This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS THE HAGUE 002328 
 
SIPDIS 
 
DEPARTMENT FOR IO/S - ABRAHAMS/JACOBSON, L - BETTAUER, 
L/UNA - KIINGI, L/PIL - KOVAR, L/CID - CLODFELTER 
 
E.O. 12958: N/A 
TAGS: ABUD AFIN AORC IBPCA
SUBJECT: PCA:  ADMINISTRATIVE COUNCIL ADOPTS BUDGET PROPOSAL 
 
REF: A. PCA DOCUMENT CAC 43.389 (JULY 16 2003) 
 
     ¶B. SANDERS-BETTAUER MEMO (AUGUST 25 2003) 
     ¶C. KAYE-VAN DEN HOUT LETTER (AUGUST 28 2003) 
 
¶1. (U) The Administrative Council of the Permanent Court of 
Arbitration (PCA) decided by consensus on Monday, September 
15, to adopt Secretary General Tjaco van den Hout's proposed 
budget (ref A) for the biennium 2004-2005.  Consistent with 
the USG position found in ref B, the Secretary General 
explained that the scale to be adopted would not be the 
OECD's so-called IOS scale for the coordinated organizations 
but rather the scale adopted by the OECD proper.  He 
underscored that PCA staff, unlike OECD staff, will not be 
receiving any of the benefits otherwise included in the OECD 
salary system.  Responding to previous discussions he held 
with major contributors and P-5 members, the Secretary 
General also confirmed that the PCA will remain committed to 
the user-pays approach of registry fees, whereby arbitrating 
parties pay the costs of registry services and other arbitral 
fees.  He also said that the prevailing fee schedule would 
continue to be the basis of such fees and that he would make 
sparing application of fixed-fee arrangements.  Finally, van 
den Hout noted that he is working to secure from the Dutch 
Government a continuation of its subsidy for purposes of 
renting space at the Peace Palace. 
 
¶2. (U) The PCA, which has labored under a budget designed at 
the beginning of the 20th Century, has seen its workload 
outgrow its budget over the past decade.  (NB: The PCA, the 
first of the international dispute settlement bodies founded 
in The Hague, was established during the First Hague Peace 
Conference in 1899.  It plays important roles in matters of 
concern to the USG, including as Appointing Authority for the 
neutral arbitrators of the Iran-U.S. Claims Tribunal, and has 
played a key role in arbitrations of sensitive state-to-state 
disputes, including the recent Ethiopia-Eritrea boundary 
claims.)  While Member State assessed contributions have 
remained steady, the PCA has relied on extrabudgetary 
funding, mostly through registry fees for arbitration 
services, to handle the increased workload, but the result 
was a small and poorly paid staff of high quality.  In the 
face of these difficulties and increased competition for 
legal talent from better-paying, higher-profile institutions 
such as the International Court of Justice, International 
Criminal Tribunal for the Former Yugoslavia and the 
International Criminal Court, van den Hout sought to put the 
PCA budget onto more stable footing, hoping in the process to 
prevent the likely attrition his small organization faced. 
The initial two proposals, beginning in March of this year, 
would have provided for extensive increases in the PCA budget 
and had the Administrative Council commit, in principle, to a 
budget scheme extending beyond 2005.  Few Member States were 
prepared to accept these early proposals.  As a result, van 
den Hout decided to pare back his proposal significantly. 
 
¶3. (U) The adopted budget proposal's main feature is its 
shifting of the majority of core staff positions to the 
regular budget, which is funded out of Member State assessed 
contributions.  Under the biennial budget, the staff funding 
will move to the regular budget in fiscal year 2004, and the 
salary scale of the OECD will be applied to the staff 
beginning in fiscal year 2005. 
 
¶4. (U)  Embassy legal officer, drawing on refs B and C, 
expressed the USG's acceptance of the PCA's budget proposal 
on the condition cited by the Secretary General (i.e., 
application of the OECD salary scale).  Emboff noted the 
USG's strong support for the PCA and further noted that its 
continuing support of the organization would depend upon the 
PCA's adherence to basic budgetary principles applied to IOs 
across the board.  In particular, emboff noted the importance 
of cost containment and a continued search for efficiencies 
in the budget, such as keeping in check discretionary 
operating expenditures with a view to further savings; the 
USG expectation that the PCA will look to apply surplus 
registry fees to the regular budget so as to alleviate the 
increase in assessments; and the continuing importance of 
zero nominal budget growth upon stabilization of the PCA 
budget. 
SOBEL