CHILE: DECREE CONCERNING EXCESS PROFITS OF COPPER COMPANIES Source: International Legal Materials, Vol. 12, No. 4 (JULY 1973), pp. 983-988 Published by: American Society of International Law Stable URL: http://www.jstor.org/stable/20691133 . Accessed: 12/06/2014 15:55 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp . JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected]. . American Society of International Law is collaborating with JSTOR to digitize, preserve and extend access to International Legal Materials. http://www.jstor.org This content downloaded from 62.122.73.17 on Thu, 12 Jun 2014 15:55:02 PM All use subject to JSTOR Terms and Conditions
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CHILE: DECREE CONCERNING EXCESS PROFITS OF COPPER COMPANIESSource: International Legal Materials, Vol. 12, No. 4 (JULY 1973), pp. 983-988Published by: American Society of International LawStable URL: http://www.jstor.org/stable/20691133 .
Accessed: 12/06/2014 15:55
Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at .http://www.jstor.org/page/info/about/policies/terms.jsp
.JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range ofcontent in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new formsof scholarship. For more information about JSTOR, please contact [email protected].
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American Society of International Law is collaborating with JSTOR to digitize, preserve and extend access toInternational Legal Materials.
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CHILE: DECREE CONCERNING EXCESS PROFITS OF COPPER COMPANIES*
[September 28, 1971]
MINISTRY OF MINES
MEASURES ON DEDUCTION OF INDICATED AMOUNTS IN THE COMPUTATION OF COMPENSATION DUE TO THE MAJOR COPPER MINING ENTERPRISES AFFECTED BY THE NATIONALIZATION.
Santiago, 28 September 1971? His Excellency has today decreed the following!
(Decree)No.92. His Excellency, the President of the Republic, by virtue of powers conferred upon him by Transitional Article Seven teen, Paragraph (B) of the Political Constitution of the State?
In the course of its historical development, our nation, with great effort, has won the right to provide for itself and to be owner of its own natural resources. This right, universally acknow ledged today, is being exercised by Chile to nationalize the Major Copper Mining Enterprises and the Andean Mining Company. And it does so on equitable social terms, theoretically justified and scrupulously enforced.
The international economic relations,from which our people have suffered, are based on an essentially unjust system which im poses on dependent countries unilateral decisions adopted by the hegemonic countries. This unilateral situation not only violates publicly-contracted agreements, but has also seriously prejudiced the economic interests of Latin America, and particularly those of Chile.
The formal equality of all States, acknowledged by universal law and conscience, is intrinsically limited, if not mocked, by the use made by some States of their great power to subject others to
their acts. It is not possible to refer accurately to freedom and dignity in the relations among nations when the basic means of pro duction, the vital resources of their subsistence, have been appro priated or confiscated by a very limited group of large enterprises pursuing their profits at the expense of the underdevelopment and backwardness of the masses in those countries in which they es tabi isti themselves.
*[Translated for International Legal Materials by Helen L. Clagett from the official Spanish text in Diario Oficial of Chile, Septem ber 29, 1971.
[This Decree is being reprinted to rectify an error that appeared in the translation at 10 International Legal Materials 1235 (1971). The Editor deeply regrets the mistake in paragraphs 16 and 17 which occurred in the earlier version.]
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Today, with inflamed momentum, conscience rebels against similar situations, where the dispossessed peoples throughout the world are
becoming aware of their own personality, their rights and aspirations thus fomenting open conflict between the egocentric interests of the powerful enterprises and cartels, and the liberating ambitions of the peoples who have been subjugated for centuries.
Throughout a continuous process within the context of profound inequality between the parties, and lacking any bilateral or inter national agreement to legalize it, Chile has on numerous occasions suffered discrimination in the exploitation of its mineral deposits. A unilateral discrimination that, on two occasions alon?, as oittd here by way of example, during world war II and the Korean war, has prejudiced our economy in the amount of hundreds of millions of dollars.
If it is natural for each nation to decide freely what activi ties shall bind its destiny as a nation, even more legitimate, if pertinent, should be the fact that those economies condemned to a mono-export?tion system by the international division of work, cease
permitting their basic wealth to be alienated by the dispropor tionate profits of foreign enterprises.
In an act of full national sovereignty, chile resolved to re cover for itself the ownership of the production sources most deci sive to its present and its future, upon which depends the outcome of the battle in which it is engaged to liberate the great majority of its people from material misery, from internal human exploita tion, and from foreign subordination. Two-thirds of our revenue in foreign exchange and the financing of approximately a quarter of our national budget proceeds from the exportation of copper.
On this occasion of determining the amount of compensation to correspond to the nationalization, after decades of exploitation the
people of Chile now assert their right to have the principles of equity applied in favor of the national community. In the preserva tion of their patrimony, in the defense of their inherent right of economic sovereignty ?historically violated by the copper enter
prises ? the people of Chile have earned their rights against these
companies, which today they legally and logically exercise by deduc ting the excessive profits obtained by the nationalized enterprises.
In compliance with this constitutional mandate, the President of the Republic simultaneously tak?s into consideration the demands of Chilean public order. The historic reparation won by our nation had necessarily to manifest itself through measures of revolutionary content and scope. These were in response to explicit manifesta
tions of the will of the Chilean people through successive decisions and measures adopted pursuant to our democratic and representative institutions, fully utilizing the powers inherent in our sovereignty. On k September 1970, Chile voted to nationalize the major copper mines. On 11 July 1971, the full Congress unanimously approved, at the initiative of the Executive, the Constitutional Amendment on the
nationalization, as well as the terms on which it would be implemented.
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With absolute respect for the principles conforming to the Rule of Law, the process of nationalization of the major copper enter prises has been carried out, each of its steps and respective proce dures pursuant to our legal system.
WHEREFORE, AND
CONSIDERING!
1) That Law 0.17 50 of 16 July 1971 approved the Constitutional Amendment proposed by the Supreme Government to proceed with the na tionalization of the Major Copper Mining Enterprises and of the Andean Mining Company, an amendment which received the unanimous approval of the full Congressi
2) That Transitional Article Seventeen of the Political Constitu tion of the State, consulted in relation to the amendment, expressly contemplates in its Paragraph (b) the exclusive power of the President of the Republic to order the Comptroller-General, upon computing the amount of compensation to be paid to the nationalized enterprises, to "deduct all or any part of excessive profits received annually by the
nationalized enterprises or their predecessors after the effective date of Law No.11.828-, that is, after 5 May 1955m
3) That, in order to determine the said deduction, the President of the Republic may consider factors or precedents other than those
specifically cited in Paragraph (b) of Transitional Article Seventeen of the Constitution, since this merely sets forth as examples some of the grounds that may be considered^
k) That the President of th? Republic must exercise the power ex clusively granted to him in the Constitution, keeping in mind in a very special way the sovereign will of the Nation as expressed in the above-cited Constitutional Amendment, a will which, through this most fundamental politico-legal document in the historic destiny of Chile, that is, its Political Constitution, has expressed itself in the sens that recovery be made for the Chilean Nation of its dominion over the natural resources of its most important wealthf
5) That the International Community has acknowledged, and parti cularly the United Nations in its Declaration No.l803(XVII) "the ina lienable right of each State to dispose freely of its natural wealth and resources pursuant to its national interests" and "the respect for the economic dependence of States"1
6) That this goal is attained through the nationalization process of the Major Copper Mining Enterprises and the Andean Mining company, under terms which the constituent himself has defined, in order that there be incorporated into the dominion of the nation the total pro perties held by the enterprises affected by the nationalization.
7) That the Constitution establishes a procedure for fixing com pensation in favor of said enterprises. Rectifying an historic past that permitted the exploitation of basic natural resources of major copper mines by private investors, without adequate legislation to
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preserve to the State its right to receive the benefits of said ex ploitation* the Constitution has provided that deduction may be made of the excess profits obtained by foreign enterprises as a means of restoring to the country the legitimate participation it should have obtained from said natural resources* This declaration responds to the will to acknowledge that the national patrimony represented by its basic natural resources should be at the service of national in terests ? over and above any private interests, national or foreigni
8) That upon exercising the above-cited constitutional power, the President of the Republic must respect the spirit and hist?rico political inspiration of the Constitutional Amendment over every other
consideration!
9) That, on the other hand, within the procedure stipulated by the Constitution, it is necessary that his decision be sufficiently explicit to enable it to fulfill an informative function as well for the Chilean people, who are the direct owners of the recovered na
tional patrimony* For this reason, it is appropriate to state the fundamental principles of the resolution which was issued on this matter by the Chief of State
10) That, in order to estimate the excess profits obtained by the enterprises affectfcd by nationalization, the President of the Republic has been able to consider only the financial figures of said enterprises as reflected in their respective balance sheets since 5 May 1955? On this point, it is fitting to indicate that said accounts did not include, among others, those benefits which the parent corporations had been successful in procuring at the ex
pense of those companies and branches operating in Chile, based on the higher costs charged to the latter for delivery of costly ma
terials, services amd technological assistance and the lesser sums
paid for the production!
11) That the backwardness and poverty which afflict numerous
?ommunities of the land are not phenomena that can be analyzed out
of context with international economic relations existing between
poor and wealthy countries* Foreign investment- so it is said- is one of the mechanisms that can contribute to raising the standard of living and increasing the rate of development in the under
developed countries* As a matter of fact, however, this mechanism
has been converted into just one more element which, in conjunction with financial dependency and unequal interchange, has served to
mold the subordination of backward nations to the economically powerful countries*
12) That, in Chile, as in the rest of Latin America, the revenues produced by foreign capital contributions are much inferior to the disbursements engendered by profits of already-invested capital. Up to the present time, because of lack of adequate regulation, foreign investment has failed to be a mechanism by virtue of which rich nations
contribute to the development of poor countries ? and. consequently to
international peace and community living? but on the contrary, it is a mechanism by which the latter make contributions to the economies of the former
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13) That one of the basic reasons explaining the magnitude of this phenomenon is the toleration of the past granting exceptionally favor able conditions to the foreign investor, particularly the very high rates of profits obtained by himi
Ik) That the enterprises of the Anaconda Company and the Kenne cott Copper Corporation, which have been operating the Major Copper Mines, are organizations functioning internationally with multiple investments in the United States and the rest of the world. If the profits of the enterprises that operated in Chile ?based on the difference between the annual net profits and the booK values ?wece to be compared with the profits of the parent corporation received from the aggregate of its international activities, those obtained in Chile are much higher* This phenomenon is true, wtoether compari son is made with the results obtained by the respective company in its aggregate of operations including the Chilean branches, or made, as more pertinent, with those obtained in the aggregate of operations of the Anaconda Company and the Kennecott Copper Corporation, exclud ing their Chilean affiliates
15) That we have considered the profits obtained by the Ana conda Company and the Kennecott Copper Corporation, based on their book values, within the context of their international op?rations? the profits obtained by other North American and Canadian mining enterprises! the cases of limits placed on profits for free disposi tion, as fixed by Chile for the foreign investor! and other examples of profits obtained from investments made in both developed and under developed countries!
16) That, as a conclusion reached after examination of the preceding facts, the President of the Republic has resolved that the annual return (profits) for nationalized enterprises and their predecessors shall be fixed at the rate of 10# of their respective book values}
17) That, notwithstanding the above indicated rate of return, the President of the Republic is empowered to order the deduction of all of the excess, or any part thereof, for which reason, in the exercise of this exclusive power, he shall order in the dispositive portion of the present Decree, those amounts to be de ducted for each enterprise that does not fully satisfy the total possible deduction.
I DECREE
That the Comptroller-General of the Republic, in his computa tion of compensation payable to the Major Copper Mining Enter prises affected by the nationalization, shall deduct the following amounts as excessive profits obtained between 5 May 1955 and 31 De cember 1971?
a) From the Chuquicamata Copper Company, S.A. the amount of $300,000,000 (three hundred million U.S. dollars).
b) From the Salvador Copper Company, S.A., the amount of $64,000,000 (sixty-four million U.S. dollars).
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