'ection 104.

This section was added by the Committee to remove any doubt oncerning the velidity of the international agreements in force beween the United States and the entity recognized as the Republic of hine prior to the normalization of relations with the People's Reublic of China. Its effect is to make clear that these agreements have ot "lapsed" and that they continue in effect between the United states and the people on Taiwan. The reference to all courts "in" the Jnited States expresses the Committee's intent that this rule of subtantive Federal law be applied by both Federal and State courts.

Section 105.

This section authorizes the President end departments and agencies o carry out programs, transactions and other relations with the people on Taiwan under laws which provide for such programs, transactions and relations with respect to foreign countries. Such activities should be carried out in accordance with the applicable laws of the United States. The Committee regards this section as legally necessary to rive the President and departments and agencies the authority to conduct and carry out U.S. programs, transactions, and other relations authorized or required by law with respect to foreign countries, nations, states, governments, or similar entities, with the people on Taiwan. This will assure the continuation of authority for such important programs as arms sales, nuclear exports, and Export-Import Bank financing.

Section 106.

Subsection (a) provides that programs, transactions and relations with respect to the people on Taiwan will be conducted by or through the American Institute in Taiwan, in the manner and to the extent directed by the President. This provision implements the President's statement of December 15, 1978, that the American people and the people on Taiwan "will maintain commercial, cultural and other relations without official government representation. . . ." The American Institute in Taiwan is a nonprofit corporation organized under the laws of the District of Columbia, which has been established for this purpose. The Administration's version of this section was amended to make it completely clear that while U.S. relations with the people on Taiwan will be carried out principally through the American Institute in Taiwan, this need not be the only channel for such relations without official government representation. . . ." The American Institute in Taiwan is a nonprofit corporation, organized under the the Institute, substituted the words "in the manner and to the extent directed by the President" for the words "as the President may direct." This makes clear that the President may conduct relations with the people on Taiwan in a flexible manner, having, for example, the Export-Import Bank work with commercial banks in making loans. The Committee regarded this subsection as legally required to provide the President or departments or agencies of the United States Government with the authority to carry out programs, transactions or other arrangements with the people on Taiwan through the American Institute in Taiwan.

Subsection (b) of section 106, added by the Committee as proposed by Senator Javits, applies the Preemption Doctrine to any state or local laws that may conflict with provisions of the statute under which

the Institute operates. The supremacy clause, clause 2 of article IV of the Constitution, provides that Federal law takes precedence over any State law to the extent that the two cannot both stand, and it has been further construed as allowing the Congress to "occupy the field," or preempt, State legislation in carrying into execution its enumerated powers. It is the intent of the Committee, in including this provision, to require that the Institute be treated by State and local law for this purpose on the same basis as an agency of the United States Government.

Section 107.

This section was offered as an amendment to the Administration's bill by Senators Pell, Javits, and Percy, replacing an earlier related amendment by Senator Pell. This section authorizes the American Institute in Taiwan to undertake a policy of furthering human rights when and as appropriate. Senator Javits suggested that for the purpose of this section the applicable definition of human rights should be that contained in the Helsinki Declaration.

The Committee made clear that this section was not to be construed as authority for Institute officials to intervene in Taiwan's domestic affairs by favoring one or another group of people on Taiwan, or by strengthening United States links with any particular group on Taiwan, nor was it to be construed as giving the Institute official status. The Committee also specified that Institute officials were not authorized to become involved in matters affecting the international status of Taiwan.

Section 108.

This section provides for the performance and enforcement of existing agreements, and the making of new agreements, with the people on Taiwan by or through the Institute, to satisfy authorizations or requirements for agreements or arrangements with the people on Taiwan. If, for example, an agreement with a "foreign country" is a condition of eligibility for participation in a program with respect to the people on Taiwan, such a condition will be satisfied by an agreement entered into or performed through the Institute. This section applies not only to new agreements, but also to previous agreements, which remain in force unless terminated.

The Committee regarded this section as legally necessary to authorize the United States Government to perform, enforce, or have in force agreements or arrangements or enter into new agreements or arrangements. The Committee also changed the words "as the President may direct" in the Administration's bill to "in the manner and to the extent directed by the President" to emphasize the flexibility accorded to the President.

Section 109.

This section provides for dealing with the people on Taiwan through an instrumentality acting on their behalf. It makes clear that provisions for dealing with a "foreign government" will be satisfied with respect to the people on Taiwan by dealing with that instrumentality. Sections 106 and 108 and this section provide for the conduct of nongovernmental relations through the Institute and the counterpart instrumentality of the people on Taiwan. The instrumentality referred to in this section thus is not considered an instrumentality of the people on Taiwan as that term is defined in section 101(b).

For example, the Arms Export Control Act authorizes sales of lefense articles and defense services to foreign countries, and requires hose countries to agree to certain conditions and to provide certain ssurances. Under the bill, these sales will be made by the Institute to he Taiwan counterpart instrumentality, and the agreements and Issurances by that counterpart instrumentality will be accepted in satisfaction of the requirements of the Arms Export Control Act.

This section was regarded by the Committee as legally necessary to authorize the President and departments or agencies of the United States Government to conduct specified relations and actions with the people on Taiwan through an instrumentality established by the people on Taiwan. The Committee also changed the words "as the President may direct" in the Administration's bill to "in the manner and to the extent directed by the President" to emphasize the flexibility available to the President in dealing with the people on Taiwan. Section 110.

This section provides that when the application of United States. law depends upon foreign law, the law actually applied by the people on Taiwan shall be looked to for that purpose. The provision does not affect the enforceability of judgments rendered by the courts on Taiwan.

The Committee expects that courts in the United States will continue to enforce judgments rendered by courts on Taiwan and that, on a reciprocal basis, the courts on Taiwan will continue to enforce judgments rendered by the courts in the United States.

Section 111.

Subsection (a).-This provision assures that the withdrawal of recognition does not affect the ownership of property owned by Taiwan in the name of the Republic of China as of December 31, 1978 or thereafter acquired or earned by them. However, the section does not apply to the ownership of diplomatic real properties situated in the United States and acquired by the Republic of China before October 1, 1949, such as the former embassy at Twin Oaks, or property held by international organizations.

For purposes of section 25 of the Federal Reserve Act (12 U.S.C. section 632) reference to "a representative of such foreign state who is recognized by the Secretary of State as being the accredited representatives of such foreign state to the Government of the United States," shall include the representative of an instrumentality established by the people on Taiwan.

The Committee regarded this section as legally necessary to make clear that United States recognition of the People's Republic of China as the legal government of China does not affect ownership of, or other rights or interests in, properties, tangible and intangible, and other things of value, owned or held on December 31, 1978, or thereafter acquired or earned by the people on Taiwan except for diplomatic real properties situated in the United States which were acquired prior to October 1, 1949.

Senator Helms, who had proposed an amendment covering similar matters, withdrew his amendment when this section was approved by the Committee.

Subsection (b).-This provision intended to protect U.S. persons who, prior to January 1, 1979, acquired, or thereafter acquire, contract or property rights or have claims against the governing authority on

Taiwan, recognized by the United States prior to January 1, 1979, a the Republic of China and its instrumentalities and agencies. Withdrawal of recognition of the Republic of China does not affect the con tractual obligations and debts which it and its instrumentalities incurred prior to January 1, 1979, or may incur in the future. Such obligations will continue to be enforceable (on the same basis) in courts i the United States. For example, if after January 1, 1979, a U.S. bank makes a loan to a Taiwan entity, which loan is guaranteed by the st thorities on Taiwan or their instrumentality, such authorities or their instrumentality remain suable in courts in the United States on the loan guarantee on the same basis as would have been the case prior to January 1, 1979. Similarly, the people on Taiwan have continued access to courts in the United States on the same terms as obtained prior to derecognition. The Foreign Sovereign Immunities Act of 1976 will continue to apply to the authorities on Taiwan and their agencies and instrumentalities to the extent it did prior to January 1, 1979. Finally, the term "United States persons" used in section 111(b) is intended to have the broadest possible meaning, including, but not limited to, the meaning of the comparable term used in section 112 of the Export Administration Act of 1969 as amended, as well as all persons doing business in the United States who may become involved in litigation in the United States relating to the people on Taiwan. The Committee regarded this subsection as legally necessary to insure that property rights, interests and obligations will not be affected in any way by the absence of diplomatic relations between the United States and the people on Taiwan or lack of United States recognition of a government of Taiwan.

Section 112.

Subsection (a), proposed by Senator Percy, directs the Overseas Private Investment Corporation (OPIC) to provide insurance, reinsurance, loans, or guaranties for projects on Taiwan without regard to the provision of Section 231 of the Foreign Assistance Act of 1961, as amended, which restricts eligibility for OPIC programs in countries with per capita incomes of $1,000 or more in 1975 United States dollars. Coincidentally, Taiwan's per capita GNP will have exceede the $1,000 level this year for the first time, thereby making the avai ability of war risk, expropriation and inconvertibility insurance much more limited at a time when uncertainties about the island's future may have increased. The effect of this provision, therefore, is to waive a restriction which would otherwise begin to apply to OPIC program with respect to investments on Taiwan.

Subsection (b), proposed by Senator Glenn, directs that OPIC no apply special or discriminatory criteria for its issuance of insurance, reinsurance, loans or guaranties with respect to investment projects on Taiwan as a result of the establishment of diplomatic relations between the United States and the People's Republic of China. Subsection (c), also agreed upon by the Committee, directs the President to report to Congress within 5 years whether the waiver of the per capita restriction should continue with respect to Taiwan in light of prevailing economic conditions on Taiwan on the date of such report.

Senator Biden asked that he be recorded in opposition to the section

Section 113.

In connection with this section, the Committee considered two bills ntroduced by Senator Dole (S. 8) and Senator Stone (S. 46). Senator Dole's bill called for the President to extend to any principal liaison office of the Republic of China established in the District of Columbia he same privileges and immunities as are enjoyed by diplomatic nissions accredited to the United States. Senator Stone's bill called or extending full diplomatic privileges and immunities to all offices epresenting the Republic of China in the United States. Both bills were strongly opposed by the Administration on the ground that they would confer diplomatic status on an unofficial, nongovernmental body, and would be inconsistent with the unofficial character of United States relations with the people on Taiwan since January 1, 1979.

This section as approved by the Committee authorizes and requests, but does not direct, the President to extend to the instrumentality established by the people on Taiwan, and, as appropriate, to the members thereof, privileges and immunities comparable to those provided to missions of foreign countries, upon the condition that similar privileges and immunities are extended on a reciprocal basis to the American Institute in Taiwan.

This section as originally drafted was amended in two ways by proposals of Senator Stone. The Committee approved his suggestions that the words "as appropriate" be inserted before "the members thereof," and that the words "comparable to those provided by missions of foreign countries recognized by the United States" replace the words "subject to corresponding conditions and obligations which are necessary for the effective performance of their functions." Senator Stone indicated that he believed that the first change clarified the amendment by indicating that not all members of the instrumentality should be accorded such privileges and immunities as were granted, and that the second change broadened the privileges and immunities that the President could be expected to grant to the instrumentality. At the request of the State Department, Senator Stone agreed to drop the words "recognized by the United States" from his second proposed change.

Senator Stone asked the State Department to specify which of seven categories of privileges and immunities normally given to diplomats of foreign nations would be extended to the instrumentality established by the people on Taiwan. The State Department responded that the instrumentality would enjoy the following five privileges and immunities fully: (1) the privilege of a secure pouch; (2) the right to send and receive coded messages; (3) customs courtesies, involving such matters as freedom from customs inspections and duties; (4) tax exemption on income earned by the instrumentality and on the official income of the appropriate personnel of the instrumentality, but not for U.S. citizens or residents employed by it; and (5) inviolability of the premises of the instrumentality. As for the sixth category normally accorded diplomats, the appropriate members of the instrumentality would enjoy immunity from criminal prosecution and civil liability for any acts committed in the performance of their duties, but not for any acts they committed which were unrelated to their duties. The State Department said it did not plan