[Federal Register Volume 65, Number 248 (Tuesday, December 26, 2000)]
[Notices]
[Pages 81563-81571]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-32853]


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DEPARTMENT OF TRANSPORTATION

Maritime Administration

[Docket No. MARAD-2000-8558]


ARCTIC STORM, SEA STORM, ARCTIC FJORD and NEAHKAHNIE--
Applicability of Ownership and Control Requirements for Fishery 
Endorsement

AGENCY: Maritime Administration, Department of Transportation.

ACTION: Invitation for public comments on a petition requesting MARAD 
to issue a determination that the ownership and control requirements of 
the American Fisheries Act of 1998 and 46 CFR Part 356 are in conflict 
with an international investment agreement.

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SUMMARY: The Maritime Administration (MARAD, we, our, or us) is 
soliciting public comments on a petition from the owners and managers 
of the vessels ARCTIC STORM--Official Number 903511, SEA STORM--
Official Number 628959, ARCTIC FJORD--Official Number 940866, and 
NEAHKAHNIE--Official Number 599534, (hereinafter the ``Vessels''). The 
petition requests that MARAD issue a decision that the American 
Fisheries Act of 1998 (``AFA''), Title II, Division C, Public Law 105-
277, and our regulations at 46 CFR Part 356 are in conflict with the 
Treaty of Friendship Commerce and Navigation Between the United States 
and Korea. The petition is submitted pursuant to 46 CFR 356.53 and 
213(g) of AFA, which provides that the requirements of the AFA and the 
implementing regulations will not apply to the owners or mortgagees of 
a U.S.-

[[Page 81564]]

flag vessel documented with a fishery endorsement to the extent that 
the provisions of the AFA conflict with an existing international 
agreement relating to foreign investment to which the United States is 
a party. This notice sets forth the provisions of the international 
agreement that the Petitioner alleges are in conflict with the AFA and 
46 CFR Part 356 and the arguments submitted by the Petitioner in 
support of its request. If MARAD determines that the AFA and MARAD's 
implementing regulations conflict with the bilateral investment treaty, 
the requirements of 46 CFR Part 356 will not apply to the extent of the 
inconsistency. Accordingly, interested parties are invited to submit 
their views on this petition and whether there is a conflict between 
the international agreement and the requirements of both the AFA and 46 
CFR Part 356. In addition to receiving the views of interested parties, 
MARAD will consult with other Departments and Agencies within the 
Federal Government that have responsibility or expertise related to the 
interpretation of or application of international investment 
agreements.

DATES: You should submit your comments early enough to ensure that 
Docket Management receives them not later than January 25, 2001.

ADDRESSES: Comments should refer to the docket number that appears at 
the top of this document. Written comments may be submitted by mail to 
the Docket Clerk, U.S. DOT Dockets, Room PL-401, Department of 
Transportation, 400 7th St., S.W., Washington, D.C. 20590-0001. You may 
also send comments electronically via the Internet at http://dms.dot.gov/submit/. All comments will become part of this docket and 
will be available for inspection and copying at the above address 
between 10 a.m. and 5 p.m., E.T., Monday through Friday, except Federal 
Holidays. An electronic version of this document and all documents 
entered into this docket is available on the World Wide Web at http://dms.dot.gov.

FOR FURTHER INFORMATION CONTACT: John T. Marquez, Jr. of the Office of 
Chief Counsel at (202) 366-5320. You may send mail to John T. Marquez, 
Jr., Maritime Administration, Office of Chief Counsel, Room 7228, MAR-
222, 400 Seventh St., S.W., Washington, D.C., 20590-0001 or you may 
send e-mail to [email protected].

SUPPLEMENTARY INFORMATION:

Background

    The AFA, Title II, Division C, Public Law 105-277, was enacted in 
1998 to give U.S. interests a priority in the harvest of U.S.-fishery 
resources by increasing the requirements for U.S. Citizen ownership, 
control and financing of U.S.-flag vessels documented with a fishery 
endorsement. MARAD was charged with promulgating implementing 
regulations for fishing vessels of 100 feet or greater in registered 
length while the Coast Guard retains responsibility for vessels under 
100 feet.
    Section 202 of the AFA, raises, with some exceptions, the U.S.-
Citizen ownership and control standards for U.S.-flag vessels that are 
documented with a fishery endorsement and operating in U.S.-waters. The 
ownership and control standard was increased from the controlling 
interest standard (greater than 50%) of section 2(b) of Shipping Act, 
1916, as amended (1916 Act), to the standard contained in section 2(c) 
of the 1916 Act which requires that 75 percent of the ownership and 
control in a vessel owning entity be vested in U.S. Citizens. In 
addition, section 202 of the AFA establishes new requirements to hold a 
preferred mortgage on a vessel with a fishery endorsement. State or 
federally chartered financial institutions must now comply with the 
controlling interest standard of section 2(b) of the 1916 Act in order 
to hold a preferred mortgage on a vessel with a fishery endorsement. 
Entities other than state or federally chartered financial institutions 
must either meet the 75% ownership and control requirements of section 
2(c) of the 1916 Act or utilize an approved U.S.-Citizen Trustee that 
meets the 75% ownership and control requirements to hold the preferred 
mortgage for the benefit of the non-citizen lender.
    Section 213(g) of the AFA provides that if the new ownership and 
control provisions are determined to be inconsistent with an existing 
international agreement relating to foreign investment to which the 
United States is a party, such provisions of the AFA shall not apply to 
the owner or mortgagee on October 1, 2001, with respect to the 
particular vessel and to the extent of the inconsistency. MARAD's 
regulations at 46 CFR 356.53 set forth a process wherein owners or 
mortgagees may petition MARAD, with respect to a specific vessel, for a 
determination that the implementing regulations are in conflict with an 
international investment agreement. Petitions must be noticed in the 
Federal Register with a request for comments. The Chief Counsel of 
MARAD, in consultation with other Departments and Agencies within the 
Federal Government that have responsibility or expertise related to the 
interpretation of or application of international investment 
agreements, will review the petitions and, absent extenuating 
circumstances, render a decision within 120 days of the receipt of a 
fully completed petition.

The Petitioners

    Arctic Storm, Inc.(``Arctic Storm, Inc.'') and Sea Storm Fisheries, 
Inc. (``Sea Storm, Inc.''), both Washington State corporations, Sea 
Storm LP (``Sea Storm LP''), a Washington State limited partnership, 
and Oyang Corporation (``Oyang''), a Korean corporation, (collectively 
referred to as ``Petitioner'' or ``Petitioners'') have filed a petition 
with MARAD pursuant to 46 CFR 356.53 for a determination that a 
conflict exists between the Treaty of Friendship, Commerce and 
Navigation Between the United States of America and the Republic of 
Korea, signed at Seoul, November 28, 1956 (the ``FCN Treaty'' or the 
``Treaty''), 8 UST 2217; TIAS 3947 UST; 302 UNTS 28, and both the AFA 
and 46 CFR Part 356.
    Petitioner states that Oyang, a company duly established and 
existing under the laws of the Republic of Korea, owns 50% of the joint 
venture company, Arctic Storm, Inc. The remaining 50% interest in 
Arctic Storm, Inc. is owned by Arctic Storm Partnership, a Washington 
State partnership owned entirely by citizens of the United States. 
Oyang is involved in the ownership or management of the four vessels 
identified in this petition in the following manner, mainly through 
Arctic Storm, Inc.:
    (1) ARCTIC STORM is owned and managed by Arctic Storm, Inc.;
    (2) SEA STORM is owned by Sea Storm, Inc., which is a wholly owned 
subsidiary of Arctic Storm, Inc. The fishing rights of the SEA STORM 
are owned by Sea Storm LP, a partnership in which Oyang owns a 49% 
interest and of which balance is owned by U.S. citizens. Oyang acquired 
its interest in Sea Storm, Inc. prior to April 1991;
    (3) ARCTIC FJORD and NEAHKAHNIE are managed by Arctic Storm, Inc.

Requested Action

    The Petitioners have requested a consolidated filing for the 
Vessels. MARAD's regulations require at 46 CFR 356.53(c) that a 
separate petition be filed for each vessel for which the owner or 
Mortgagee is requesting an exemption unless the Chief Counsel 
authorizes a consolidated filing. The Chief Counsel hereby authorizes 
the consolidated filing by Petitioners relating to the four Vessels.

[[Page 81565]]

    The Petitioners seek a determination from MARAD that:
    (1) Arctic Storm, Inc., Sea Storm Fisheries, Inc. and Sea Storm, LP 
are exempt from the requirements of 46 U.S.C. 12102(c) and may maintain 
their respective ownership agreements with Oyang with respect to the 
ARCTIC STORM and the SEA STORM; and
    (2) the existing management contracts of Arctic Storm, Inc. for the 
ARCTIC FJORD and the NEAHKAHNIE are protected under the American 
Fisheries Act.

Petitioner's Description of the Conflict Between the FCN Treaty and 
Both 46 CFR Part 356 and the AFA

    MARAD's regulations at 46 CFR 356.53(b)(3) require Petitioners to 
submit a detailed description of how the provisions of the 
international investment agreement or treaty and the implementing 
regulations are in conflict. The entire text of the FCN Treaty is 
available on MARAD's internet site at http://www.marad.dot.gov. The 
description submitted by the Petitioner of the conflict between the FCN 
Treaty and both the AFA and MARAD's implementing regulations forms the 
basis on which the Petitioners request that the Chief Counsel issue a 
ruling that 46 CFR Part 356 does not apply to Petitioners with respect 
to the Vessels. The description from the petition is as follows:

I. Summary of Argument

    ``The ownership and control provisions of the American Fisheries 
Act (``AFA'') are directly inconsistent with the Korea Treaty, an 
existing international agreement relating to foreign investments to 
which the United States is a party. The issue is relevant to the 
petitioners (namely, Arctic Storm, Inc., Sea Storm Fisheries, Inc., and 
Sea Storm LP) and Oyang, a Korean corporation, because the petitioners 
and Oyang have ownership interests in the entities that own two U.S. 
flag fishing vessels and their fishing rights, and that manage two 
other U.S. flag fishing vessels, all of which would be directly 
impaired by the AFA.
    ``Specifically, the AFA's unambiguous, retroactive discrimination 
against fishing companies with foreign ownership interests, for the 
benefit of those U.S. companies with a super-majority U.S. citizen 
ownership as required by the Act, is directly at odds with the Korea 
Treaty.
    ``The explicit purpose of the Korea Treaty is to encourage 
international investment between the United States and the Republic of 
Korea. The Treaty requires that rights legally acquired by Korean 
investors in U.S. enterprises cannot be impaired. The Korea Treaty also 
explicitly accords Korean investors national treatment, that is, 
treatment by the U.S. government as if such investors were U.S. 
nationals, with respect to their investments in the United States. 
Perhaps most plainly, the Korea Treaty explicitly forbids interference 
with Korean investors' rights to control and manage enterprises which 
they have established or acquired.
    ``Under Section 213(g) of the Act, the irreconcilable conflict 
between the investment protection provisions of the Korea Treaty and 
the AFA's retroactive impairment of Oyang's investment rights requires 
Marad to grant this petition to exempt the petitioners and Oyang with 
respect to their ownership and management interests in the ARCTIC 
STORM, the SEA STORM, the ARCTIC FJORD and the NEAHKAHNIE from 
application of the U.S. citizen ownership and control requirements of 
the AFA and the corresponding requirements of 46 CFR part 356.

II. The U.S. Treaties of Friendship, Commerce and Navigation Are a 
Class of International Agreements Protecting Bilateral Investment

    ``The Korea Treaty was one of a series of post-World War II 
treaties designed to create open-door investment between the U.S. and 
nearly twenty other countries. Unlike previous agreements, these 
Friendship, Commerce and Navigation treaties dealt explicitly with 
corporate investment between countries.
    ``The primary purpose of the FCN treaties in the post-war period 
was to provide a stable environment for private international 
investment.\1\ The FCN treaties sought ``national treatment,'' \2\ and 
were intended as an ``open door'' for foreign investment.\3\ After the 
war, the United States ``took the lead in developing [a liberal] 
international investment regime, and began to negotiate a series of 
Friendship, Commerce and Navigation treaties, a major purpose of which 
was to protect U.S. investment abroad.'' \4\
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    \1\ Walker, Modern Treaties of Friendship, Commerce and 
Navigation, 42 Minn. L. Rev. 805 (1958). Herman Walker, Jr., the 
chief commentator on the Friendship, Commerce and Navigation 
(``FCN'') treaties, served, at the time of the drafting of the 
Treaty as Adviser on Commercial Treaties at the State Department and 
was responsible for formulation of the postwar form of the FCN 
Treaty, negotiating several of the treaties for the United States. 
See Sumitomo Shoji America, Inc. v Avagliano et al., 457 U.S. 176, 
182 (1982).
    \2\ Walker, Modern Treaties of Friendship, Commerce and 
Navigation, 42 Minn. L. Rev. 817 (1958).
    \3\ ``National Treatment'' is defined by Article XXII of the 
Korea Treaty as ``treatment accorded within the territories of a 
Party upon terms no less favorable than the treatment accorded 
therein, in like situations, to nationals, companies, products, 
vessels or other objects, as the case may be, of such parties.'' 
National treatment is to be accorded automatically and without 
condition of reciprocity (Sullivan Report at page 64; See, infra at 
p. 5 fn. 19.) Harold F. Linder, Deputy Assistant Secretary of State 
for Economic Affairs, testified before the Senate during hearings on 
ratification of the Korea Treaty (among others) and corrected U.S. 
Senator Sparkman at this hearing on his misapprehension that 
``national treatment'' meant treatment of U.S. nationals in a 
foreign nation in the way foreign nationals were treated in the 
United States, clarifying that it meant, instead, treatment of 
foreign nationals in the U.S. exactly as U.S. citizens are treated. 
Hearing, Subcommittee on Commercial Treaties and Consular 
Conventions, at p. 7, 82''d Cong. (May 9, 1952).
    \4\ Vandevelde, Sustainable Liberalism and the International 
Investments, 19 Mich. J. Int'l L. 373 (1998).
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    ``Federal courts have recognized that the FCN treaties are ``the 
medium through which the U.S. and other nations could provide for the 
rights of each country's citizens, their property and their interests, 
in the territories of the other.'' Spiess v. C. Itoh and Co. (Am.) 
Inc., 643 F.2d 353, 361 (5th Cir. 1981), vacated on other grounds, 457 
U.S. 1128 (1982), quoting Walker, Treaties for the Encouragement and 
Protection of Foreign Investment: Present United States Practice, 5 
Am.J.Comp. L. 229 (1956). The purpose of the FCN treaties was ``to 
assure [non-U.S. nationals] the right to conduct business on an equal 
basis without suffering discrimination based on their alienage.'' 
Sumitomo Shoji America v. Avagliano, 457 U.S. 176, 187-88 (1982). The 
treaties were the means by which nationals of each country could 
``manage their investment in the host country.'' Lemnitzer v. 
Philippine Airlines, 783 F. Supp. 1238 (N.D. Cal. 1991), quoting 
Spiess, supra at 361.
    ``These FCN treaties ``define the treatment each country owes the 
nationals of the other; their rights to engage in business and other 
activities within the boundaries of the former; and the respect due 
them, their property and their enterprises.\5\ Foreign investment 
issues were a centerpiece of the Treaties' purpose:
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    \5\ Wickes v. Olympic Airways, 745 F.2d 363 (6th Cir. 1984), 
quoting Walker, Modern Treaties of Friendship, Commerce and 
Navigation, 42 Minn. L. Rev. 805, 806 (1958).

    [The FCN treaties] preoccupation with [national treatment 
issues] has been especially responsive to the contemporary need for 
a code of private foreign investment; and their adaptability for use 
as a vehicle in the forwarding of an investment aim follows

[[Page 81566]]

from their historical concern with establishment matters.\6\
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    \6\ Walker, Modern Treaties of Friendship, Commerce and 
Navigation, 42 Minn. L. Rev. 805, 806 (1958).

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    ``The FCN treaties reached after World War II had:

    ``a new consideration * * * which lent special impetus to the 
program following World War ll, was the need for encouraging and 
protecting foreign investment, responsively to the increasing 
investment interests of American business abroad and to the position 
the United States has now reached as principal reservoir of 
investment capital in a world which has become acutely ``economic 
development'' conscious.'' \7\
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    \7\ Wickes v. Olympic Airways, 745 F.2d 363 (6th Cir. 1984), 
quoting Walker, The Post-War Commercial Treaty Program of the United 
States, 73 Pol. Sci. Q. 57, 59 (1957); See also, Waldek, Note, 
Proposals for Limiting Foreign Investment Risk Under the Exon-Florio 
Amendment, 42 Hastings L.J. 1175, 1235 (1991).

    ``The FCN Treaties, including the Korea Treaty, are self executing 
treaties, that is, they are binding domestic law of their own accord, 
without the need for implementing legislation. See e.g. Zenith Radio 
Corp. v. Matsushita Electric Industrial Co. Ltd., 494 F. Supp. 1263, 
1266 (E.D. Pa. 1980). Such treaties are the supreme law of the land, 
and even federal statutes ``ought never to be construed to violate the 
law of nations if any other possible construction remains.'' McCulloch 
v. Sociedad National de Marineros de Honduras, 372 U.S. 10, 21 (1963). 
Only when Congress clearly intends to depart from the obligations of a 
treaty will inconsistent federal legislation govern. Id. See also 
Sumitomo Shoji America, Inc. v. Avagliano et al., 457 U.S. 176 (1982). 
Not only did Congress not intend to depart from the treaty obligations 
with enactment of the AFA, Section 213(g) is clear evidence that 
Congress expressly and unequivocally intended to recognize those 
obligations and to protect them, notwithstanding other provisions of 
AFA to the contrary.

III. The Korea Treaty Protects Korean Investment in U.S. Companies 
and the AFA is Clearly Inconsistent With the Korea Treaty

    The Korea Treaty foresaw specifically the kind of investment and 
control restrictions that were included in the American Fisheries Act. 
The Treaty was intended to promote free investment between the United 
States and Korea and to restrict the kind of limitations contemplated 
by the AFA. Several provisions of the Treaty are precisely germane to 
the issue at hand and are inconsistent with the AFA.\8\
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    \8\ The conflict between the AFA and certain international 
treaties has been recognized by one of the principal draftsmen of 
the Act. In assessing the potential outcome of the interpretation of 
the AFA's ownership provisions, Senator Slade Gorton (R-WA), one of 
the chief sponsors of the final legislation, was quoted in the press 
shortly after the Act passed questioning the validity of the new 
ownership provisions in relation to these investment treaties: 
``Another provision [of the American Fisheries Act] requires vessels 
operating in this fishery to have at least 75 percent U.S. ownership 
three years after the law goes into effect. But [Senator] Gorton 
said that this Americanization feature ``may very well be found 
invalid'' under U.S. trade agreements if challenged by foreign 
ownership interests. Marine Digest and Transportation News at p. 29 
(November 1998) (emphasis added).
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A. Proclamation: Desire for International Investment

    ``The first provision of the Korea Treaty, entitled ``A 
Proclamation,'' contains broad language relevant to an understanding of 
the subsequent Treaty Articles relating to bilateral investment. In 
particular, the Proclamation states:

    ``The United States of America and Korea, desirous of 
strengthening the bonds of peace and friendship traditionally 
existing between them and of encouraging closer economic and 
cultural relations between their peoples, and being cognizant of the 
contributions which may be made toward these ends by arrangements 
encouraging mutually beneficial investments, promoting mutually 
advantageous commercial intercourse, and otherwise establishing 
mutual rights and privileges, have resolved to conclude a Treaty of 
Friendship, Commerce and Navigation, based in general upon the 
principles of national and of most-favored-nation treatment 
unconditionally accorded * * *'' (emphasis added).

    ``Emphasizing the importance of international investment, the 
Proclamation provides a useful context for interpreting the investment 
protection provisions of the Treaty.\9\ In entering into the Treaty, 
the United States recognized, and accepted as consideration, the 
advantages provided by foreign investment in this country and 
protection of U.S. investments abroad. The national treatment benefits 
of the Korean Treaty are ``to be accorded automatically and without 
condition of reciprocity.''
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    \9\ One of the sources for the analysis contained in this 
memorandum is ``The Sullivan Report'' which is an Article-by-Article 
annotated discussion of the standard draft Treaty of Friendship, 
Commerce and Navigation, based on the record of negotiation, State 
Department messages providing instructions or reporting on 
negotiating sessions, and internal memoranda dealing with issues 
raised in the course of negotiations. The Sullivan Report was 
completed in November, 1973 (hereinafter cited as the ``Sullivan 
Report''). The Sullivan Report states that the standard FCN Treaty 
Preamble (designated ``Proclamation'' in the Korea Treaty'') ``has 
legal effect, for the courts to rely upon it at as guide to 
interpretation concerning the applicability of the operative 
articles.'' Sullivan Report at 62.
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B. Article VII: Protection for Controlling Companies

1. Paragraph 1: Ownership and Control of Enterprises
    ``Paragraph 1 of Article VII of the Korea Treaty states:

    ``Nationals and companies of either party shall be accorded 
national treatment with respect to engaging in all types of 
commercial, industrial, financial and other activities for gain 
(business activities) within the territories of [the United States] 
directly or by agent or through the medium of any form of lawful 
juridical entity. * * * Accordingly, such nationals and companies 
shall be permitted within such territories: * * * (b) to organize 
companies under the general company laws of such other Party, and to 
acquire majority interests in companies of [such other Party]; and 
(c) to control and manage enterprises which they have established or 
acquired. Moreover, enterprises which the control, whether in the 
form of individual proprietorships, companies or otherwise, shall, 
in all that relates to the conduct of the activities thereof, be 
accorded treatment no less favorable than that accorded like 
enterprises controlled by nationals and companies of such other 
Party.'' (emphasis added).

    ``The expressed purposes of the FCN treaties, and this provision in 
particular, evidence a central goal of encouraging capital investment 
between treaty signatories by protecting potential investors from the 
fear that government action would retroactively impair equity ownership 
rights in that investment. It is only in this context of mutually 
understood and guaranteed investment rights that an open invitation to 
foreign capital to develop the U.S. fishing fleet could be, and was, 
successful.
    ``This provision is at the heart of the conflict between the Korea 
Treaty and the AFA. Denying foreign investors the ability to own, 
control and manage their existing equity interest in U.S. companies is 
the most basic element of the AFA. There cannot possibly be any clearer 
statement of the preclusion of such activity as it relates to Korean 
investors than is set forth in this provision.\10\
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    \10\ Paragraph 3 of Article VII also permits signatory Parties 
to prescribe ``special formalities'' with respect to the 
establishment of alien controlled enterprises under Paragraph 1, 
``but such formalities may not impair the substance of the rights 
set forth in said paragraph.''
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    ``The clear conflict between Article VII of the Korea Treaty and 
the AFA's order of retroactive divestment could already be seen from 
the stated purpose of the legislation that was eventually enacted as 
the AFA:
    ``To prevent foreign ownership and control of United States flag 
vessels employed in the fisheries in the navigable waters and

[[Page 81567]]

exclusive economic zone of the United States * * *'' (emphasis 
added).\11\
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    \11\ S. 1221, 105th Cong. (1997).

Ownership and Control of Investments
    ``The AFA would force the Korean investor in Arctic Storm Inc.\12\ 
to sell its interest and to relinquish control over its remaining 
investments in the enterprise.
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    \12\ As stated earlier, Arctic Storm Inc. owns the fishing 
vessel ARCTIC STORM and, through a wholly owned subsidiary, the 
fishing vessel SEA STORM. There is no question that Arctic Storm 
Inc. engages in commercial activities directly or through related 
entities: the sale of fish harvested by these fishing vessels, and 
the fish processing undertaken aboard the vessel ARCTIC STORM. 
Processing is described as covering all ``manipulation'' of a 
product short of manufacturing. Sullivan Report at 133. Finally, 
Arctic Storm, Inc. is directly engaged in financial activities: 
e.g., the investment of funds in the U.S. fishing industry. See 
Sullivan Report at 133: The line of demarcation was never explicitly 
drawn between the terms ``commercial'' and ``financial.'' Finally, 
the word ``industrial'' was used so as to provide the broadest 
possible coverage, limited only by [explicit treaty reservations].
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    ``Forced divestiture of a legally acquired interest in a U.S. 
company is clearly inconsistent with the protections required by 
Article VII, above. Article VII conspicuously anticipates and precludes 
precisely this situation. Article VII also requires that enterprises 
controlled by Korean nationals shall be accorded ``national 
treatment.''\13\ Such an obligation can hardly be met by requiring the 
transfer of ownership and control interests of a company from Korean 
investors to U.S. nationals.\14\
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    \13\ In this context, it is important to note that the 
``national treatment'' standard is considered ``first class 
treatment,'' and ``the hallmark of the [FCN] Treaty program is the 
advanced degree to which it espouses the rule of national treatment; 
that which the citizens of the country enjoy * * *'' Walker, Modern 
Treaties of Friendship, Commerce and Navigation, supra at 811. See 
also, Exhibit C to the petition: Statement of the Honorable Walter 
Dowling, Ambassador of the United States to the Republic of Korea on 
the Occasion of the Signing of the [Korea Treaty]: ``The Treaty 
contains 25 articles and a protocol which cover in some detail a 
wide range of subject matter. In brief, each of the two countries: 
agree to accord within its territories to citizens and corporations 
of the other, treatment no less favorable than it accords to its own 
citizens and corporations with respect to carrying on commercial and 
industrial activities.'' (emphasis added). See also Jones Study at 
57 (``protection is afforded to any privilege granted * * * prior to 
a change in national treatment * * * at a minimum these foreign 
enterprises are guaranteed the maintenance of their existing 
operations'').
    \14\ See, Sullivan Study at 149: ``rights which have been 
extended in the past shall be respected and exempted from the 
application of new restrictions.''
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    ``Additionally, under the Act, if Korean nationals seek to retain 
control over a U.S. corporation owning a fishing vessel, the assets of 
that company (i.e. the fishery endorsements permitting vessels to fish) 
will be rendered valueless on October 1, 2001. Bankrupting corporations 
because of their Korean investors hardly constitutes ``national 
treatment.''
    ``Similarly, Article VII guarantees to Korean investors the ability 
to control their investments. Thus, the AFA's prohibition on any form 
of ``control'' of a business--defined by the AFA as the right to 
``direct the business,'' limit the actions of or replace a manager in 
the business, or direct the operation or manning of a vessel--being 
held by a non-U.S. citizen are also plainly inconsistent with Article 
VII.\15\
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    \15\ Article II of the Korea Treaty adds additional support to 
Article VII's requirement that Korean investors be permitted to hold 
control over enterprises in which they have invested. Article II 
states:
    ``Nationals of either Party shall be permitted to enter the 
territories of the other Party and to remain therein: * * * for the 
purpose of developing and directing the operations of an enterprise 
in which they have invested, or in which they are actively in the 
process of investing, a substantial amount of capital * * *'' 
(emphasis added).
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    ``The U.S. State Department has repeatedly recognized these 
interpretations of Article VII in formulating its foreign policy 
positions.\16\ Similarly, the history of the negotiations between the 
U.S. State Department and the Korean Foreign Ministry over the Korea 
Treaty provides ample support for the importance both signatory nations 
placed upon the provision guaranteeing ownership and control of 
majority shares in one another's companies. State Department 
negotiators insisted upon inclusion of this provision, over the Korean 
Foreign Ministry's opposition. The issue was discussed in depth over 
the course of two years, and in the end, the U.S. position prevailed.'' 
\17\
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    \16\ In 1971, the State Department opposed legislation in Guam 
requiring that 50% of the voting stock of corporations doing 
business in Guam be owned by U.S. citizens. The State Department 
took the position that such legislation was inconsistent with 
Article VII of the Korea FCN Treaty, which establishes a right to 
national treatment of non-U.S. companies and nationals engaged in 
business activity. The State Department's position on this and other 
FCN issues are reviewed in the ``Jones Study,'' prepared by Ronny E. 
Jones for the U.S. State Department, and is a compilation of post-
World War II State Department positions on FCN Treaties through 1981 
(hereinafter cited as the ``Jones Study''). See e.g. State 
Department position re: Letter to A. Papa (U.S. Attorney General's 
office) from F.R. Brown (Legislative Counsel of 11h Legislature of 
Guam), Sept. 27, 1971, Jones Study at 76. See also, State Department 
position concluding under the French FCN Treaty that control and 
national treatment provisions ``bar new discriminatory limitations 
from being applied to established or authorized operations and 
rights of a protected foreign company'' (differentiating from 
permissible prospective limitations on ownership), Jones Study at 
54; State Department position opposing Korean government's 
restricting foreign majority ownership of companies in certain 
industries, October, 1972, Jones Study at 86; State Department 
position opposing Thai government's restrictions on majority 
ownership of companies in some industries, 1972, Jones Study at 104-
106.
    \17\ Korea was concerned that the FCN Treaty with the United 
States would become a model for future treaties with other nations, 
including Japan and China. Korea argued that provisions permitting 
majority foreign ownership would allow domination of Korean 
industries by China and Japan. Nevertheless, in the end, the U.S. 
position prevailed. See e.g. Exhibit A to the petition: Explanation 
of Reasons for the Changes as Proposed by the Korean Draft for the 
U.S. Draft of the [Korea Treaty]; Telegram from American Embassy in 
Seoul to Department of State; January 8, 1955; Telegram from 
American Embassy in Seoul to Department of State; February 18, 1955; 
Department of State Instruction to American Embassy in Seoul, April 
5, 1955; Telegram from American Embassy in Seoul to Department of 
State, June 3, 1955.
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2. Paragraph 2: Prohibition on Retroactive Limitations
    Paragraph 2 of Article V11 states:

    ``Each Party reserves the right to limit the extent to which 
aliens may establish, acquire interests in, or carry on enterprises 
engaged within its territories in * * * banking involving depository 
or fiduciary functions, or the exploitation of land or other natural 
resources. However, new limitations imposed by either Party upon the 
extent to which aliens are accorded national treatment, with respect 
to carrying on such activities within its territories, shall not be 
applied as against enterprises which are engaged in such activities 
therein at the time such new limitations are adopted and which are 
owned or controlled by nationals and companies of the other Party.'' 
(emphasis added).

    ``As if the provisions of Paragraph 1 were not sufficient, 
Paragraph 2 of Article VII requires that even where a signatory Party 
is permitted to impose investment related limitations in certain 
industries, including exploitation of natural resources \18\ and 
``fiduciary functions,'' such limitations may not be imposed 
retroactively. Once again, the Treaty anticipates the current situation 
and ensures that even more sensitive industries are protected against 
post hoc limitations. This difference was recognized contemporaneously 
with the Treaty.
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    \18\ It is important to note, however, that ``the exploitation 
of land or other natural resources'' does not include fish 
processing. The Department of State represented to the House 
Merchant Marine and Fisheries Committee that ``[n]either of the 
Article VII exceptions to national treatment relate to vessels 
engaged in the canning and packing of fish.'' Similarly, in 1966, 
during discussions over the identical language in the U.S. Japan FCN 
Treaty, the State Department cabled the U.S. Embassy in Tokyo that 
national treatment covered fish processing enterprises at sea. Korea 
Treaty Negotiating History, July 21, 1966 (p. 1).

    ``For while practical treaty negotiating objectives must concede 
the notion of selectivity and differential control on entry of 
investments, its historical protective role would be lost if it 
began admitting the legitimacy of discriminating against

[[Page 81568]]

investments legally present in the territory.'' \19\
---------------------------------------------------------------------------

    \19\ Walker, Modern Treaties of Friendship, Commerce and 
Navigation, supra at 820.

---------------------------------------------------------------------------
    Similarly, while:

    ``either Party may prohibit or limit alien entry into an 
excepted field of activity, but if nevertheless, entry has been in 
fact permitted, the enterprise in question is protected against 
later discrimination. (emphasis added).\20\
---------------------------------------------------------------------------

    \20\ Walker, Treaties for the Encouragement and Protection of 
Foreign Investment: Present United States Practice, 5 American 
Journal of Comparative Law 229 (1956).

    ``Internal Commerce Department memoranda during the negotiations 
further substantiate the understanding by the United States and Korea 
that investments would be secure from discrimination ``once they are 
established.'' \21\
---------------------------------------------------------------------------

    \21\ See Exhibit B to the petition: Commerce Department 
Memoranda re: Position Regarding the FCN Treaty Negotiation With 
Korea, Aug. 15, 1955. (referring specifically to Korea's acceptance 
of the U.S. position that U.S. investments in Korea must be secure 
from discrimination once established).
---------------------------------------------------------------------------

    ``The State Department's Sullivan Report sets forth the extent to 
which Paragraph 2 protects existing companies in a newly restricted 
industry. Such a company ``enjoy[s] what may be considered normal 
business growth in terms of acquiring new customers and increasing the 
dollar volume of its business, but cannot claim expanded privileges.'' 
\22\ Thus, the Treaty makes crystal clear the intention of both the 
United States and Korea to protect their respective investors from 
retroactive divestiture of assets and loss of control over investments 
and mortgage property.
---------------------------------------------------------------------------

    \22\ Sullivan Report at p. 150.
---------------------------------------------------------------------------

3. Paragraph 4: Most Favored Nation Status
    Paragraph 4 of Article VII requires most-favored-nation treatment 
with respect to ``any of the matters in [Article VII].'' Most-favored-
nation treatment is defined by Article XXII of the Korea Treaty as 
``treatment accorded * * * upon terms no less favorable than the 
treatment accorded therein, in like situations, to nationals, 
companies, products, vessels or other objects, as the case may be, of 
any third country. Thus, it is important to note that if nationals of 
any other country are afforded protection under Section 213(g) of the 
Act, failure to provide the same protection to Korean nationals would 
also be inconsistent with Article VII.

C. Article VI, Paragraph 3: Impairment of Interest in Supplied Capital 
Prohibited

    ``Paragraph 3 of Article VI of the Korea Treaty prohibits signatory 
Parties from taking:

    ``unreasonable or discriminatory'' \23\ measures that would 
impair the legally acquired rights or interests within its 
territories of nationals and companies of the other Party in the 
enterprises which they have established, in their capital, or in the 
skills, arts or technology which they have supplied * * *'' 
(emphasis added).
---------------------------------------------------------------------------

    \23\ The term ``discriminatory'' as used in this context would 
comprehend denials of either national or most-favored-nation 
treatment, or both * * * the intent is to protect against 
retroactive impairment of vested rights if the acquisition of such 
rights was lawful * * *'' (emphasis added). Sullivan Report at 115.

---------------------------------------------------------------------------
    ``This Article was included:

    ``to provide in general that expropriations and sequestrations, 
should they occur, shall be implemented in a non-discriminatory 
manner (so as, for example, to preclude an unequal selection of 
enterprises for nationalization). Moreover, to account for the 
possibility of injurious governmental harassments short of 
expropriation or sequestration, there is included a general 
injunction against ``unreasonable or discriminatory'' impairments of 
vested interests.'' \24\
---------------------------------------------------------------------------

    \24\ Walker, Treaties for the Encouragement and Protection of 
Foreign Investment Present United States Practice. 5 American 
Journal of Comparative Law 229 (1956).

    ``The explicit purpose and effect of the AFA is to discriminate 
against foreign nationals and companies. The Act's ownership provisions 
require Korean investors to sell their equity and turn over management 
and control of the remainder of their investments, (which were entered 
into in large measure because of the technical expertise they possess 
in the fishing industry), entirely to their U.S. partners. On their 
face, these provisions directly ``impair the legally acquired 
interests'' of Korean investors both ``in the enterprises which they 
have established,'' and ``in their capital * * * which they have 
supplied.''
    ``Terminating control over assets to a limited class of persons is 
inherently an unreasonable and discriminatory measure impairing the 
legally acquired rights of Korean investors in their enterprises and 
the capital they have supplied. Historically, limitations on the 
ability to participate in certain businesses has been a hallmark of 
discrimination against minority groups in times of intolerance.\25\
---------------------------------------------------------------------------

    \25\ Rather than merely imposing, for example, a tax or levy on 
companies with Korean investment, the Act simply requires that 
Korean investors get out of the business altogether, preventing them 
from exercising any corporate oversight over the small investment 
they are permitted to retain.
---------------------------------------------------------------------------

    ``The ownership provisions are particularly unreasonable and 
discriminatory when understood in the context of an explicit invitation 
by the U.S. Congress and the U.S. fishing industry to foreign, in this 
case Korean, investors, to invest in the U.S. flag fishing fleet.\26\ 
In effect, the Act retroactively practices a ``bait and switch'' 
operation upon Korean investors: invite their participation, use their 
capital to build a U.S. fleet, and then take away their ability to 
control their own investments by statute.\27\
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    \26\ U.S.-Korea Agreement Concerning Fisheries Off the Coast of 
the United States, 34 UST 3617 (1982), (``Korean GIFA''), which 
expired in 1995, is relevant to this analysis. The Korean GIFA 
operative at the time Oyang invested in the ARCTIC STORM required 
Korea ``to cooperate with and assist the United States in the 
development of the United States fishing industry,'' and ``to enter 
into ``joint ventures and other arrangements * * *'' Thus, it is 
clear that the U.S. in fact sought to encourage Korean investment, 
rendering more inequitable the effort under the AFA to force 
relinquishment of that investment.
    \27\ See Appendix 5: Why They Invested: U.S. Encouragement of 
Foreign Investment in the U.S. Fishing Fleet.
---------------------------------------------------------------------------

    ``The impact of such discriminatory treatment is self-evident. For 
example, the imposition of intrusive and discriminatory restrictions on 
transactions between U.S. fishing vessel owners and non-citizen 
lenders, fish processors and fish buyers places Korean-owned fish 
processors and other fish buyers at a significant competitive 
disadvantage. For one thing, their wholly U.S.-owned competitors remain 
free to obtain a reliable supply of fish by entering into exclusive 
sales contracts arrangements and the like with the owners of U.S. 
fishing vessels on terms which Korean-owned fish buyers would be 
prohibited from using.
    ``Thus, there is an irreconcilable conflict between the Treaty 
provision prohibiting measures impairing the legally acquired interests 
of Korean investors ``in [the] capital * * * which they have supplied'' 
and the provisions of the AFA prohibiting them from involvement in 
corporate affairs.\28\
---------------------------------------------------------------------------

    \28\ Article IX of the Korea Treaty explicitly applies the 
protections afforded by the rest of the Treaty, and in particular 
those protections secured by Articles V, VI and VII of the Treaty, 
to the purchase, ownership and disposition of property. Paragraph 2 
of Article IX sets out the only conditions under which nationals and 
companies of either party may be required to dispose of property 
they have acquired. Article IX permits such limitations on ``movable 
property'' so long as such the limitations conform to Article VII 
and all other provisions of the Korea Treaty. As set forth above and 
below, the AFA's retroactive equity divestment requirements do not 
conform with Article VII and the other provisions of the Korea 
Treaty. Therefore, under Article IX of the Korea Treaty, it is clear 
that ownership of interest in movable property may not be subject to 
forced retroactive divestiture.

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[[Page 81569]]

D. Article I: Equitable Treatment

    ``Article I of the Korea Treaty states:

    ``Each Party shall at all times accord equitable treatment to 
the persons, property, enterprises and other interests of nationals 
and companies of the other Party.'' (emphasis added).

    ``This Article was intended to provide a ``fail safe'' mechanism in 
the Treaty to ensure that fair and equitable treatment be afforded to 
nationals of both countries.\29\ The forced divestiture of investments 
and/or sale of assets cannot be viewed as equitable treatment under any 
reasonable reading of Article 1.
---------------------------------------------------------------------------

    \29\ This Article ``provides a basis for making representation 
against actions detrimental to [a signatory's] interests that may 
not be covered by any specific legal rule in the treaty, as, for 
example, a measure that is superficially nondiscriminatory but is so 
framed as to harm only some [signatory's] interest * * * the 
construction leading to a just or equitable result is to be 
preferred.'' Sullivan Report at 67. See also, Webster's New 
Universal Unabridged Dictionary, Barnes and Noble Books, 1996, 
``Equitable: 1. Characterized by equity or fairness; just and right; 
fair; reasonable: equitable treatment of all citizens''; Black's Law 
Dictionary, 7th ed. West Publishing, 1999, ``Equitable: just; 
conformable to principles of justice and right.''
---------------------------------------------------------------------------

E. Article XIX: Vessels Flying the U.S. Flag Are Deemed U.S. Vessels 
for Purposes of Access to U.S. Fisheries

    ``Paragraph 3 of Article XIX of the Korea Treaty states:

    ``* * * each Party may reserve exclusive rights and privileges 
to its own vessels with respect to the coasting trade, inland 
navigation and national fisheries.'' (emphasis added).

    ``This provision allows the United States and Korea each to reserve 
exclusive rights and privileges to ``its own vessels'' operating in the 
fisheries of their respective countries. The national identity of a 
vessel is determined by the country in which the vessel is documented, 
i.e. by the flag that it flies. The national identity of a vessel is 
not determined by the nationality of the investors in the owning 
entity.\30\ The U.S. took advantage of this permission in the 1976 
Magnuson-Stevens Act when it provided priority access to the fisheries 
in the U.S. Exclusive Economic Zone to vessels of the United States, 
i.e., vessels documented under the U.S. flag.\31\
---------------------------------------------------------------------------

    \30\ In order to be documented under the U.S. flag, for example, 
a vessel must be owned by a U.S. citizen corporation, partnership or 
other entity. There is no limitation on the citizenship of the 
stockholders or other investors for the basic documentation of the 
vessel. Should the vessel be used in specific trades, such as 
coastwise or fisheries, there may be a limitation on the citizenship 
of the stockholders or investors. It is significant to note that at 
the time the Korea Treaty was signed there was no such limitation on 
the citizenship of who could invest in entities owning U.S. flag 
fishing vessels. See The Commercial Fishing Industry Vessel Anti-
Reflagging Act of 1987, Pub. L. 100-239, 101 Stat 1778 (1988).
    \31\ To be eligible for U.S. vessel documentation, a vessel must 
be owned by a U.S. citizen entity. A corporation qualifies as a U.S. 
citizen if it is incorporated under the laws of the United States, 
and the Chief Executive Officer, the Chairman of the Board and the 
directors meet individual citizenship requirements. As with most 
U.S. companies, there is no limitation on the citizenship of the 
stockholders of the corporation. The citizenship of the stockholders 
of a corporation that owns a vessel becomes relevant only if the 
vessel seeks to qualify for operation in certain trades or 
participate in certain government programs. 46 U.S.C. Chapter 121; 
Merchant Marine Act, 1936, 46 App. U.S.C. 1101, et seq. In 1976 when 
the MagnusonStevens Act was first enacted, there was no citizenship 
limitation on the investors in an entity owning a vessel with a 
fishery endorsement.
---------------------------------------------------------------------------

    ``Both the ARCTIC STORM and the SEA STORM are vessels documented 
under the laws of the United States. Half of the ultimate ownership of 
both owning corporations is held by foreign investors. The purpose of 
this provision in the Treaty was to allow the United States and Korea 
the opportunity to restrict fisheries to vessels each country 
controlled through the flag of the vessel,\32\ not to restrict the 
availability of investment capital in the owning entity.
---------------------------------------------------------------------------

    \32\ The fact that the vessel is documented under the laws of 
the United States gives the United States jurisdiction over the 
vessel in significant ways, including the manning of the vessel, 
payment of federal and other taxes, compliance with environmental 
laws, including those relating to the management of the fishery 
resources.
---------------------------------------------------------------------------

    ``This issue is further clarified by Paragraph 2 of the very same 
Article, which states explicitly:

    ``Vessels under the flag of either Party, and carrying the 
papers required by its law in proof of nationality, shall be deemed 
to be vessels of that Party both on the high seas and within the 
ports, places and waters of the other Party.'' (emphasis added).

    ``Since the Treaty, the State Department has reaffirmed that the 
Article XIX exemption only applies to the activities of fishing 
vessels, not investment in those vessels. Specifically, the State 
Department has stated that Article XIX is limited to the ``catching or 
landing of fish.'' \33\ The Sullivan Report confirms that Article XIX 
``relates to the treatment of vessels and to the treatment of their 
cargo. It is not concerned with the treatment of the enterprises which 
own the vessels and the cargoes.'' (emphasis added) \34\
---------------------------------------------------------------------------

    \33\ See Jones Study at pp. 80-81.
    \34\ Sullivan Report at p. 284.
---------------------------------------------------------------------------

    ``Thus, Article XIX does not permit the United States to reserve 
rights or privileges over investment to Americans in U.S. flag vessels. 
On the contrary, it guarantees U.S. flag vessels having Korean 
investors who control their own investment equal access to U.S. 
fisheries.

F. Article VI: Taking of Property and Just Compensation

    Paragraphs 4 and 5 of Article VI of the Korea Treaty state:

    ``Property of nationals and companies of either Party shall not be 
taken within the territories of the other Party except for a public 
purpose, nor shall it be taken without the prompt payment of lost 
compensation. Such compensation shall be in an effectively realizable 
form and shall represent the full equivalent of the property taken; and 
adequate provision shall have been made at or prior to the time of 
taking for the determination and payment thereof * * *
    Nationals and companies of either party shall in no case be 
accorded, within the territories of the other Party, less than national 
treatment \35\ and most favored nation treatment with respect to the 
matters set forth in [the above paragraph].'' (emphasis added).
---------------------------------------------------------------------------

    \35\ ``National Treatment'' is defined by Article XXII of the 
Treaty as ``treatment accorded within the territories of a Party 
upon terms no less favorable than the treatment accorded therein, in 
like situations, to nationals, companies, products, vessels or other 
objects, as the case may be, of such parties.''
---------------------------------------------------------------------------

    ``There is no practical difference between forcing a sale of 
property to the U.S. government and forcing such a sale to American 
nationals.\36\ Thus, to the extent that a forced sale of property (1) 
diminishes the value of the asset for the company by virtue of the 
AFA's passage; or (2) results in a below-market sale of assets, the AFA 
violates Article Vl,\37\ as it makes no provision for compensation of 
Korean investors.38 39
---------------------------------------------------------------------------

    \36\ ``The rule of just compensation covers partial takings. In 
such cases, the compensation should be a full approximation of the 
amount by which the taking impaired the value of the property.'' 
Sullivan Report at 117.
    \37\ At the very least, Paragraph 3 of Article VI requires 
application of a standard similar to that under the Fifth Amendment 
to the United States Constitution. Paragraph 5 of Article VI 
requires that Korean citizens ``shall in no case be accorded * * * 
less than national treatment * * * with respect to the matters set 
forth'' in paragraph 3. No federal court would permit the government 
to force a sale of assets by a U.S. citizen, thus denying that 
citizen any use of that property in the future, without requiring 
just compensation. The Korean Protocol 2 appended to the Korea 
Treaty requires that the provision of Article VI for payment of just 
compensation shall extend to interests held directly or indirectly 
by nationals and companies of either party.
    \38\ ``The intent of this requirement [that provision is made 
for the determination and payment of compensation] is to afford 
protection against ex post facto proceedings that could work to the 
disadvantage of the person whose property is taken.'' Sullivan 
Report at 119.
    \39\ Even with respect to the forced sale of ``materials 
dangerous from the standpoint of public safety,'' permitted under 
Article IX of the Treaty, the Korean Treaty requires that ``a term 
of at least five years shall be allowed in which to effect such 
disposition.'' Subparagraph b, Paragraph 4, Article IX.
---------------------------------------------------------------------------

(1) Ownership of Stock is a Property Interest
    ``It is settled law that ownership of stock constitutes a specific 
interest in

[[Page 81570]]

the corporation's property. 11 W. Fletcher, Cyclopedia of the Law of 
Private Corporations Sec. 5100 (1971 ed.). As set forth above, the AFA 
requires that Korean nationals sell their property to Americans.
    ``Such a forced sale represents a taking of property requiring just 
compensation. In direct violation of the Treaty, the Act makes no 
provision whatsoever for the ``determination and payment'' * * * 
``represent [ing] the full equivalent of the property taken.'' While 
requiring that Korean investors sell their property, the Act fails to 
give any form of guarantee that they will receive the ``full 
equivalent'' worth of the property taken.\40\
---------------------------------------------------------------------------

    \40\ ``This is an especially valuable right in a day when 
nationalizations, often entailing great loss to private owners, has 
tended to become not uncommon.'' Walker, Modern Treaties of 
Friendship, Commerce and Navigation, supra at 823.
---------------------------------------------------------------------------

    ``This precise language of Article VI is present in a number of 
Friendship Commerce and Navigation Treaties or similar treaties to 
which the U.S. is a party. The language has been repeatedly held by 
U.S. courts to require payment of just compensation when property 
belonging to nationals of signatory nation has been negatively impacted 
by government action. See e.g. Kalamazoo Spice Extraction Co. v. The 
Provisional Military Government of Socialist Ethiopia, 729 F.2d 422 
(6th Cir. 1984); American International Group, Inc. v. Islamic Republic 
of Iran, 493 F. Supp. 522 (D.D.C. 1980).
(2) ``Taking of Property'' Under the Treaty Should Be Defined More 
Broadly Than Under the U.S. Constitution
    ``It is important to note that unlike the Fifth Amendment to the 
United States Constitution which contains only limited and undefined 
language on just compensation \41\ the Treaty states explicitly and in 
detail the form and timing of compensation for Korean investors whose 
property has been divested.\42\ The precision with which the Treaty 
delineates these issues indicates the strength of the signatory 
nation's resolve to ensure just compensation in the case of legislation 
having an adverse and discriminatory impact on their nationals in the 
other country. In the context of the Treaty, therefore, it is likely 
that a court would apply a broader definition of the phrase `taking of 
property,' than in interpretation of that term in cases relating to the 
Fifth Amendment.
---------------------------------------------------------------------------

    \41\ ``nor shall private property be taken for public use, 
without just compensation.'' U.S. Const. Amend. V.
    \42\ Nevertheless, it is important to note that the protections 
of the Fifth Amendment have been extended to ``alien friends'' whose 
property is taken by the U.S. government. Russian Fleet v. United 
States, 282 U.S. 481 (1931).
---------------------------------------------------------------------------

    ``Secondly, the purposes and policies involved in a treaty 
negotiation between countries are different from those involved in the 
Fifth Amendment to the U.S. Constitution. It is well established that 
the Fifth Amendment ensures that Americans whose property was seized by 
the government be paid for it. Specifically, the purpose of the takings 
clause is to preclude the government from ``forcing some people alone 
to bear public burdens that, in all fairness and justice, should be 
borne by the public as a whole.\43\
---------------------------------------------------------------------------

    \43\ Armstrong v. United States, 364 U.S. 40, 49 (1960).
---------------------------------------------------------------------------

    ``In the case of the Treaty, the Korean government was engaged in 
an arms length negotiation with the United States and gave up certain 
rights with respect to U.S. investors in Korea in return for gaining 
rights for its nationals investing in U.S. companies. The goal of the 
Treaty was to foster a stable business climate. Hence, in interpreting 
the meaning of a ``takings'' under Article VI of the Korea Treaty, a 
broader standard should be applied.

IV. Conclusion: The Inconsistencies Between the Korea Treaty and 
the AFA Entitle the Petitioners and Oyang to be Exempt From the 
Act's Ownership and Control Requirements With Respect to the 
Vessels Pursuant to the Terms of Section 213(g) of the Act

    ``The Korean Treaty clearly contemplates, and just as clearly 
prohibits, the kind of investment and related restrictions that are 
imposed on vessel owners under the AFA. Should the United States or the 
Republic of Korea have wished to exclude the fishing industry from the 
breadth of the investment protections granted by the Korean Treaty, 
they could easily have done so.\44\ They did not.
---------------------------------------------------------------------------

    \44\ For example, Paragraph 6 of Article XIX likewise reserves 
exclusive rights and privileges to each signatory's own vessels with 
respect to national fisheries.
---------------------------------------------------------------------------

    ``At no time, does the Korea Treaty permit the United States to 
force Korean companies operating in the national fisheries to give up 
ownership or control of existing assets. Article VII's prohibition on 
retroactive limitations--specifically in the context of ``exploitation 
of natural resources''--could not be more clear.
    ``The primary author of the FCN Treaty stated its purposes as 
follows:

    The intergovernmental regulation of these rights, by the 
establishment of reciprocally binding rules of law, requires a 
certain community of ideals regarding the respect for private 
property, the dignity of the individual, and the degree to which the 
foreigner should be allowed to participate in the economic life of 
the country. It also requires mutual forbearance, and an interest in 
undertaking formal long term commitments towards the foreigner, 
binding as against internal legislative and administrative freedom. 
The outward limits of any treaty to which the United States 
subscribes are accordingly set by the extent of the rights it is 
willing to accord in face of its own state and federal 
legislation.\45\
---------------------------------------------------------------------------

    \45\ Walker, Modern Treaties of Friendship, Commerce and 
Navigation, supra at 824.

    ``It is also important to note that Article XXIV, paragraph 1 of 
the Korea Treaty states: ``Each Party shall accord sympathetic 
consideration to, and shall afford adequate opportunity for 
consultation regarding, such representations as the other Party may 
make with respect to any matter affecting the operation of the present 
Treaty.'' The Korean Government has indicated strong interest in this 
issue; consultation with the co-signatory of the Korea Treaty is 
implicitly mandated by the AFA in determining the appropriate 
interpretation of the Korea Treaty and its conflict with the AFA.
    ``Marad should therefore grant the accompanying petition pursuant 
to Section 213(g) of the American Fisheries Act and 46 CFR 356.53 
promulgated thereunder, and rule that:
    ``(1) Arctic Storm, Inc., Sea Storm Fisheries, Inc. and Sea Storm, 
LP are exempt from the requirements of 46 U.S.C. 12102(c) and may 
maintain their respective ownership agreements with Oyang with respect 
to the ARCTIC STORM and the SEA STORM; and''
    (2) The existing management contracts of Arctic Storm, Inc. for the 
ARCTIC FJORD and the NEAHKAHNIE are protected under the American 
Fisheries Act.\46\''

[[Page 81571]]

    This concludes the analysis submitted by Petitioner for 
consideration.
---------------------------------------------------------------------------

    \46\ The National Marine Fisheries Service has issued an opinion 
permitting the vessels SEA STORM and the NEAHKAHNIE to lease their 
harvest quota shares under the co-op arrangement to the ARCTIC STORM 
and the ARCTIC FJORD. Both the SEA STORM and NEAHKAHNIE are 
explicitly named in the AFA as catcher vessels delivering to 
catcher/processors eligible to participate in a fishery cooperative. 
Section 208(b). The AFA also directs Marad to minimize disruptions 
``to the commercial fishing industry * * * and to the opportunity to 
form fishery cooperatives.'' Section 203(b). Thus, it is clear that 
Congress intended that such existing contractual relationships--
between named catcher vessels and catcher processors otherwise 
permitted in the fishery--should not be disrupted. An inconsistency 
finding under Section 213(g) with respect to Arctic Storm, Inc., Sea 
Storm Fisheries, Inc., Sea Storm, L.P, and Oyang, therefore permits 
the continuation of the existing contractual arrangements between 
the SEA STORM and the NEAHKHANIE and the catcher processors with 
which they contract.''

---------------------------------------------------------------------------
    By Order of the Maritime Administrator.

    Dated: December 19, 2000.
Murray A. Bloom,
Acting Secretary, Maritime Administration.
[FR Doc. 00-32853 Filed 12-22-00; 8:45 am]
BILLING CODE 4910-81-P