from London. “Illogical is not a strong

enough word. It is counter-logical. It could not have happened under the legal system of any other civilised jurisdiction.

We wanted it held in the state court.

They got it removed to the Federal court, where we won. Now, five years later, it is back to the court we wanted orig inally.” But he adds: “TBere is no question of the banks dropping the case now.”

But as the debt grows with interest, even if the banks were to win, how could the consortium ever get the Palauans to pay a dept which is already over twice the Republic’s prospective annual in come? “The Compact money, in due course,” Halerow answered, referring to the anticipated United States grants if and when Palau accepts the Compact of Free Association with the US and terminates its trusteeship.

The case has indeed seen a seeming reversal of views by the parties. Orig inally, in 1986, Palau’s lawyers had argued successfully in the state court that the Republic had “de facto” sovereignty so, under US Federal Law, the case should be heard in the Federal Courts without a jury. There, explains Cross, the judge ruled in 1988 that there had indeed been fraud and misrepresentation in the contracts in question, but that there was some evidence that the now deceased

Palauan President Remeliik had been warned of this in a telex from the US Department of the Interior. So Palau was ordered to pay the money plus accumu lated interest, and, pending appeal, lodge a bond for about half the amount.

At the appeal stage, the positions were reversed. The banks, happy with the verdict, had now reconciled themselves to Palau’s sovereignty, while Palau argued that, although in 1986 it had

‘After eleven plebiscites, the republic of Palau concedes its lack of sovereignty.

We are constrained to agree’

appeared to be heading for sover eignty, the refer endum later that year, and the Palau

Supreme Court

verdict on the Compact with the US, had put the whole process in re verse.

The Appeals Court ruled that “subject to the con trol of its internal and external affairs

by the United States, deficient in all the major attributes of statehood, its Com pact of Free Association remaining unapproved after seven plebiscites, the Republic of Palau concedes its lack of sovereignty. We are constrained to

agree.” □