Wednesday, October 26, 2011

Covington & Burling’s Unique International Practice: as “a prime mover in shaping foreign policy” 1947

From “The Super-Lawyers: The Small and Powerful World of the Great Washington Law Firm”
by Joseph C. Goulden; chapter 1: “Covington & Burling: Pinnacle of Power” pp 42- 49

Illustrations: C&B and Iran

How this reportedly started:

One morning in 1947 the Iranian Ambassador to the United States telephoned John G. Laylin, a senior partner at Covington and Burling, and asked him to come to the embassy immediately. The matter was urgent, the Ambassador said, and he would be appreciative if Laylin would hurry. The firm had already done no work for Iran previously; curious about the summons, Laylin dropped whatever work he was doing and caught a cab. “When I got there and sat down, the Ambassador asked what I liked to drink,” Laylin recollects. “I told him that I was a Scotch man, but that I normally didn’t drink anything that early. After all, it was only ten in the morning. “The Ambassador smiled, “Mr. Laylin’ he said, ‘after what I am going to tell you, I think you are going to need a drink. I have just been authorized to hire you to get the Russians out of my country.” “’Mr. Ambassador,’ I said, ‘I think I would like to have a Scotch.’” And thus began a period of cold war diplomacy which variably made Covington and Burling an arm of the United States Department of State, orchestrating activities of friendly allied governments so they do not conflict with Washington’s foreign policy goals.

Covington and Burling’s international practice is unique in several respects. As do a score of other New York and Washington firms, it advises foreign governments and companies in routine commercial matters. But unlike the others, it is also a prime mover in shaping foreign policy- both of the United States and of its clients and Washington overlap.

In the case of Iran, Laylin says, “the Russians had overstayed their welcome” after the Second World War ended, and both the Iranians and Washington wanted them out. A formal treaty obligated the Soviets to withdraw by March 2, 1946, but they stalled, pressing for Iranian recognition of a pro-Soviet autonomous regime created in Azerbaijan, and for a joint Soviet-Iranian company to exploit oil resources in the north of the country. Because of a strong pro-Soviet element in its Parliament, the Iranian government did not have complete freedom of action, and Ambassador Hussein Ala maneuvered to persuade the United States to take the matter to the Security Council on its own initiative. Secretary of State James Byrnes was sympathetic, but replied Iran would be better received if it acted on its own. The visit to Laylin followed.

Laylin helped the Ambassador draft Iran’s case for presentation o the United Nations Security Council; after some months of haggling, the Soviets appeared to have won their two points and withdraw the troops. Whereupon the Iranian parliament repudiated the oil consortium agreement and sent troops into Azerbaijan to reestablish authority in the breakaway region. Summarizing his efforts, Laylin says, “This was the only time in the postwar period the Soviets were bargained out of anything.”

Dean Acheson had left Covington and Burling in 1941 to reenter government; from August 1945 to June 1947, when the firm was rebuilding its international practice, he served as Under Secretary of State, the department’s number-two position. Laylin, however, insists that Acheson “had absolutely nothing to do” with Covington and Burling representing Iran and Greece, two nations with whose affairs Acheson dealt intimately in his official capacity. “The Iran case came about this way,” he said. “Immediately after the war I handled a routine case for Saudi Arabia. An Arabist in the State Department apparently was impressed. Anyway, shortly thereafter, when Iran asked this man to recommend a United States lawyer for the Soviet problem, he listed three firms- Covington and Burling was among them- and told what I had done for Saudi Arabia. That’s why the [Iranian] Ambassador called me in. Right after we won the Iranian case in the United Nations, the Greek Ambassador said to me, “Congratulations! You ran the Russians out of Iran. Now you are going to run them out of Greece.’”

The Greek case, considerably more complicated, involved much closer liaison with former partner Acheson, and it is also a nigh-classic case of the overlaps between government and the quasi-public world of the Washington lawyer. Greece was near collapse in the winter of 1946-47 because of guerrilla activity, economic turmoil and inept government; Acheson writes in his memoirs that the situation there “deteriorated rapidly during January and February 1947” and that by late February “all signs pointed to an impending move by the Communists to take over the Country.”

On February 15, 1947, Covington and Burling formally consummated its agreement with the Greek government. P. Economous-Gouras, charge d’ affaires of the Greek embassy in Washington, spelled out the terms in a letter to Laylin and John Lord O’Brien, another senior partner in the international field:

You are to act as our sole legal advisors in the United States in all matters brought by Greece to the attention of the Security Council of the United Nations and all questions involved in the application of Greece for loans from the Export-Import Bank, and from the International Bank for Reconstructing and Development [the World Bank].

It is understood that you are not to be asked to undertake any work that may conflict in any way with the foreign policy of your government, and that you may reserve the right to withdraw at any time as our advisors if in your opinion any proposed course of conduct will conflict with the policy of your government.

You have stated it will not be satisfactory to answer isolated questions but that within the scope of your work you must be kept fully informed and consulted on all developments. Te embassy and our country will, of course, be free to follow your advice or not as we think best promotes the interests of Greece, but we fully understand and will respect your desire to withdraw as counsel in the event that your advice is not followed on any matter of importance.

Economou-Gouras agreed to pay Covington and Burling “in accordance with your customary scale of charges on a time basis,” and enclosed a $5,000 retainer. But the amount actually received by Covington and Burling for the case indicates Greece was not a normal commercial client. The fees for three years totaled only $52,263, a pittance for the amount of work done by the firm. The Iranians paid less than $50,000. Laylin, however, denies Covington and Burling got into the case on behalf of the State Department or any other Federal agency.

Three days later, on February 21, Secretary of State George C. Marshall directed Dean Acheson “to prepare the necessary steps for sending economic and military aid” to Greece; shortly thereafter, economically strapped Britain formally announced her intention to cease aid to Greece and Turkey within six weeks, and the chain of events which led to the establishment of the Marshall Plan was underway. Financially, Covington and Burling worked with state Department officials to lobby $400 million in economic and military aid through Congress, paying particular attention to Republican Senator Arthur Vandenberg. Diplomatically, Laylin and O’Brien wrote speeches for the Greeks to present both in the Security Council and in the General Assembly. The issue there, was support of guerrillas in Greece by Yugoslavia, Albania and Bulgaria. “I never spoke for Greece in the debates, but I sat in the audience or right behind the delegates, and I offered my thoughts,” Laylin says. “It was ninety-nine percent legal work.” A Soviet veto killed a U.S. resolution in the Security Council asking for cessation of external aid to the guerrillas, but with Laylin’s guidance Greece managed to push the same document through the General Assembly.

According to the record of U.N. debates, the U.S. and Greek position were indistinguishable during the entire episode. Yet Laylin attempts to draw a clear distinction during the entire episode. Yet Laylin attempts to draw a clear distinction between representing a foreign government – “which we never do” – and advising a foreign government. “I would not go to the State Department and say I am speaking for the government of Greece,” Laylin says. “I say I am advising the Greeks, and that the Prime Minister, or Foreign Minister has asked me to say “this is the position of Greece.” When working for a foreign client, Laylin says, “I make clear that I am American, and I am not going to do anything against the high policy of my government; if it ever gets to the point, I’ll withdraw. But that does not mean I am reluctant about telling people in the State Department that something I am advocating is a good thing for my client and the United States, too.”

The distinction carries with it an independence that Laylin says he would not have if he acted as an agent of a foreign client. “If a lawyer is acting as the representative of a foreign government and instructions come from the home office—the foreign ministry, or the chief executive officer- he has to follow them. This holds also for the Ambassador. But I come back to them and say, ‘I don’t think this is so good, and I don’t think you should do it.’

‘Let me give you an example, concerning a country I’ll have to leave nameless. This country was a beneficiary of a considerable amount of United States financial aid. It fell down in a deal involving a shipment of grain and was sued for certain demurrage charges for the shipping, something relatively simple relating to slowness of the paperwork. The case was pretty clear-cut against the country. The foreign ministry wanted to plead sovereign immunity and get out of the suit. It was silly. At most, the country would save $300,000 or so. But in doing so it would jeopardize literally tens of millions of future aid, because the United States government would be most upset.

“The Ambassador did not have guts enough to tell the foreign minister he was doing a stupid thing. We can speak candidly, for the worst thing they can do, if the foreign minister is offended, is to fire us. We are not dependent upon any one client- but the Ambassador is.” The country followed Laylin’s advice and paid the claim.

Laylin and other firm partners frequently- but non-specifically- speak of Dean Acheson’s “attractiveness” in obtaining new clients. Acheson rejoined the firm on January 21, 1953, the day after leaving the office of Secretary of State. He registered as an agent of a foreign government in only one instance: in August 1959, to aid the Venezuelan government in its successful attempt to extradite the ousted dictator Marcos Perez Jimenez for trial for fiscal corruption. But as a private citizen, Acheson spoke with the authority of a former Secretary of State on issues involving foreign governments which Covington and Burling had represented. He argued to the House Foreign Affairs Committee in 1970 against commercial strictures against South Africa, and he had friendly words for the junta government of Greece. And Acheson also did favors for Presidents. The public awareness of which is not harmful to a Washington Lawyer. President Kennedy used Acheson to pass word to the West German government he wanted a different German Ambassador in Washington, and the sooner the better, and to help through the NATO crisis precipitated by Charles de Gaulle’s withdrawal of France. President Johnson first utilized Acheson as an advisor on civil rights matters, and found him a faithful follower of his Vietnam policy. And President Nixon brought Acheson out of retirement in 1971 to help beat down an attempt by Senator Mike Mansfield to cut U.S. troop commitments to NATO.

Laylin is the Covington and Burling partner responsible for training new associates who intend to work in the international field. He looks for men with a background parallel to his own: an emphasis on political science, history, and government in undergraduate school, then a heavy load of international law courses. After his own graduation from Harvard Law, in 1928, Laylin interviewed at Sullivan and Cromwell, the big New York law firm. This was an era when one could make a serious case for the position that Sullivan and Cromwell outranked the State Department in the conduct of U.S. foreign policy. Both John Foster and Allen Dulles came through that law firm, and Laylin says John Foster Dulles “arranged for an appointment for me to work with Dwight Murrow, who was then our Ambassador in Mexico City. I learned much there about how business is done with foreign nations. It was invaluable.” (Covington and Burling which avoids hiring lawyers from the government actually scouts the Foreign Service for bright people). After two years with Marrow, Laylin returned to Sullivan and Cromwell; although he yearned for an independent practice, some homework was in order. “Talk all you want to about being an ‘international lawyer,’ Laylin says, “first you’ve got to learn to be a good lawyer. I handled all sorts of small cases; the principles are pretty much the same- how to develop a factual situation; what is important to your case; where to draw the issue; how to argue it.”

Notably while stating that Covington & Burling had its start as an arm of the U.S. State Department owing to its hiring by the government of Iran, his book states on p 50 that:

“But Covington and Burling’s longest time client has been Pakistan, for which it has served as permanent solicitor around the world. “We have advised them from the beginning, when they first came into existence in 1947.” The first case involved a dispute with India over water rights in the Indus River basin. Laylin prepared a World Court brief, but India refused to accept the court’s jurisdiction,. And what followed is why Laylin thinks international law is a fascinating way to make a living. “In international law,” he told me, “you about have to create your own forum. If you have a really hot dispute, they certainly are not going to arbitrate.” So Laylin began searching for someone to whom he could argue Pakistan’s cause. He learned that India had asked the World Bank for financing of a dam on its side of the Indes- one which would enable it to halt the flow of water to Pakistan. “I persuaded the World Bank and its directors to adopt a policy under which they would not lend money for structures on international rivers before the parties had agreed on an equitable distribution of water,” Laylin said. India protested the regulation, for she knew exactly why it was being proposed, and by what lawyer. But India also needed the dam, so she agreed to negotiate the settlement of the Indus issue with Pakistan. To tighten the lid on his victory, Laylin also succeeded in persuading the International Law Commission, a UN group, to pass a declaration on the rights of riparian states to waters from international waters.

Laylin worked fourteen years on the Indus River, and very profitably. Pakistan paid legal fees ranging from as high as $125,000 per year during the period, according to foreign agent registration statements filed by Covington and Burling with the Justice Department. Also remunerative is a commercial and political intelligence operation Covington and Burling runs for the Hong Kong General Chamber of Commerce. The firm periodically reports on “proposed legislation introduced in Congress and on matters raised with the Tariff Commission and with other agencies concerning imports in which the members of the Chamber and/or Federation [of Industries] may be interested.” In 1968 alone, Covington and Burling received $33,450 for its reports on tariff matters. But foreign representations carry with them the potential for nickel and dime cases a firm as august as Covington and Burling would normally shun- for instance, a lease dispute between Guinea and the New York World Fair Corporation, and a row between client Canada and Ghana over who was responsible for repairs to a nine-inch-tall brick fence and retaining wall separating their respective embassies.

And on p 53 it states:

“Actually, Laylin continued, Covington and Burling once had an even more intense internal dispute over representation of a nation at the other end of the political spectrum. “We were attorneys for Poland before it went Communist. On that occasion, we resigned at the insistence of one or two partners- not including Mr. Acheson, I might add. I was dead set against resigning. We were helping them prepare paperwork for an Export-Import Bank loan for construction of coal cars that would service all of Europe. The coal was badly needed, for this was the period of great economic stress, the years right after the war. The State Department was most upset by our decision, for Americans in Poland were having trouble obtaining counsel. I argued, but I lost, and we had to drop Poland.

Laylin was silent for a moment. “You know,” he finally continued, “some of these younger people don’t seem to understand the proper role of a lawyer. We are not here to save the worked, or to force our own ideas on someone else, but to represent clients.”

Poland went communist in 1947.

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