B-155216, DEC. 3, 1964

B-155216: Dec 3, 1964

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

ATTORNEYS AT LAW: FURTHER REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 10. WHEREIN YOU WERE ADVISED THAT OUR OFFICE WAS WITHOUT JURISDICTION TO GRANT THE RELIEF REQUESTED. IT WAS AGREED THAT ANY CLAIM OR DISPUTE WHICH AFFECTED THE OBLIGATION TO MAKE UNITED STATES DOLLAR PAYMENTS WOULD BE GOVERNED BY THE PROCEDURES AGREED UPON BETWEEN THE CONTRACTOR (MORRISON-KNUDSEN) AND THE THEN INTERNATIONAL COOPERATION ADMINISTRATION. WE UNDERSTAND THAT THE ABOVE PROVISION WAS INSERTED INTO THE CONTRACT IN ORDER TO RELIEVE THE UNITED STATES FROM INCURRING ANY OBLIGATION ARISING OUT OF DECISIONS ADJUDICATED BY OTHERS AT A TIME WHEN THE UNITED STATES GOVERNMENT WAS FINANCING THE DOLLAR PORTION OF THE CONTRACT.

B-155216, DEC. 3, 1964

TO MCNUTT, DUDLEY AND EASTERWOOD, ATTORNEYS AT LAW:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 10, 1964, ASKING THAT WE RECONSIDER THE DECISION OF OUR CLAIMS DIVISION PB-Z-977 (11) DATED SEPTEMBER 10, 1964, WHEREIN YOU WERE ADVISED THAT OUR OFFICE WAS WITHOUT JURISDICTION TO GRANT THE RELIEF REQUESTED.

REVIEW OF THE RECORD DISCLOSES THAT ON MARCH 20, 1959, YOUR CLIENT, MORRISON-KNUDSEN OF ASIA, INC., AND THE SHIHMEN DEVELOPMENT COMMISSION, (SDC), AN AGENCY OF THE REPUBLIC OF CHINA ENTERED INTO CONTRACT NO. ICAC- 1001 IN CONNECTION WITH THE CONSTRUCTION OF THE SHIHMEN RESERVOIR PROJECT IN TAIWAN, FORMOSA. AMONG OTHER THINGS THE AGREEMENT CONTAINED AN ARBITRATION PROVISION, ARTICLE 33.0, WHICH ESTABLISHED A PROCEDURE FOR ADJUDICATING ALL DISPUTES, CLAIMS OR QUESTIONS ARISING UNDER THE AGREEMENT EXCEPT THOSE AFFECTING THE OBLIGATION TO MAKE UNITED STATES DOLLAR PAYMENTS. IT WAS AGREED THAT ANY CLAIM OR DISPUTE WHICH AFFECTED THE OBLIGATION TO MAKE UNITED STATES DOLLAR PAYMENTS WOULD BE GOVERNED BY THE PROCEDURES AGREED UPON BETWEEN THE CONTRACTOR (MORRISON-KNUDSEN) AND THE THEN INTERNATIONAL COOPERATION ADMINISTRATION, NOW THE AGENCY FOR INTERNATIONAL DEVELOPMENT (AID). WE UNDERSTAND THAT THE ABOVE PROVISION WAS INSERTED INTO THE CONTRACT IN ORDER TO RELIEVE THE UNITED STATES FROM INCURRING ANY OBLIGATION ARISING OUT OF DECISIONS ADJUDICATED BY OTHERS AT A TIME WHEN THE UNITED STATES GOVERNMENT WAS FINANCING THE DOLLAR PORTION OF THE CONTRACT. SUBSEQUENTLY, THE SDC AGREED TO FINANCE THE DOLLAR COSTS WITH ITS OWN U.S. DOLLARS THROUGH THE MEDIUM OF A TRUST FUND. SDC DOLLARS WOULD BE EXPENDED AS A RESULT OF ANY FEE ADJUDICATION.

ON JANUARY 28, 1960, MORRISON-KNUDSEN ENTERED INTO A "LETTER AGREEMENT" WITH THE INTERNATIONAL COOPERATION ADMINISTRATION RELATING TO THE FINANCING OF THE PROJECT. PARAGRAPH 20 OF THIS AGREEMENT PROVIDES AS FOLLOWS:

"20. ARBITRATION UNDER THE CONTRACT--- INSOFAR AS ARBITRATION OF AN ISSUE AFFECTS DOLLAR FINANCING BY ICA, ICA DOES NOT CONSENT TO BE BOUND BY THE ARBITRATION PROVISIONS OF SECTION 33.0 OF THE CONTRACT AND RESERVES ALL RIGHTS, AND ANY DISPUTES WITH RESPECT THERETO SHALL BE SETTLED UNDER PARAGRAPH 10 DISPUTES OF THIS AGREEMENT.'

THE ABOVE PARAGRAPH BRINGS RESOLUTION OF ISSUES AFFECTING FINANCING BY AID UNDER PARAGRAPH 10; IT THEREFORE APPEARS LOGICAL TO CONCLUDE THAT THE PARTIES INTENDED (AND THIS POSITION IS ASSERTED BY AID) THAT RESOLUTION OF ISSUES INVOLVING U.S. DOLLAR FINANCING BY ONE OTHER THAN THE UNITED STATES WOULD BE COVERED BY ARTICLE 33.0 OF THE BASIC CONTRACT. THIS INTERPRETATION IS FULLY COMPATIBLE WITH THE EXPRESS TERMS OF ARTICLE 33.0.

UNDER THE CIRCUMSTANCES, THERE APPEARS TO BE NO BASIS FOR NOW REFERRING THE MATTER TO AID. MOREOVER, SINCE IT IS CLEAR THAT YOUR CLAIM IS AGAINST SDC AND NOT THE UNITED STATES, WE ARE WITHOUT JURISDICTION IN THE MATTER. PARENTHETICALLY, IT SHOULD BE NOTED THAT ALL FUNDS HELD BY AID UNDER THE TRUST FUND AGREEMENT OF MARCH 31, 1963, HAVE SINCE BEEN COMMITTED. WE ARE INFORMED, HOWEVER, THAT IF YOUR CLIENT IS SUCCESSFUL IN HIS CLAIM AND SUFFICIENT FUNDS ARE DEPOSITED IN THE TRUST FUND, AID WOULD HAVE NO OBJECTION TO INCREASING ITS LETTER OF COMMITMENT BY AN AMOUNT EQUAL TO THE ADDITIONAL DEPOSIT.