polish Agreement. A total of $12 million has been paid into the fund by the Polish Government. Therefore, only those awards approved in the principal amounts of $1,000 or less have been paid, and in those awards approved in excess of $1,000, the Treasury Department has made an initial payment of $1,000 (less 5% for administrative expenses).

In view of the foregoing, it would appear that the Senate amendment to S. 1935, which will undoubtedly result in a number of new awardees, is unfair 67-498-66- -2

and discriminatory to those claimants who through their own initiative and diligence were able to acquire the necessary supporting evidence with respect to their claims within the prescribed time.

The amendment would also cause a further delay in additional prorated payments to the present awardees. A number of claimants have been waiting for periods in excess of four years for an additional payment by the Treasury Department on account of their awards.

Moreover, to accommodate the Senate amendment would entail seeking additional appropriations and maintaining a staff to handle an unknown quantity of claims.

For the foregoing reasons the Commission is opposed to the Senate amendment, extending the Polish program until March 31, 1968, and recommends that the language in regard to the completion date of the Polish program as contained in the bill, S. 1935, as introduced be restored.

PROVISIONS FOR ATTORNEYS FEES

With respect to other sections of Title I of the International Claims Settlement Act of 1949, a proposal is made under the bill to amend subsection (f) of section 4 which would have the effect of relieving the Commission of the burden of determining attorneys' fees and of making Title I consistent with the attorney fee provisions of Titles III and IV of the Act.

Section 4(f) presently provides for a limitation on attorneys' fees of 10% of any payment on an award made by the Commission but authorizes the Commission to set the amount of such fee within the 10% limitation. Further provision is made for deduction by the Secretary of the Treasury of the amount of the fee and for payment directly to the attorney. Titles III and IV of the Act simplify this procedure by authorizing a flat 10% fee and leaving the settlement to the attorney and client.

DEDUCTION OF FIVE PERCENT

An amendment is also proposed to change the existing procedures under section 7(b) which presently provides for a direct deduction of 5% of any payment made on an award. This procedure was changed under Titles III and IV by providing for a direct deduction of 5% from each deposit into the respective funds thus eliminating an extensive administrative burden for the Treasury Department.

S. 1935 proposes to incorporate the provisions comparable to those of Title IV to apply (1) to the undisbursed balance of the Polish Claims Fund as of the date of enactment and to the future payments received from the Polish Government under the terms of the Agreement to be completed in 1980; (2) to payments into the fund contemplated by the new Yugoslav Claims Agreement of November 5, 1964, which calls for five annual payments of $700,000 to be completed in 1970; and (3) to payments into any other similar fund.

The Treasury Department has deducted from each Polish payment of up to $1,000 already made on account of the principal of awards, 5% for administrative expenses. Under the present priority of payments, holders of awards in the principal amount of $1,000 or less have not, therefore, received payment in full. The amendment would authorize the Treasury Department to make payment of the amount previously deducted.

PRO RATA PAYMENT ON AWARDS

Unlike the Yugoslav Agreement of 1948, whereby a lump-sum settlement was made, the Polish Agreement of 1960 provided payment in installments. Therefore, the present provisions of section 8(b) which deals with payment priorities were geared to the Yugoslav settlement by providing for additional payments up to 25 per centum of the unpaid principal of awards in amounts in excess of $1,000 after awards in the amount of $1,000 or less have been paid in full. Money thus far received for transfer into the Polish Claims Fund has only been sufficient to pay awards less than $1,000 in full and an initial payment of $1,000 in those cases where the award exceeded $1,000. As indicated previously, payments have been reduced by the 5% deduction for administrative expenses.

The bill proposes to retain the present language of section 8(c) in the event future prorated payments are made under the Yugoslav Claims Agreement of 1948 and to add a new subsection (e) to apply to the Polish Claims Agreement of