S/PV.348 Security Council

Unfortunate1y we cannot hl.\ve recourne to simultaneous interpretatiori because' the Seçre~ariat has begun its exodus to Paris. We shall, therefore, .have consecutive interpretation of aU speeches. Mr. VILFAN (Yugoslavia): The representatives of the United States of America and the United Kingdom in their respective speeches on thisquestion at the 345th and. 346th meetings ·of the Security Council implied that the entire problem now being considered by the Security ·Council is·one of a .legal interpretation of the Treaty of Peace with Italy, especially of those ,.provisions of the Treaty which pertain ta the' Free Territory of Trieste. In actual fact, the c~x of the problem does not lie there, and cèrtainly does not arise from any difficu:1ty in interpreting thoseprovisions of the Peace Treaty whiçhrefer tothe Free Territory of·Trieste. No diffièlllty, ofcourse,exists jf the·terms of the Peaèe'rreaty are approached with sincerityand witha>~eal desire to implement them in the spirit inte'(ided. Thisis precisely what the Gov- èrnment 01 the .United States of America and ~e United ~gdomlack. The represeIit,!:tive of the Union of Soviet Socialist Republics, Ù'l bis last speech [346th meeting],andtherepres~ntative of the. Ukrainian ·Soviet Socialist Republic today, spoke at length on the tactics-of these.Gpvermnents·in delaying the· appoîntment of..a .Gôvernor and of their attempt to create .in this waya situationjusti- The legal theory involved in such a task unavoidably leads the contrivers into a contradiction with the Peace Treaty. The thesis of the representatives of the United States and the United Kingdom is that the agreements concluded between the Allied Military Ccmmand and the Republic of !taly, which have been characterized by my Govemment as an open violation of the independence and integrity of the Free Territory of Trieste, are based on article 11 of Annex VII of the Peace Treaty. They say that these' agreements do signify econoroic union-that is to say, e.'Cclusive association of the Free Territory of Trieste wim ltaly-but that this is warranted by' article 11 of Anne:;:: VII which provides, fqr a certain period, for the use of the Italian lira as legal tender in the Free Territory of Trieste and for the supply of Italian lire and ioreign curre:ncy by the.Italian . Government. The Free Territory of Trieste was created by the Peace Treaty. It is clear that in cr~ating the Free Territory, the Peace Treaty could not at the same time provide for its immediateand complete financial and economic independence. Of course, there is a transitional period and we know that· in this period, especially with regard to the continued validity of. the lira as legal tender, there exist certain limitations to the complete financiaI and economic independence oi '.leFree Territory. This is evident from the !e!?.Jrt 0.<f the Trieste Commission of, Inqu~ and 1 port lt 18 eVldent also from the comments which my Government made in connexion with this report. However, what the representatives of the United States,and the United Kingdom overlook in their interpretation of the Treaty iS that no advantage must be taken of this situation in order to place the Free Territory of Trieste into a complete depen.dencyon one country, as wasdone by the Allied,Military Command with respect to, Ital:y. It is my intention to show that the tepresentatives of the United States and the United Kingdom interpret arbitrarily the provisions of article 11 of Annex VII. Upon examining article 11 of Annex VII, we see that it provides for an obligation that Italy "... shail sup'ply the foreign exchange and currencyneeds"--I stress needs-"of the Free .Territory .. ," ThiS,implies the establishment of a limitation of thefinancial andeconomic policy ?f Italy toward thé Free Terrhory of Trieste. It IS ntated "that Italy shall supply the territorywith lire and foreign exchange accordiJ;lg to thé needs of ~he Free TerritOlyand not according to Italianestimations, not without any limitation and not on the basis of eliminating every monetary The representatives of the United States and the United Kingdom assert that there have never existed manetary, foreign exchange or duty barriers and that, therefcre, it is incorrect ta maintain that agreements with the Republic of Italy havehad the effect of destroying sucb barriers and of placing the Free ':'"'erritary of Trieste in an exclusive association with Italy. Accarding ta the assertion of the representatives of the United States and the United Kingdom, they have mere1y embodied in the form of an agreement a situation which existed before and after the creation of tile Free Territory. If this were the case, then the question would inevitably arise: Why was it necessary, in the first place, ta provide in article Il of Annex VII for an obligation to concl'.lde an agreement? Was it provided simply to authenticate an actual situation in written forrn-the situation of an exclusive association which existed merely by the continuation of the validity of the Italian lira? Of course, such a tbesis would be totally in contradiction to the task of the Provisional Regime, which is to prepare the independence of the Free Territol'Y. Article Il of Annex VII, interpreted in the spirit of the other provisions of the Peace Treaty, of the report of the Trieste Commission of Inquiry and of the decision of the Council of Foreign Ministers, would run aIong the following Hnes: article 11 of Annex VII provides for the continuation of the validity of the Italian lira pending the establishment of à separate currency regime for the Free Territory dissimilar'to the Italian lira and the Yugoslav dinar. It is logical to assume that in such a situation it would be impossible to realizé immediately the com~diatement pIete financial" and economic independencf' of the Free.Territory of Trieste. On the other hand, the objectives of the Peace Treaty are to use this transitional period for the preparation ofthe complete independence of the· Free Territory of Trieste, including its financial and economic independence. Therefore,. the provisk:.n concerning an agr.eement was included in thePeace Treaty "",ith one aim alone -to vest in Italy the obligation ta supply lire and foreignexchange tothe Free Territory and to ren4erÎI:rlpos§ible€;very inclination onthe part : z:,;;,~.•';f.a.:.,,:fo.~~-d~:à~.ZY~.b. :c.~.t:~~1 of the continued validityof the lira in the Free sous sive To such agreements the Allied administration was entitled. But, instead of that, under the pretext of abiding by article Il of •\nnex VII, under the pretext that an exclusive association aIready existed, it has concluded agreements by means of which the Free Territory of Trieste is, financially and economically, complete1y restored ta Italy. sion l'indépendance Do the other provisions of the Peace Treaty, the decision of the Cauncil of Foreign Ministers and the report of the Trieste Commission of Inquiry, clearly express that the activities of those administerlng the Territory be orientated towards the aim of preparing it for future complete independence and that the agreements stipulated under article 11 of Annex VII shall provide only for the corresponding Italian obligations? This question is answered by the report of the TrieSte Commission of Inquiry. The Trieste Commission of Inquiry of the Council of Foreign Ministers was concerned with four main problems: budget, bC'lance-of-payment, money a..'1d banks, and foreign exchange control. .ritoire The Commission considered it a duty of the Provisional .Regime ta strive for a balanced budget, and, if necessary, ta seek loans on the basis of calculation of needs and the possibilities of returning such loans. The budget, as planned by the' Commission, anticipated income from customs obtainable from import of all countries, ' with certain and, as specified by the decision of the Council of Foreign Ministers, equal, privileges for Italy and Yugoslavia. The Commission considered it a duty of the Provisional Regime to build up a balance-of-payment in respect to all countries, Italy included. .As Jor money and banks, the CJmmission foresaw a period in which Italy would be obliged to continue to fUf!l..ish currency as heretofore. Thi'> period, according to the Co~sion, would last until a central bank of the Free Territory of Trieste would be created, and only after the establishment of such a bank could agreements, based on article 11 of Annex VII, be concluded. Even while the Italian lira would be legal tender for the Free Territory of Trieste, the Provisional Regime must control aIl foreign exchange; must accumulate foreign exchange in the Free Territory; must introduce a special dollar rate of exchange fol' the Italian lira in the Free Territory, distinct from, the dollar rate of exchange of the Italian lira in Italy; .must have a special !>alance of foreign exchange with Italy and must mtroduce e~port and import licensing. ' The following quotation wasread by Mr. Vilfan in French: "All exports of commodities from the Free Territory or payments ta the Free Territory for services ta foreigners, inc1uding compensation arrangements, should be paid for in foreign exchange or îts equivalent, and such foreign exchange should be sold ta the Government of the Free Territory. This arrangement should apply for all countries except Italy until the new currency of the Free Territory is established. In the case of Italy, it is recommended that an agreement with Italy be reached whereby the lira proceeds' of the principal exports of the Free Territory to Italy and of the principal payments for services sold to Italy should be placed in a special central lira account at the Bank of Italy, which will he used only with the approval of the Govcrnment of the Free Territory for the purchase of commodities or foreign exchange in Italy." It establishes, in fact, a monopoly of the Pro- visional Regime in regard to foreign exchange of all countries and, naturally, of Italy too. Con- trariwise, the first agreement of 9 March 1948 foresees a free circulation of currency with no limitation. Rence, it is in contradiction with the task of the Provisional Regime. . Artide 11 of Annex VII provides for the consid{~mtion of the varying and specific needs of the. Free Territory of Trieste. The report specifies that an independent monetary policy of the Free Territory "hould be carried out. Chapter V, paragraph3, .conspicuously states that the Provisional Regime should introduce a special rate of exchange for the Italian lira in the Free Territory. The United Kingdom l'epre- sentative, attempting to· point out the "ab- surdity" of the Yugoslav thesis, said in his speech [346th meeting]: "Had the Allied Mllitary Government divorced the lira in their zone from that circu- lating in Italy by creating a currency and cus- toms barrier, it is not difficult to see that the lira in their zone would soon have assumed a difIerent meaning and value from that of the metropolitan lira in Italy." In another instance, he said: "One cannot have the lira in .the zone and yet treat it as a separate currency to that in use in Italy." But the report shows that this was preciseIy the in- tention and the unanimous decision of the fepre- Contrariwise, the first agreement of 9 March 1948 [S/781] introduces the mechanical and automatic supply of lire. Hence, it is in con- • tradiction with the task of the Provisional Regime. Chapter V, paragraph 6, of the report of the Commission states: "The agreement to be reached between the Italian Government and the Government of the Free Territory with respect to the use of the Italian lira in the Free Territory pending the establishment of a definitive currency should in· clude such provisions as may appear appropriate for the purposes of strengthening the exchange control syste;m of the Free Territory." Contrariwise, article 5, paragraph l,of the above-mentioned agreement explicitly introduces Italian œgulations concerning monet<l-ry circu- lation and forbids any independent measure of the administration. Hence, it is in contradiction with the task of the Provisi6nal Regime. The report of the Commission, in chapter II, imposes a policy directed toward balancing the budget, and in particular, making up the deficit with calculated laans. Contrariwise, the second agreement concluded on 9 March 1948 [S/781] bases aIl financing of the United States-United Kingdom adminis- tration on open credit, the ceiling of which is unknown, and with uncertainty as to how it will be covered. Renee, it is in contradiction with the ùlsk of the Provi~:ionalRegime.· The report of the Commission, in aIl the para- graphs of Chapter V, foresees a foreign exchange control and, even more,' a foreign exchange monopoly and the obligation of accumulation of . foreign currency. . ContrariWise, the third agreement of 9 March 1948 [S/781] reads as follows: "The Italian Gov- emment shall receive CUITent foreign exchange earnings accruing to the command of the zone under the exchange regulations in force." Hence, it is in contradiction with the task· of the Pro- visional Regime. The:report of the- Commission, in cuapter II, expre:"y imposes independent trade and pay- ment '.agreements. . The report of the Commission in chapter II, paragraph 3 and chapter V, paragraph 7, im.. poses an independent customs poliey, especially an independent policy of export and import licences. It is true that the Commission dia not attain complote unanimity on the question of customs and the customs system. However, all ag~eed on the necessity for a customs system and the decision of the Council of Foreign Min.. isters, in paragraph 2, then decicled to exempt from duties only goods of Italian and Yugoslav origin on the basis of reciprocity fol' goods of Triestine origiu. Contrariwise, the agreement incorporates the United States-United Kingdom zone into the Italian customs system and makes it dependent on Italian quotas. Hence, it is in contradiction with the task of the Provisional Regime. It is dear that the cited provisions of the Provisional Regime and of the report of the Trieste Commission of Inquiry strictly adhere to the provisiqn contained in paragraph.4, article 24 of the Permanent Statute, that is, that eca- nomie union or associations of an exclusive character with any State are incompatible with the status of the Free Territory. Thus, we have proof that not only is it possible to combine the provision of article Il of Annex VII with para- graph 4, article 24 of the Permanent Statute, but it is an obligation for aIl administering tl1e Free Territory of Trieste during the period of the Provisional Regime-preciseIy the contrary of what was maintained by the representatives of the United States and the United Kingdom. 1 consider it necessary to complete this analy- sis of the Iegal theory of the represeritatives of the United States and the United Kingdom with some brief remarks concerning' their methods. In referring to the decisi0ll of the Council of Foreign Mjnisters [8/577] and that part of the decision wmch freIates to customs, the repre- sentative of the United States cautiously cites [345th meetirig] the foIloWing part of the text: H ••• untilthe new customs l-egime is introduced by the authorities of the Free Territory of Trieste::, the present regime should be maLt},- tained . . .". The reptesentative of the United States,however, ignores the rest of the text, whichreacb as folI()ws: ".. . and goods QI Ital- jan and Yugoslav origin should be imported into the Free Territory of Trieste without. payment ./, ''''of custqms l~~.~, providedthat .reciprocal arrangements willbe grantedby these·countries to the products originating in the ~ree Tercitory Furthennore, in citing the provisions of chap~ ter V of the report of the Commission, the repre~ sentative of the United States quotes the opening paragraph which deats with the provisional con- tinuation of the existing foreign exchange con- trol and he quotes paragraph 7 of the chapter, which deals with the provisional continuation of the existing system of export and import licences, but he dl?es not mention at aU the remaining points which are on the identical page of the report and which establish that at the moment of the conclusion of an agreement based on article 11 of Annex VII, a control of foreign exchange should exist; that on the occasion of the conclusion of an agreement in accordance with article 11 of Annex VII, Italy should take iuto account the independent control of the Free Territory of Trieste, and sa forth. It is obvious that by employing such expert methods of interpretation of international agree- ments, one must interpret the Provisional Regime into its opposite-from a regime which should lead ta independence, ta a regime which intensifies the former dependency. It is obvious that the result of such methods cannat be other- wise. But the question is: Why are such methods used by the representative of the United States? 1 can find no other reason than the desire ta disguise the question with which we are here confronted, namely, whet.lter the Allied adminis- tration will be allowed ta continue its violation of the Peace Treaty. That is the question we are considering and 1 hope this question will remain before us in spite of the manœuvre of the representatives of the United States and the United Kingdom ta divert the discussion into another channel. 1 shall not enter iilto a discussion of these manœuvres, but 1· would like ta go back ta one of the remarks of the representative of the United States. In defending the thesis of restoring Trieste to Italy, the representative of the United States spoke [345th meeting] about Trieste's historie ties ta Italy. What history does the representative of the United States have in minq.? The history of albout 600 years when Trieste was connected with the countries of the Danube basin, ""en TriCl;i:e achieved everything of its economic sig- nificance? No, the United States representative has in mind the 25 years of Italian rule which were characterized by national. oppression and economic exploitation, which even before fascism rose to power, developed in this province all methods of persecution of its democratic elements. And, of course, the United States representative does not have in.mind the history of the common struggle of the Yugoslav and Italian peoples in this province, who in 1943 already began a general popular uprising, fought In fact, the whole policy of the United States and the United Kingdom, which is supported by France, resolves itself, on the Trieste question, into identifying it with the darkest epoch of the history of Trieste, into support tn the remuants of fascism and ta neo-fascist groups, thus making Trieste a mast dangerous spot for the peace of Europe. This is the general significance of the question we al'e now considering. . With the permis.<:ion of the President, 1should like to submit to the Security Council, at this point, a cIraft resolution [S/968] regarding this question. .' cCWhereas, article 21, paragraph 1, of the Treaty of Peace with Italy states: 'The Free Territory of Trieste is recognized. by the Allied and Associated Powers and by Italy, which agree .that its integrity and independence shall be assured by the Security Council of the United Nations'; "Whereas article 21, paragraph 3 of the Treaty of Peace with Italy states: 'On the termi- nation of Italian sovereignty, the Free Territory of Trieste shall be governed in accordance with an Instrument for a Provisional Regime drafted by the Couneil of Foreign Ministers and ap- proved by the Security Council'; "The Security Counâl, "Having considered the ·accusations of the Government of the Federated People's Republic of Yugoslavia brought before the Security Coun- eil regarding a series of agreements cif 9 March . 1948 and 16 April 1948 concIuded between the Allied Military Command and the Republic of Italy; "Determines that the above mentioned agree- ments are in· complete contradiction with the obligations undertaken by the Allied and Asso- ciated Powers and Italy in respect of article 21 of the Treaty of Peace with Italy and in respect to reguIations in the annexes which. are part of the Peace Treaty, and consequently "Declares the agreements of 9 March1948 conclpded between the Allied Military. Com- mand and the Republic of Italy and of 16 April 1948· relative ta the fulfilment of the agreements made on 9 March, and the postal agreement, ta be incompatible with the status of the Free Territory of Trieste and, therefore, renders them nuU and void; "Calls upon the Governments of the Dnited Kingdom and the tJnited States of AmërÏca to take note of this resolution and to avoid any action in .the future wmch is contrary to the. provisions of thePeace Treaty."

1 propose the following schedule of work: the discussion of the question of the Free Territory of Trieste to be c::ontinued at the meeting seheduled for Monday, 16 August, at 11 a.m., the further discussion of the Palestine question ta take place at a meeting called for this afternoon at 3 0'clock. As there are no objections, we shall adopt this programme. THREE HUNDRED AND FORTY-NINTH MEETING .Held at Lake Success, New·York, on Friday, 13 August 1948, at 3 p.m. President: Mr. J. MALIK. (Union of Soviet . Socialist Republics) . Present: The representatives of the following countries: Argentina,·Belgium, Canada, China, Colombia, France, Syria, Ukrainian Soviet Socialist Republic, Union of Soviet Socialist Republics, United Kingdom, United States of America.

1 call 1;1pon Mr. Sobolev, Assistant Secretary- General, to give us briefiy some information on the documents which have recently been teeeived by the Secretary-General and the President of the Security Council. Mi. SOBOLEV -.(Assistant Secretary-General in charge of Security Council Afi'airs): Since the last meeting of the Security Council on the Palestine questipn [343rd meeting], a number of documents have been received which are relevarit to the issue appearing on the' agenda of today's meeting of thé Security Council. 1. shouId like to draw the Council's attention to some of the more' important documents which have a direct relevance to the matter under discus:i!ion. 1.should like' to draw your attention to documents whichhave been received from the. Mediator concerning- Arab refugees and ·displaced persons. These are documents which were sent to·the Security Counc"îl in response to the