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Section I.—General Provisions (Art. 231 to 244)

Article 231.

The Allied and Associated Governments affirm and Germany accepts the responsibility of Germany and her Allies for causing all the loss and damage to which the Allied and Associated Governments and their nationals have been subjected as a consequence of the war imposed upon them by the aggression of Germany and her allies.

Note to VIII, 231

Owing to the German policy of interpreting this article as the “war-guilt article” and the immense literature produced around that thesis, the evolution of the language in the final text is given.

The Commission on Reparation of Damage of the preliminary peace conference submitted to the representatives of the United States, France, Great Britain, and Italy a paragraph reading as follows:

“The Allied and Associated Powers require that the Enemy States at whatever cost to themselves make compensation for all damages done to the civilian population of the Allied and Associated Powers, and to their property by the aggression of the Enemy States by land, by sea, and from the air, and also for all damages resulting from permanent injury to the health of any of their nationals and for all damages resulting from the acts of the enemy in violation of formal engagements and of the law of nations.”

This proposal had been evolved from memoranda submitted to the commission in February 1919, on behalf of the United States, Great Britain, France, Italy, Poland, and Serbia, none of which envisaged reparation for intangible damages. At the Council of Four meeting on April 5, 1919 ( Foreign Relations, The Paris Peace Conference, 1919, v, 22) the paragraph was adopted after discussion with two changes. The sentence now began: “The Allied and Associated Powers require and the Enemy States accept that”, etc. The last clause, “and for all damages” etc., was omitted as being inconsistent with the thesis of dealing only with material damages.

The reparation clauses adopted on the 5th were revised by Thomas W. Lamont, John Maynard Keynes, and Louis Loucheur for consideration by the Council of Four on April 7. At that meeting the language of what became articles 231 and 232 was discussed together and clause 1 was approved in this form: [Page 414]

“The Allied and Associated Governments affirm and the Enemy States accept the responsibility of the Enemy States for causing all the loss and damage [to] which the Allied and Associated Governments and their nationals have been subjected as a consequence of the war imposed upon them by the aggression of the Enemy States” ( ibid., p. 44).

This language closely corresponds with that of the pre-armistice note of November 5, 1918. It was perfectly clear from the discussion that this form was chosen simply to establish the potential extent of responsibility in clause 1 (art. 231) and to define its limitations in clause 2 (art. 232), which was put in “to justify to the French and British peoples their acceptance of less than the whole cost of the war”. On April 23 the Council of Four went over the reparation decisions with special reference to their incorporation in the treaty of peace with Germany. A last change eliminating the phrase “Enemy States” and substituting “Germany” or “Germany and her Allies” was then made ( ibid., p. 165). This final text was carried over literally into the treaties of peace with Austria and Hungary.

The German position in the peace negotiations was that the Allied and Associated Powers had undertaken to grant them a peace on the basis of the 14 points of President Wilson of January 8, 1918 and the subsequent elucidations of February 11, July 4, and September 27. In the last note to the Germans before the granting of the armistice, that of November 5, 1918 ( Foreign Relations, 1918, Supp. 1, i, 469), Germany was told that the Allied Governments understood “that compensation will be made by Germany for all damage done to the civilian population of the Allies and their property by the aggression of Germany by land, by sea and from the air.”

Article 231 was regarded by the victors as establishing that basis for the assessment of reparation. The question of responsibility for the war, as distinguished from the damage resulting from it, was considered elsewhere in the peace conference and the conclusions were exhibited in part VII, Penalties, of the treaty. Those provisions were narrowed down to the responsibility of individuals and afforded slight ground for argument on the broad question. Article 231 was a general statement, modified by article 232.

Notwithstanding its origin in the note of November 5, 1918 the German Observations on the Conditions of Peace found in the article an interpretation for what came to be known by the Germans as the “Schuldartikel”, the article on guilt. How this came about is traceable. [Page 415]The Conditions of Peace were handed to the Germans on May 7, 1919 in French and English official texts. The German delegation produced a German version of article 231 for the intimate study of their specialists and for extensive distribution at home, though the peace conference did not release that draft text for publication among their own people. That German version was in general highly accurate. The German text of article 231, however, read as follows:

“Die alliierten und assoziierten Regierungen erklären, und Deutsch-land erkennt an, dass Deutschland und seine Verbündeten als Urheber [italics added] für alle Verluste und Schäden verantwortlich sind, die die alliierten und assoziierten Regierungen und ihre Staatsangehörigen infolge des ihnen durch den Angriff Deutschlands und seiner Verbündeten aufgezwungenen Krieges erlitten haben.” (Reichsgesetzblatt, 1919, 687, at 985.)

This version reflects the German view in the phrase “als Urheber für alle Verluste und Schäden verantwortlich” (as author responsible for all losses and damages), which in the official English reads “responsibility … for causing all the loss and damage” and in the official French: “responsables, pour les avoir causés, de toutes les pertes et tous les dommages”.

The true significance of the language used is, however, not to be found exclusively in a particular phrase. The meaning is in the whole sentence, read as a unit, and that meaning, as indicated by the intention of its originators, is confirmed by the use of the identical wording, mutatis mutandis, in the Austrian and Hungarian treaties of peace. The official German version of article 177 of the Austrian treaty (Staatsgesetzblatt, 1920, 1080) follows that of Germany as quoted. The Hungarian version (Márkus Dezsö, Magyar Törvénytár Alaptotta, 239) of article 161 of the Hungarian treaty varies slightly; Hungary acknowledges “Hungary and its allies as the causers of the losses and damages”. Neither the Austrian nor Hungarian Governments nor peoples found “guilt” instead of “responsibility” in the obligation assumed. The “guilt” interpretation was peculiar to Germany and the Germans.

The German version reflected a preoccupation with “war guilt” and a disposition to combat the conclusions of the Commission on the Responsibility of the Authors of the War and on Enforcement of Penalties, whose report had been published in Germany. Article 231 was clearly intended by the Allied and Associated Powers to state [Page 416]the legal responsibility for reparation, the actual extent of which was indicated by article 232.

On May 13 the German delegation protested against article 231 on the ground that the obligation to pay reparation depended on the German acceptance of the “Lansing Note” of November 5, 1918, “independently of the question of responsibility for the war” ( Foreign Relations, The Paris Peace Conference, 1919, v, 727). To this the Allies replied on May 20 that in the Lansing note the obligation to make reparation was based on “Germany’s aggression by land, sea and air” and that Germany had not at the time objected to this statement, which it thereby recognized as “well founded” ( ibid., p. 742).

In the “Observations” of May 29 the German Delegation accepted the obligation to pay for damages sustained by the civilian population in occupied parts of Belgium and France on the ground that Germany had brought the terrors of war on these areas by the violation of Belgian neutrality, but denied any obligation as regards Italy, Montenegro, Serbia, Roumania, and Poland, for there was “no question of an attack by Germany contrary to International Law” ( ibid., vi, 849). Germany also accepted responsibility for Belgian loans from the Allies, but asserted that the Allied claims went beyond the categories set forth in the Lansing note, especially the losses to civilians outside the occupied territories, to the states themselves, to military persons, and the damage done by Germany’s allies. If the Allies insisted on these terms, Germany would present counter-claims and an impartial International Court of Arbitration would become necessary.

The Allied and Associated Powers did not repudiate the German interpretation of article 231, because they did not regard it as important, significant, or politically wise to deny an implication which they believed to be true, even though not intended.

The German Government, having identified for itself a clause which imputed “war guilt” to them, confirmed the identification by its note of June 22, 1919 accepting the treaty with certain exceptions. The note transmitted a declaration, to become an “integral part of the treaty”, which stated that Germany would sign the treaty “without, however, recognizing thereby that the German people was the author of the war, and without undertaking any responsibility for delivering persons in accordance with Articles 227 to 230.” This formal draft of declaration did not mention article 231 but the full note contained this paragraph: [Page 417]

“Germany further lays the greatest emphasis on the declaration that she cannot accept Article 231 of the Treaty of Peace, which requires Germany to admit herself to be the sole and only author of the war, and she does not cover this article by her signature. It consequently follows without further argument that Germany must also decline to recognize that the burden should be placed upon her on the score of the responsibility for the war which has unjustly been laid at her door.”

However the proposed declaration was phrased, the Germans were taking articles 227 to 231 very seriously as “points of honor”. The cabinet on June 18 had voted 8 to 6 for accepting them and resigned on the 19th in consequence of adverse opinion in the parties. On June 20 the parties of the National Assembly expressed their opinions. The German National Assembly heard the new premier on June 22 and voted approval of signing the treaty with the reservation by 237 to 138 (Verhandlungen der verfassunggebenden deutschen Nationalversammlung, 327, 1115C, 1135A), after which the cabinet received a vote of confidence, 235 to 89.

The Allied and Associated Powers promptly informed the German representative that they “must require of the German representatives an unequivocal decision as to their purpose to sign and accept as a whole, or not to sign and accept, the Treaty as finally formulated.”

The National Assembly met at 2:56 p.m., June 23, to hear that note read. Herr Bauer, the premier, was applauded when he told the deputies that Germany was defenseless but not without honor (wehrlos ist aber nicht ehrlos), and then he added that they must sign. He had attributed to the Allied and Associated Powers the intention of exacting from Germany a verbal recognition of guilt (Die Entente … will uns das Schuldbekenntnis auf die Zunge zwingen). On the understanding that the decision would not affect the vote of the 22d, the National Assembly by a “great majority” found that the Government “after as before” the present debate remained empowered to sign (ibid., 1141 B). The National Assembly recessed from 3:15 to 4:15 p.m., in which interval the government sent to Paris the following note:

“It is apparent to the Government of the German Republic, in consternation at the last communication of the Allied and Associated Governments, that these Governments have decided to wrest from Germany by force acceptance of the peace conditions, even those [Page 418]which, without presenting any material significance, aim at divesting the German people of their honor. No act of violence can touch the honor of the German people. The German people, after frightful suffering in these last years, have no means of defending themselves by external action. Yielding to superior force, and without renouncing in the meantime its own view of the unheard-of-injustice of the peace conditions, the Government of the German Republic declares that it is ready to accept and sign the peace conditions imposed.”

Whatever the situation was before, after this episode the German mind was set on the matter of “war guilt” and its association with article 231. The article itself was identic in the treaties of peace with Austria and Hungary, which were jointly liable under it; neither of their governments or peoples laid stress on the German interpretation. Nor did any of the three governments employ the interpretation to avoid responsibility for reparation obligations.

Following the luncheon at Thoíry of Aristide Briand, Premier of France, and Gustav Stresemann, Foreign Minister of Germany, in September 1927, the high hopes for an increasing friendliness between their two countries were dashed by an address of Stresemann to the German residents at Geneva in which he reiterated the “war-guilt” complaint in such terms that the impression was given that the rapprochement was incidental to the satisfaction of German sensibilities on that matter.

In November 1929, while the negotiations for putting the New (Young) Plan into force were under way, the Nationalist Party obtained sufficient signatures to a petition to bring before the Reichstag a bill calling upon the German Government to-notify all foreign states “that the extorted acknowledgement of war guilt in the treaty of Versailles is contrary to historical truth, is based on false premises and is not binding in international law.” The Reichstag on November 30 rejected the proposal by a vote of 317 to 82 (Verhandlungen des Reichstags, iv. Wahlperiode 1928, 426, 3374; Anlage nr. 1429, ibid., 438). The party thereupon sought to validate the proposal by a plebiscite, which failed on December 22. Only 13.8 percent of the registered voters voted. Of the 5,828,082 who did vote only 337,320 were recorded as opposed. Nevertheless, the government statement opposing passage of the bill had said: “Every German Government has rejected the unilateral guilt sentence (Schuldspruch) of the treaty of Versailles in formal declarations and with progressive successes has used the available possibilities of setting the world [Page 419]straight concerning the true causes of the war” (Anlage nr. 1429, ibid., 438).

On January 30, 1937 the Chancellor and Führer expressed himself as follows:

“Fourth: Above all I solemnly withdraw the German signature from that declaration which was extracted under duress from a weak Government, acting against its better judgment—namely, the declaration that Germany was responsible for the war.”

The Mixed Claims Commission, United States and Germany, in its Administrative Decision No. 2, November 1, 1923 stated:

“Article 231 of the Versailles Treaty at most amounts to no more than an acceptance by Germany of the affirmance by the Allied and Associated Governments of Germany’s responsibility for all loss and damage suffered as a consequence of the war—a moral responsibility. Germany’s financial responsibility for losses occurring during belligerency is limited and clearly defined in the succeeding Article and the Annex pertaining thereto and other provisions of the Treaty.”

JOINT LIABILITY

The joint liability resulting from “the responsibility of Germany and her Allies” was apportioned by articles 1 and 2 of the Spa agreement of July 16, 1920 (Appendix, p. 851). Receipts from Germany were to be distributed by percentages of the total (see art. 237).

Article 2 of the Spa agreement of July 16, 1920 provided:

“The aggregate amount received under the head of reparation from Austria, Bulgaria and Hungary, together with the sums received from Italy, the Czecho-Slovak State, Roumania and the Serb-Croat-Slovene State under the agreements made on September 10 and December 8, 1919, shall be divided as follows:—

  • “(a) One-half shall be divided between the Allied Governments mentioned in article 1 in the proportion fixed by the said article.
  • “(b) Of the other half, Italy shall receive 40 per cent., and 60 per cent. is reserved for Greece, Roumania, the Serb-Croat-Slovene State, and for other Powers entitled to reparation which are not signatories of this agreement.”

The report of the Committee of Experts of June 7, 1929 in section 145 states: [Page 420]

“The acceptance of this plan necessarily involves the dissolution of the joint liability of Germany on the one side with Austria, Hungary and Bulgaria on the other side for reparation, and therefore finally abolishes every obligation present or future in either direction which may result between these powers from this joint liability.”

Article I of the agreement with Germany of January 20, 1930 (104 League of Nations Treaty Series, p. 243) provides that the report of June 7, 1929, the agreement itself, and the transitional protocol of August 31, 1929, all of which constituted the New Plan, were “definitely accepted as a complete and final settlement, so far as Germany is concerned, of the financial questions resulting from the War.”

It remained to cancel the joint liability of Austria, Bulgaria, and Hungary with Germany under the articles of their treaties of peace identic with article 231 of the treaty with Germany. Agreements of January 20, 1930 with each of the three, one with Czechoslovakia, and one relating to the liberation debt (ceded properties) of Austria, Bulgaria, and Hungary, effected the desired cancelation.

Liberation debt. An international agreement relating to the liberation debt between Belgium, the United Kingdom, Canada, Australia, New Zealand, the Union of South Africa, India, France, Greece, Italy, Japan, Poland, Portugal, Czechoslovakia, Rumania, and Yugoslavia was signed at The Hague on January 20, 1930 and all ratifications were deposited on May 11, 1932 (United Kingdom, Treaty Series No. 25 (1932), Cmd. 4146). This agreement was a final and complete discharge of the liabilities of the signatories which were debtors in respect of properties ceded in virtue of the treaties of peace with Austria, Bulgaria, and Hungary and of liberation debts arising out of the agreements of September 10 and December 8, 1919 (see part II, Nos. 5 and 6). The 10,000,000 gold marks annuity payable by Czechoslovakia was to be distributed as follows:

Gold Marks
France 3,187,854
Great Britain 1,384,519
Italy 3,146,632
Belgium 418,816
Japan 51,920
Portugal 51,920
Greece 1,758,339
[Page 421]

Yugoslavia was to receive the net payments currently due from Hungary and Greece, the liquid assets in hand from the Bulgarian account, plus 5,000,000 gold francs paid on April 1, 1930. After these adjustments Bulgarian and Hungarian payments were to be distributed up to 1943 as follows: Greece, 76.73 percent; Rumania, 13 percent; Czechoslovakia, 1 percent; Yugoslavia, 5 percent (Bulgarian) and 2 percent (Hungarian); other Spa agreement creditors, 4.27 percent (Bulgarian) and 7.27 percent (Hungarian).

Austria. The agreement between Austria, Belgium, Great Britain, Canada, Australia, New Zealand, the Union of South Africa, India, France, Greece, Italy, Japan, Poland, Portugal, Rumania, Czechoslovakia, and Yugoslavia, which entered into force June 28, 1930 (104 League of Nations Treaty Series, p. 413), finally discharged all Austrian financial obligations arising under the armistice or the treaty of peace by reason of the payments, deliveries, and cessions made after that date, subject to the execution of any arrangements then in force.

The first charge on Austrian assets and revenues created by article 197 of the treaty of peace (German art. 248) ceased to be operative. Relations with the Reparation Commission terminated and all outstanding claims and counterclaims were reciprocally waived.

Bulgaria. The agreement between Bulgaria and the same states entered into force December 27, 1930 (112 League of Nations Treaty Series, p. 361). Creditors waived payments under tranche B of the agreement of March 21, 1923 (117 British and Foreign State Papers, p. 534). The United Kingdom, France, and Italy, the creditor parties to that agreement, waived outstanding claims for armies of occupation costs. Tranche A of the 1923 agreement called for payments of 2,255,766,800 gold francs from October 1, 1923 to April 1, 1983, of which some 56,000,000 gold francs had been paid according to schedule. Tranche A of the 1923 agreement was superseded by a Schedule of Payments requiring total service of 420,200,000 gold francs in graduated annuities from April 1, 1930 to March 31, 1966 (see table, p. 412). Claims of various kinds under the treaty of peace were waived or canceled. The trust agreement between the Bank for International Settlements and the creditor governments came into force on April 28, 1931. A protocol of January 21, 1932 (United Kingdom, Bulgaria No. 1 (1932), Cmd. 4071) caused the payments from the instalment due on September 30, 1931 to be reserved under the Hoover moratorium; further, part III of the Lausanne agreement of July 7, 1932 recommended setting up a [Page 422]committee to bring “non-German reparations” and cognate questions into a general settlement. Pending the work of the committee for such a settlement, execution of payments was reserved until December 15, 1932 and by successive extensions until June 15, 1936.

Hungary. Hungarian reparation in 1930 was being met within the terms of decision 2797, February 21, 1924, of the Reparation Commission which (1) excepted specified assets in view of the Hungarian reconstruction loan of 250,000,000 gold crowns issued under League of Nations auspices in virtue of the protocols of March 24, 1924 (25 League of Nations Treaty Series, pp. 423, 427) and (2) laid down the charges under article 180 of the treaty of peace for 20 years. According to this schedule Hungary made payments equivalent to 880 tons of coal per working day for 1924–26 and annual payments thereafter beginning at 5,000,000 gold crowns in 1927 and scaling up to 14,000,000 for 1942 and 1943, a total of 179,000,000 gold crowns. The sum due in 1930 was 7,000,000 gold crowns (League of Nations, The Financial Reconstruction of Hungary, doc. C.583.M221.1926, II. 54, p. 197).

Hungarian payments under this decision of the Reparation Commission were credited as follows by a procès-verbal fixing the final accounts agreed to on March 5, 1930 (Annex 4075B; file 464.00 R 29/93):

Gold crowns
1924 8,164,639.76
1925 7,070,630.24
1926 5,728,901.58
1927 4,393,991.37
1928 906,165.87
1929 5,268,384.65
1930 (Jan.–June) 8,520,164.22
40,052,877.69
Due July 1930–Dec. 31, 1943 159,947,122.31

The four “inseparably connected” agreements between Hungary and the same 16 creditor states were initialed at The Hague on January 20, 1930, signed at Paris on April 28, 1930, and entered into force April 9, 1931 (121 League of Nations Treaty Series, p. 69). Except for obligations in respect of pre-war public debts, judgments by the Mixed Arbitral Tribunals, and article 186 of the treaty of peace, the annuities were to be a “complete and final settlement of the charges incumbent” on Hungary, which waived any claims it might have. The annuities varied in 1930–43 but were constant [Page 423]at 13,500,000 gold crowns from January 1, 1944 to 1966 inclusive, aggregating 475,500,000 gold crowns (see table p. 412). The trust agreement between the Bank for International Settlements and the creditors came into force on May 6, 1931, and the instalments due through June 30, 1931 were paid. The London protocol of January 21, 1932 (United Kingdom, Hungary No. 1 (1932), Cmd. 4052) suspended the payments under the Hoover moratorium, and part III of the Lausanne agreement of July 7, 1932 operated to reserve the execution of payments until December 15, 1932 and afterward.

Agreements II and III dealt with the establishment and use of the Agrarian Fund “A”, which met a special situation. Article 250 of the treaty of peace with Hungary provided that “the property, rights and interests of Hungarian nationals or companies controlled by them situated in the territories which formed part of the former Austro-Hungarian Monarchy”, shall be restored to their owners with some exceptions, freed from any measure “of retention or liquidation” or “of transfer, compulsory administration or sequestration”. The system of Magyar estates which the succession states of Czechoslovakia, Rumania, and Yugoslavia found on their newly acquired territory was subjected to breaking up in accordance with salutary policies of agrarian reform, which, however, were quite divergent in character in the three states. Between Hungarian present and former owners and the three states very complicated relations resulted. In Agreement II all claims of this kind by Hungarian nationals pending before the Mixed Arbitral Tribunals were to be pursued against Agrarian Fund “A” instead of against Czechoslovakia, Rumania, or Yugoslavia. The agreement provided in detail for the handling of claims and set time-limits upon filing them. The Mixed Arbitral Tribunals, as organized for the purpose, were not to interpret article 250, on which the four states nearly concerned reserved their legal positions.

Agreement III concerned the organization and working of Fund “A”, the capital of which was fixed at 219,500,000 gold crowns (.304878 grams of fine gold). Annual contributions to the fund in the early period (1931–44) were for Rumania, 500,000 gold crowns and for Yugoslavia, 1,000,000 gold crowns. Czechoslovak agrarian reform was well advanced, and its contributions were to be at the rate of 226 gold crowns per cadastral jugar of the land for which indemnity was due, of which a gross 726,000 jugars in four categories were distinguished. Payments by Hungary were to constitute the shares of Belgium, the British Empire, France, Italy, [Page 424]Japan, and Portugal under Agreement I. Belgium, the British Empire, France, and Italy were to contribute annuities equal to their receipts from Bulgaria. Further, the British Empire, France, and Italy were to contribute 800,000 gold crowns in 1931 and 1932 and 3,600,000 gold crowns thereafter until 1944.

Agreement IV, between France, the United Kingdom, Italy, Czechoslovakia, Rumania, and Yugoslavia, concerned the constitution of Fund “B”, which was to liquidate claims with respect to Hungarian nationals arising out of nationality provisions (art. 63), state property (art. 191), and private property (art. 250) of the Hungarian treaty of peace. The capital of the fund was to be contributed up to December 31, 1943 by Great Britain, 600,000 gold crowns; France and Italy, 1,200,000 gold crowns each; for the 23 years 1944—66 Hungary was to pay into it out of its annuity debt 7,400,000 gold crowns annually. Surpluses in Fund “A” would cause transfers to Fund “B”, increased capital in which would be distributed between Czechoslovakia, Rumania, and Yugoslavia.

Both funds were to be administered by Managing Committees. They were established as juridical personalities at Basel under Swiss law by international conventions concluded at Bern August 21, 1931 and in force for 15 years from December 28, 1931 (United Kingdom, Treaty Series No. 8 (1932), Cmd. 4037). With Switzerland, the United Kingdom, France, Hungary, and Italy were parties to the conventions establishing Fund “A”; the United Kingdom, France, Italy, Czechoslovakia, Rumania, and Yugoslavia were parties to the convention on Fund “B”.

Czechoslovakia, Rumania, and Yugoslavia signed an agreement regarding the allocation of Fund “B” at Paris on April 25, 1930 and brought it into force by exchange of ratifications on February 8, 1932 (121 League of Nations Treaty Series, p. 149). The three states of the Little Entente agreed to divide the fund into three equal parts, transfers due to the initiative of each remaining its exclusive property. General transfers were to be divided equally and any share not taken by one was to go to the other two. Any undivided balance was to be paid to France, Great Britain, and Italy.

Czechoslovakia. The agreement between Czechoslovakia and the same creditor states, signed at The Hague on January 20, 1930, entered into force on July 11, 1930 (113 League of Nations Treaty Series, p. 389). It was a complete and final settlement of the Czechoslovak debt arising out of the agreement of September 10, [Page 425]1919 (see p. 808) to the states having a credit in reparation under the treaties of peace. The final instalment of 37 annuities of 10,000,000 gold marks was payable January 1, 1966 (see table, p. 412).

The trust agreement between the Bank for International Settlements and the creditors came into force on August 1, 1931. The Hoover moratorium suspended payments in accordance with the London protocol of August 11, 1931.

Article 232.

The Allied and Associated Governments recognize that the resources of Germany are not adequate, after taking into account permanent diminutions of such resources which will result from other provisions of the present Treaty, to make complete reparation for all such loss and damage.

The Allied and Associated Governments, however, require, and Germany undertakes, that she will make compensation for all damage done to the civilian population of the Allied and Associated Powers and to their property during the period of the belligerency of each as an Allied or Associated Power against Germany by such aggression by land, by sea and from the air, and in general all damage as defined in Annex I hereto.

In accordance with Germany’s pledges, already given, as to complete restoration for Belgium, Germany undertakes, in addition to the compensation for damage elsewhere in this Part provided for, as a consequence of the violation of the Treaty of 1839, to make reimbursement of all sums which Belgium has borrowed from the Allied and Associated Governments up to November 11, 1918, together with interest at the rate of five per cent. (5%) per annum on such sums. This amount shall be determined by the Reparation Commission, and the German Government undertakes thereupon forthwith to make a special issue of bearer bonds to an equivalent amount payable in marks gold, on May 1, 1926, or, at the option of the German Government, on the 1st of May in any year up to 1926. Subject to the foregoing, the form of such bonds shall be determined by the Reparation Commission. Such bonds shall be handed over to the Reparation Commission, which has authority to take and acknowledge receipt thereof on behalf of Belgium.

[Page 426]

Note to VIII, 232

DETERMINATION OF DATES OF BELLIGERENCY, INCLUDING THOSE DETERMINED BY THE REPARATION COMMISSION

Country Date of commencement Special findings
America, United States of Apr. 6, 1917
Australia Aug. 4, 1914
Belgium Aug. 4, 1914
Bolivia Apr. 13, 1917 (breach of relations); no period of belligerency found by Reparation Commission
Brazil Oct. 26, 1917
Canada Aug. 4, 1914
China Aug. 14, 1917
Cuba Apr. 7, 1917
Czechoslovakia Oct. 28, 1918 (Reparation Commission)
Ecuador Dec. 9, 1917 (breach of relations)
France Aug. 3, 1914
Great Britain Aug. 4, 1914
Greece June 27, 1917 (Reparation Commission)
Guatemala Apr. 30, 1918
Haiti no period found by Reparation Commission; by the Haitian Government, July 12, 1918
Honduras June 19, 1918
India Aug. 4, 1914
Italy May 24, 1915 (Austria-Hungary)
Aug. 28, 1916 (Germany)
Japan Aug. 23, 1914
Liberia Aug. 4, 1917
New Zealand Aug. 4, 1914
Nicaragua May 8, 1918
Panama Apr. 10, 1917
Peru Oct. 8, 1917 (breach of relations); no period of belligerency found by Reparation Commission no period found by Reparation Commission; see art. 87
Poland
Portugal Mar. 9, 1916 (Reparation Commission)
Rumania Aug. 28, 1916
Russia Aug. 1, 1914
Serbia (Serb-Croat-Slovene State) Aug. 6, 1914
Siam July 22, 1917
South Africa, Union of Aug. 4, 1914
Uruguay Oct. 7, 1917 (breach of relations)
[Page 427]

The Belgian war debt incurred up to November 11, 1918 was fixed by the Reparation Commission as of May 1, 1921, at the equivalent of 5,612,385,422.54 gold marks. The reimbursement of this debt was allocated in execution of article 4 of the Finance Ministers’ Agreement of January 14, 1925 as follows: France 45.891 percent; Great Britain 39.407 percent; Belgium, on account of its debt to the United States, 14.702 percent.

The United States was a party to the 1925 agreement which laid the ground for the conclusion of its debt-funding agreement with Belgium on August 18, 1925, approved by an act of Congress April 30, 1926. In it the pre-armistice indebtedness of Belgium to the United States was funded at $171,780,000 payable in annual instalments without interest over a period of 62 years, the first payment falling due June 15, 1926. The annuities fluctuated between $1,000,000 and $2,900,000 per annum. The debt-funding agreement also provided for Belgium’s direct payment of post-armistice indebtedness which was funded at $246,000,000 with interest at 3 to 3½ percent over the 62-year period. The agreement was subject to the moratorium of June 10, 1932 and payments on both parts of it went into default from December 15, 1932. This debt was included in the agreement, relating to the “concurrent memorandum”, signed at The Hague January 20, 1930 (see p. 399).

At the closing of accounts, January 20, 1930, the Reparation Commission had credited Belgium with receipts of 2,228,247,533 gold marks. Belgium’s priority, in addition to its 8 percent of receipts under article 237, was defined by article 5 of the agreement between Belgium, France, Great Britain, Italy, Japan, and Portugal for the settlement of certain questions as to the application of the treaties of peace and complementary agreements with Germany, Austria, Hungary, and Bulgaria, signed at Spa, July 16, 1920 (United Kingdom, Reparation, Agreement between the Allies for the Settlement of Certain Questions … 1922, Cmd. 1615); it was redefined by article 6 of the Finance Ministers’ Agreement of January 14, 1925, which envisaged the cessation of the priority except for the war-debt service. As a result of these arrangements Belgium received up to June 30, 1923 nearly a third of the sums distributed, 1,730,126,000 gold marks out of 5,494,782,000 gold marks.

During the German occupation of Belgium, the German authorities issued marks for circulation as currency in Belgium and after the resumption of Belgian control and the withdrawal of the marks by the Belgian Government, their value remained a charge on that [Page 428]government. The question of German reimbursement was handled independently of reparation and the Belgian and German Governments attempted repeatedly after 1920 to reach a settlement. Throughout part of these negotiations the German Government attempted to secure a credit for the renunciation of Eupen and Malmédy. Against the obligation, which was set by the Belgians at 390,000,000 marks, a final settlement of claims was effected by an agreement between Belgium and Germany, signed on July 13, 1929 (104 League of Nations Treaty Series, p. 201), made in consequence of the report of the Committee of Experts, June 7, 1929 (Young Plan) respecting reparation. By this arrangement Germany was to pay annuities to Belgium amounting to 607,600,000 Reichsmarks from 1930 to 1966.

Article 233.

The amount of the above damage for which compensation is to be made by Germany shall be determined by an Inter-Allied Commission, to be called the Reparation Commission and constituted in the form and with the powers set forth hereunder and in Annexes II to VII inclusive hereto.

This Commission shall consider the claims and give to the German Government a just opportunity to be heard.

The findings of the Commission as to the amount of damage defined as above shall be concluded and notified to the German Government on or before May 1, 1921, as representing the extent of that Government’s obligations.

The Commission shall concurrently draw up a schedule of payments prescribing the time and manner for securing and discharging the entire obligation within a period of thirty years from May 1, 1921. If, however, within the period mentioned Germany fails to discharge her obligations, any balance remaining unpaid may, within the discretion of the Commission, be postponed for settlement in subsequent years, or may be handled otherwise in such manner as the Allied and Associated Governments, acting in accordance with the procedure laid down in this Part of the present Treaty, shall determine.

Note to VIII, 233

In the covering letter to the comments by the German delegation on the Conditions of Peace of May 29, 1919, the president of the delegation stated: “Germany is ready to make the payments incumbent [Page 429]upon her according to the peace program agreed upon, up to the maximum sum of 100,000,000,000 marks gold, of which 20,000,000,000 marks gold are to be paid by May 1, 1926, the other 80,000,000,000 marks gold in annual sums without interest.”

A total amount payable by Germany was, however, not stated in the treaty. This was due to disagreement at Paris among the creditors as to the amount, and to the contention that the total should be fixed with relation to the damage, then undetermined, for which reparation was claimed.

An early function of the Reparation Commission was therefore to secure the data upon which to determine the amount. The commission was not permitted to pursue this duty entirely on its own initiative. While the treaty did not set a total figure, section 12 (c), annex II, of part V, forecast the eventual issuance of bonds in the amount of 100,000,000,000 marks in three series of 20, 40, and 40 billion marks respectively. At a conference held at Boulognesur-Mer in June 1920 the Allied premiers tentatively agreed to ask for 269,000,000,000 gold marks, which with interest was calculated to involve an eventual payment by Germany of 400,000,000,000 gold marks. The Germans were entitled to be heard by the Reparation Commission and established at Paris a body known as the Kriegslastenkommission, one of whose initial activities was to figure out the present value of the proposals coming to their attention from Allied sources. For several months there was a lively competitive trade in divers present values of reparation proposals. On the same offer the Germans, French, and British invariably found different present values. One result of this debate on present values was that the creditors did not themselves reach an agreement as to the amount to be demanded from Germany.

Belgium, France, Great Britain, Italy, and Japan sent delegates to a conference at Paris from January 25 to 29, 1921 at which they reverted to their Boulogne plan and on the 29th signed an agreement which called for 42 (instead of 30) annuities beginning at 2,000,000,000 gold marks and rising to 6,000,000,000 from May 1, 1932 to May 1, 1963. Further occupation of German territory was contemplated as a sanction. The French Chamber of Deputies approved ratification of the agreement by a vote of 395 to 83 on February 9.

Meantime the Reparation Commission was engaged in securing claims from the creditors and in determining the standards by which claims were to be judged fit for acceptance. The commission closed its receipt of claims on February 12, 1921. On the basis of the exchange [Page 430]of that day, the claims submitted by France, Great Britain, Italy, Belgium, Japan, Serb-Croat-Slovene State, Rumania, Portugal, Greece, Brazil, Czechoslovakia, Siam, Bolivia, Peru, Haiti, Liberia, Cuba, Poland, and the European Commission of the Danube represented a total of 266,000,000,000 marks. The German Government contested some amounts. On April 27, 1921 the Reparation Commission unanimously decided that “the amount of damages for which reparation is due” was 132,000,000,000 gold marks.

The creditor states and Germany met in conference at London on March 1 to 7, 1921 and the creditors continued in session there until after the Separation Commission adopted the Schedule of Payments on May 5. At the March conference the German representatives made counterproposals to the January agreement, without result. On March 3 the president of the conference announced that it “must act upon the assumption that the German Government are not merely in default, but deliberately in default; and unless we hear by Monday [March 7] that Germany is either prepared to accept the Paris decisions or to submit proposals which will in other ways be an equally satifactory discharge of her obligations”, the conference would take the following course:

1. To occupy the towns of Duisburg, Ruhrort, and Düsseldorf on the right bank of the Rhine;

2. To require their nationals to pay a certain proportion of all payments due to Germany on German goods to their several governments, on account of reparation;

3. To acquire the duties collected by the German customs on the external frontiers of occupied territories.

Germany failed to meet the terms and was thus in default. The military occupation, which continued until September 30, began on March 8, the troups in occupation of Düsseldorf, Duisburg, and Ruhrort consisting of 10,000 French and 5000 Belgian infantry and two squadrons of British cavalry. On March 12 the German Reichstag approved the foreign minister’s protest against this action by a vote of 268 to 49; on March 17 the Chamber of Deputies gave the French Prime Minister a vote of confidence, 491 to 66.

The special customs regime included the occupied zones and territory west of a line described as follows:

  • “(1) The Rhine from its entry into Holland up to Lohausen (north of Düsseldorf) including the ports of Schwelgen, Ruhrort and Duisburg;
  • “(2) A bridgehead around Düsseldorf, bounded by Lohausen, Ratingen, and Hubbelrath and Erkrath both inclusive;
  • “(3) The bridgehead of Cologne;
  • “(4) The Rhine between the two bridgeheads of Cologne and Coblenz;
  • “(5) The bridgeheads of Coblenz and Mainz joined between Diez and Walsdorf by following the North Eastern boundaries of the Kreise of Diez and Langenschwalbach;
  • “(6) The Rhine from the Mainz bridgehead to the Alsatian frontier.”

The legislation took the pattern of the German Reparation (Recovery) Act (11 & 12 Geo. V, c. 5), March 24, 1921, which, after a Treasury Minute of May 17, 1921, authorized retention of 26 percent of the value of German goods consigned from Germany to the United Kingdom.

The Conference of Ambassadors on April 7 instructed the Inter-Allied Rhineland High Commission to take appropriate measures to make the decision effective. The principal ordinances issued by the commission were—

No. 77, regarding the making of special regulations, Coblenz, March 8, 1921, Official Gazette, 1921, p. 65;

No. 81, regulating the customs organization of the occupied territories, Coblenz, April 8, 1921, ibid., p. 83;

No. 82, regarding the establishment in the occupied territories of special regulations for imports and exports, Coblenz, April 8, 1921, ibid., p. 101.

These and Ordinances Nos. 84, 86, 87, 88, 89, and 91 of the same series were repealed by Ordinance No. 98, Coblenz, September 29, 1921 (ibid., p. 223). The powers of the Customs Managing Board set up by article 8 of Ordinance No. 81 were continued and were conferred upon the commission by Ordinance No. 113, Coblenz, May 3, 1922 (ibid., 1922, p. 81). Ordinance No. 98 was issued in virtue of a resolution of the Supreme Council dated August 13, 1921 to which the German Government signified its assent.

With that sanction in operation, the Supreme Council continued its deliberations at London, again being confronted with differences concerning values of offers as much as concerning other phases of the German obligation. The Reparation Commission would not fix the amount of recognized claims against Germany until April [Page 432]27 and the Supreme Council was still trying to determine the amount of the German obligation in lieu of the commission. Germany attempted to enlist the help of the United States, which was at the moment holding its “unofficial observers” aloof from both the Supreme Council and the Reparation Commission.

The German Ministry of Foreign Affairs on March 23 sought the intervention of the United States by an informal memorandum submitted to the Commissioner at Berlin ( Foreign Relations, 1921, ii, 37). The Secretary of State on March 29 informed the Commissioner that the United States Government “stands with the governments of the Allies in holding Germany responsible for the war and therefore morally bound to make reparation, so far as may be possible.” In April the anticipation that Germany would refuse to assume the debt exercised the French Parliament. The French Premier on April 12 told the Chamber: “We have in hand a promissory note duly signed and if the debtor refuses to pay, we must coerce him by all means of coercion we have in our power. In full agreement with our Allies we have a rendezvous with Germany on May 1.”

On April 20 the German Cabinet petitioned “the President of the United States of America to mediate the reparation question and to fix the sum to be paid by Germany to the allied powers.” The Secretary of State on April 21 informed the Germans that: “This Government could not agree to mediate the question of reparation with a view to acting as umpire in its settlement.” He assured the German Government that if negotiations were immediately resumed and proposals proper as a basis for discussion were formulated by it, “this Government will consider bringing the matter to the attention of the allied governments in a manner acceptable to them”.

On April 24 ( ibid., p. 46) Germany sent a proposal to the United States, the tenor of which was a German undertaking to assume a total capital liability of 50,000,000,000 gold marks, which it was also prepared to see distributed in annuities that would entail payments of an ultimate total of 200,000,000,000 gold marks.

The British, French, Italian, and Japanese ambassadors at Washington were shown this offer by the Secretary of State on April 25 and were informed that, if it were unacceptable, “they would not find the United States athwart their path”. The Secretary of State on May 2 informed the German Government that the United States “finds itself unable to reach the conclusion that the proposals afford a basis for discussion acceptable to the allied governments.” He advised the German Government “at once to make directly to the [Page 433]allied governments clear, definite, and adequate proposals which would in all respects meet its just obligations.”

The Supreme Council of the Allies, which had been in session in London since March 1, was also engaged in considering various questions connected with the treaty of peace. Its members, not having themselves reached a conclusion as to the amount of reparation which they should receive from Germany, allowed the Reparation Commission to proceed with that task. Germany had failed to make a satisfactory offer, but the Reparation Commission, in accordance with the duty assigned to it by article 233, had on April 27 established its findings “representing the extent” of Germany’s obligations at 132,000,000,000 gold marks. On May 1, however, Germany was obligated by article 235 to have completed payments to the amount of 20,000,000,000 gold marks. No such sum showed to Germany’s credit on the books of the Reparation Commission (see art. 235); in effect, there was a technical German default.

The Reparation Commission on April 27, 1921 arrived at the following decision:

“The Reparation Commission, in pursuance of the stipulations of Article 233 of the Treaty of Versailles decided unanimously to fix at 132 milliard marks gold the amount of the damage for which reparation was due from Germany under Article 232, paragraph 2, and Annex I of Part VIII of the said Treaty.

“In fixing this figure the Commission had left out of account that amount of damages in respect of which restitution had been or was to be made in execution of Article 238, and no credit would consequently be due to Germany on account of such restitutions.

“The Commission did not include in the above figure the sum representing the further obligation incumbent on Germany in terms of the third paragraph of Article 232, ‘to make reimbursement of all sums which Belgium had borrowed from the Allied and Associated Governments up to 11th November, 1918, together with interest at the rate of 5 per cent. per annum of such sums’”.

On May 1, 1921 no notification of the amount of damages or the payments to be made by Germany was ready. The schedule was, however, not far from being ready. By May 3 the Reparation Commission had definitely been entrusted with drawing up the schedule of payments and had produced a draft calling for three series of bonds totaling 135,000,000,000 gold marks, which envisaged the amendment finally enacted as paragraph 12A of annex II. In [Page 434]the revised Schedule of Payments of May 5 Series C bonds were reduced from 85 to 82 milliard gold marks. The inclusion of Series A bonds at 12 milliard gave the Supreme Council a basis for maintaining the existence of a default under article 235.

The Supreme Council decided to make its scheduled settlement with Germany as complete and definite as possible. Its deliberations over two months had revealed several defaults in German obligations and the sanctions in force since March 7 afforded a background for insisting upon their correction. An ultimatum in which satisfaction of the reparation debt was only one of the demands was presented to the German delegation on May 5 ( Foreign Relations, 1921, ii, 57). In this note the Supreme Council found defaults in Germany’s fulfilment of the treaty with respect to (1) disarmament; (2) the trial of war criminals as provided for by the notes of February 13 and May 7, 1920 (art. 227); and (3) questions arising under articles 264–7, 269, 273, 321, 322, and 327. The note informed Germany that the Allies had decided:

  • “(a) To proceed forthwith with such preliminary measures as may be required for the occupation of the Ruhr Valley by the Allied forces on the Rhine in the contingency provided for in paragraph (d) of this note.
  • “(b) In accordance with Article 233 of the treaty to invite the Reparation Commission to prescribe to the German Government without delay the time and manner for securing and discharging the entire obligation incumbent upon that Government and to announce their decision on this point to the German Government at latest on May 6.
  • “(c) To call upon the German Government within a period of six days from the receipt of the above decision categorically to declare its resolve:
    (1)
    To carry out without reserve or condition their obligations as defined by the Reparation Commission.
    (2)
    To accept and provide without reserve or condition the guarantees in respect of those obligations demanded by the Reparation Commission.
    (3)
    To carry out without reserve or delay the measures of military, naval and aerial disarmament notified to the German Government by the Allied Powers in their note of January 29, 1921, those overdue being completed at once, and the remainder by prescribed dates.
    (4)
    To carry out without reserve or delay the trial of war criminals and other unfulfilled portions of the treaty referred to in the first paragraph of this note.
  • “(d) Failing fulfilment by the German Government of the above conditions by May 12, to proceed to occupy the Valley of Ruhr and to take all other military and naval measures that may be required. Such occupation will continue so long as Germany fails to comply with the conditions summarized in paragraph (c).”

To this note the German Government replied on May 11:

“The German Government is resolved

  • “(1) To carry out without reserve or condition their obligations as defined by the Reparation Commission,
  • “(2) To accept and to carry out without reserve or condition the guarantees in respect of these obligations prescribed by the Reparation Commission,
  • “(3) To carry out without reserve or delay the measures of military, naval and aerial disarmament, notified to the German Government by the Allied Powers in their note of January 29, 1921, those overdue being completed at once and the remainder by the prescribed dates,
  • “(4) To carry out without reserve or delay the trial of the war criminals and to execute the other unfulfilled portions of the treaty referred to in the first paragraph of the note of the Allied Governments of May 5.”

The German Government which sent this note received in the Reichstag on June 4, 1921 a vote of confidence of 213 to 77.

The creditor states accepted the determination of the German obligation by the Reparation Commission only indirectly by means of the invitation, referred to in paragraph (b) of the note of May 5, to the Commission to proceed with prescribing how the German Government should execute its obligation. The Reparation Commission proceeded to establish the Schedule of Payments by which Germany delivered bonds to the Reparation Commission as follows:

A.
On July 1, 1921 coupon bonds for 12,000,000,000 gold marks, against which 6 percent annually (720,000,000 gold marks) “shall be paid”, of which amount 5 percent interest on outstanding bonds is payable, “and the balance to sinking fund for the redemption of the bonds by annual drawings at par.” (Amortization would require some 37 years.)
B.
On November 1, 1921, coupon bonds for 38,000,000,000 gold marks, against which 6 percent annually (2,280,000,000 gold marks) “shall be paid,” of which amount 5 percent interest on outstanding bonds is payable, “and the balance to sinking fund for the redemption of the bonds by annual drawings at par.” (Amortization would require some 37 years.)
C.
On November 1, 1921, bonds, without coupons attached, “for 82,000,000,000 gold marks, subject to such subsequent adjustment by creation or cancellation of bonds as may be required under Art. 1,” which specifies the additions and deductions noted above. These bonds “shall be issued by the commission as and when it is satisfied that the payments which Germany undertakes to make in pursuance of this agreement are sufficient to provide for the payment of interest and sinking fund on such bonds”, which would presumably amount to 4,920,000,000 gold marks.

Note to VIII, 233, par. 2

The Reparation Commission did not receive any claims for reparation from the United States, Ecuador, Guatemala, Hedjaz, Honduras, Nicaragua, Panama, and Uruguay, and for sundry reasons did not admit the claims to reparation by Bolivia, China, Haiti, Peru, and Poland.

On May 19, 1921 the commission notified the following states that they were entitled to receive reparation and to appoint delegates or delegate assessors to the Reparation Commission: the British Empire, France, Italy, Japan, Belgium, Brazil (not awarded a given percentage), Cuba, Greece, Liberia, Portugal, Rumania, Serb–Croat–Slovene State, Siam, and Czechoslovakia.

Dates of the commencement of belligerency for certain states were determined by the Reparation Commission as follows:

  • Poland—none (see art. 87)
  • Czechoslovakia—October 28, 1918
  • Italy—May 24, 1915
  • Greece—June 27, 1917
  • Portugal—March 9, 1916
  • Bolivia—None
  • Haiti—None
  • Peru—None

Note to VIII, 233, par. 4

The Schedule of Payments of May 5, 1921 fixed a total amount of reparation payable by Germany at: [Page 437]

1.
132,000,000,000 gold marks less—
a.
Amount already paid on account of reparation;
b.
Sums to be credited to Germany in respect of state properties, ceded territories, etc.; and,
c.
Sums received from other enemy or ex-enemy states; and,
2.
The amount of the Belgian debt to the Allies (5,612,385,422.54 gold marks).

Payments and deliveries effected by Germany were credited to reparation account as follows:

A.
Deliveries on capital or annuity account made before or after May 1, 1921:
a.
Deliveries in kind in virtue of part VIII, annex II, paragraph 9;
b.
Deliveries in kind (art. 235);
1.
Annex III;
2.
Annex IV;
3.
Annex V;
4.
Annex VI;
5.
Annex VII;
6.
Article 247 (Louvain);
7.
Various receipts of Allied origin, including Reparation Recovery Acts;
8.
Articles 339–357;
9.
Material of non-military character delivered in execution of the armistice;
B.
Deliveries credited to reparation capital debt:
1.
Share capital of State Bank of Morocco (art. 145);
2.
Shantung (art, 156);
3.
German credits on Austria, etc.;
4.
Saar mines;
5.
Cessions in China (art. 134);
6.
Balances due under art. 297;
7.
Sums to be credited to Germany in virtue of articles 254 and 256, including rolling stock, article 371;
8.
All sums paid over by the Bureau for Liquidation of German War Material (B.L.M.G.);
C.
Recovery of all sums taken over by the German Government and its agents between March 1 and November 5, 1920, except those turned over to B.L.M.G.;
D.
The value of deliveries in virtue of article 260;
E.
The allocation of the receipts from customs duties in occupied territories.

Article 234.

The Reparation Commission shall after May 1, 1921, from time to time, consider the resources and capacity of Germany, and, after giving her representatives a just opportunity to be heard, shall have discretion to extend the date, and to modify the form of payments, such as are to be provided for in accordance with Article 233; but not to cancel any part, except with the specific authority of the several Governments represented upon the Commission.

Article 235.

In order to enable the Allied and Associated Powers to proceed at once to the restoration of their industrial and economic life, pending the full determination of their claims, Germany shall pay in such instalments and in such manner (whether in gold, commodities, ships, securities or otherwise) as the Reparation Commission may fix, during 1919, 1920 and the first four months of 1921, the equivalent of 20,000,000,000 gold marks. Out of this sum the expenses of the armies of occupation subsequent to the Armistice of November 11, 1918, shall first be met, and such supplies of food and raw materials as may be judged by the Governments of the Principal Allied and Associated Powers to be essential to enable Germany to meet her obligations for reparation may also, with the approval of the said Governments, be paid for out of the above sum. The balance shall be reckoned towards liquidation of the amounts due for reparation. Germany shall further deposit bonds as prescribed in paragraph 12 (c) of Annex II hereto.

Note to VIII, 235

The requirement of this article created the first attempt to revise the arrangements of part VIII. Repeated complaints of the German Government caused the Allied Governments to hold conferences at London, February–March 1920, at Hythe, May 15–16, at Boulogne, June 21–22, 1920, at Spa, July 5–17, 1920, in the endeavor “to find a reparation settlement along lines other than those laid down by the treaty of Versailles, and consequently outside the Reparation Commission”. The failure of those consultations and of a conference of experts at Brussels in December 1920 to reach “a general solution which would have circumvented the difficulties attending the execution [Page 439]of article 235” (Report on the Work of the Reparation Commission from the Tears 1920 to 1922, p. 14) put the Reparation Commission on notice that it might have “to fulfil its strict treaty duties”.

The German Government on January 20, 1921 submitted a memorandum in which it summarized its valuations of deliveries effected which in its opinion were to be credited on reparation account. The total amounted to over 21,000,000,000 gold marks. On February 26, 1921 the Reparation Commission denied the propriety of including five items which together amounted to 15,355,000,000 gold marks, and informed the Germans “that the final account under Article 235 could not, in present conditions, fail to reveal a deficit of at least 12 milliards”. The German Government’s persistence in its contention was held by the Reparation Commission to be a refusal to meet its obligation.

The Supreme Council convened at London on March 1 for a lengthy meeting which ended only when Germany accepted the Schedule of Payments as drawn up by the Reparation Commission on May 5.

Series “A” bonds of that instrument corresponded in value with the deficit found by the commission to exist in the pre-May 1 payments. The pre-May 1 deliveries and payments were determined retrospectively on October 26, 1921 (annex 538/9) as having approximately amounted to 7,539,000,000 gold marks.

The difference between the Reparation Commission and the German Government hinged on the liquidity of the deliveries claimed. Without passing upon the correctness of the German valuations of other items, the commission informed Germany that three items did not represent assets which were either liquid or which were capable of being made liquid in the near future. These were: capital value of Saar mines, 1,056,947,000 gold marks; value of property in ceded territories, 4,481,552,938; and value of five surrendered railroad bridges, 8,582,350. The value of property in ceded territory which could be realized before May 1, 1921 in liquid form was insignificant. Two items, merchant marine, valued at 7,310,302,824 gold marks, and abandoned property, 2,497,790,000 gold marks, would not yield more than 1,000,000,000 gold marks, but the commission doubled that figure in its finding that Germany would be short by 12,000,000,000 gold marks in the May 1 payment.

The first definite experience with payment in cash resulted from the requirement of article 5 of the Schedule of Payments of May 5, 1921, which stipulated payment by Germany in 25 days of one billion [Page 440]gold marks “in gold or approved foreign currency or approved foreign bills or in drafts of 3 months on the German Treasury endorsed by approved German banks and payable in pounds sterling in London, in francs in Paris, in dollars in New York or any currency in any other place designated by the Commission.”

The United States Treasury took a keen interest in the outcome of this transaction since it was effected through American financial channels. The variety of currencies drawn from the German economy to make the payment impressed financial observers. The first payment, for instance, consisted of 150,000,000 gold marks which was available on May 15, 1921 in the following currencies: $11,675,000; £3,500,000; 22,000,000 French francs; 4,000,000 Swiss francs; 12,000,000 Belgian francs; 2,000,000 Dutch florins; 6,500,000 Danish crowns; 3,500,000 Norwegian crowns; 8,500,000 Spanish pesetas; 10,000,000 gold marks.

Article 236.

Germany further agrees to the direct application of her economic resources to reparation as specified in Annexes III, IV, V, and VI, relating respectively to merchant shipping, to physical restoration, to coal and derivatives of coal, and to dyestuffs and other chemical products; provided always that the value of the property transferred and any services rendered by her under these Annexes, assessed in the manner therein prescribed, shall be credited to her towards liquidation of her obligations under the above Articles.

Text of May 7:

Germany further agrees to the direct application of her economic resources to reparation as specified in Annexes III, IV, V, and VI, relating respectively to merchant shipping, to physical restoration and to coal and derivatives of coal, and to dyestuffs and other chemical products; provided always that the value of the property transferred and any services rendered by her under these Annexes, assessed in the manner therein prescribed, shall be credited to her towards liquidation of her obligations under the above articles.

Article 237.

The successive instalments, including the above sum, paid over by Germany in satisfaction of the above claims will be divided by the Allied and Associated Governments in proportions which have been determined upon by them in advance on a basis of general equity and of the rights of each.

For the purposes of this division the value of property transferred [Page 441]and services rendered under Article 243, and under Annexes III, IV, V, VI, and VII, shall be reckoned in the same manner as cash payments effected in that year.

Note to VIII, 237

In execution of this article there were concluded:

Agreement of June 16 [24], 1919 relative to Belgian priority;

Spa agreement, article 1, July 16, 1920; agreement with the Serb–Croat–Slovene State, June 20, 1921; agreement of January 14, 1925, article 6, relative to percentages;

Arrangements of September 10, 1919; article 9 of Spa agreement of July 16, 1920; article 11 of agreement of March 11, 1922, relative to liberation of territories of the Austro-Hungarian Monarchy and Austria.

The original Spa percentages are here given, the percentages in force when the New (Young) Plan was being worked out and those employed in the last distribution of funds by the Reparation Commission.

Article 1 of the Spa agreement of July 16, 1920 provided:

“In pursuance of Article 237 of the Treaty of Versailles, sums received from Germany under the head of reparation shall be divided in the following proportions:

Per cent
British Empire 22
France 52
Italy 10
Japan .75
Belgium 8
Portugal .75

“6.5 per cent. shall be reserved for Greece, Roumania, the Serb–Croat–Slovene State, and for the other Powers entitled to reparation which are not signatories of this agreement.”

The percentage of the Serb–Croat–Slovene State was determined as 5 percent by an agreement with France and Great Britain concluded at Paris on June 20, 1921 and confirmed by the Spa signatories. That government did not, however, adhere to the Spa agreement until February 25, 1925 (file 462.00 R 29/3822).

Spa Percentages as revised in 1929

Percent Percent
France 54.45
British Empire 23.05
Great Britain, 86.85% 20.01024
Minor colonies, 0.80% 0.18432
[Page 442]Canada, 4.35% 1.00224
Australia, 4.35% 1.00224
New Zealand, 1.75% 0.40320
India, 1.20% 0.27648
South Africa, 0.60% 0.13824
Newfoundland, 0.10% 0.02304
Italy 10.00
Yugoslavia 5.00
Belgium 4.50
Rumania 1.10
Portugal 0.75
Japan 0.75
Greece .040

As modified at final distribution to creditors, April 13, 1931 (Annex 4193 b 3).

United Kingdom 23.58
France 56.14
Italy 8.06
Belgium 5.60
Japan .66
Yugoslavia 3.92
Portugal .66
Rumania 1.00
Greece .35
Poland .03

Belgium’s priority, in addition to its 8 percent of receipts granted by the agreement of June 16, 1919 in virtue of article 237, was defined by article 5 of the agreement between Belgium, France, Great Britain, Italy, Japan, and Portugal for the settlement of certain questions as to the application of the treaties of peace and complementary agreements with Germany, Austria, Hungary, and Bulgaria, signed at Spa, July 16, 1920 (United Kingdom, Reparation, Agreement between the Allies for the Settlement of Certain Questions … 1922, Cmd. 1615). The priority was redefined by article 6 of the Finance Ministers’ Agreement of January 14, 1925 which envisaged the cessation of the priority except for the war-debt service. As a result of these arrangements Belgium received nearly a third of the sums distributed up to June 30, 1923,1,730,126,000 gold marks out of 5,494,782,000 gold marks. At the closing of accounts, January 20, 1930, the Reparation Commission had credited Belgium with receipts of 2,228,247,533 gold marks.

[Page 443]

Article 238.

In addition to the payments mentioned above Germany shall effect, in accordance with the procedure laid down by the Reparation Commission, restitution in cash of cash taken away, seized or sequestrated, and also restitution of animals, objects of every nature and securities taken away, seized or sequestrated, in the cases in which it proves possible to identify them in territory belonging to Germany or her allies.

Until this procedure is laid down, restitution will continue in accordance with the provisions of the Armistice of November 11, 1918, and its renewals and the Protocols thereto.

Note to VIII, 238

At the beginning of the war of 1914–18, the impression prevailed that the Hague convention respecting the laws and customs of war on land of October 18, 1907 (Treaties, Conventions, etc., 1776–1909, ii, 2269) gave valid rules for the conduct of hostilities. At an early stage German action belied this impression. In rectifying the damage resulting from the war, the preliminary peace conference, therefore, made provision for the restitution of property seized improperly according to the standards of the Hague convention and the state of public opinion. Restitution began under the terms of the armistice and was further provided for in the treaty of peace. In neither case were the values involved credited on the reparation account.

Restitution differed from reparation in two respects:

1.
It affected only identifiable property which had been seized or sequestrated and which was returnable at Germany’s expense in the same or equivalent form;
2.
Restitution of such property was not susceptible of adjustment until article 5 of the Finance Ministers’ Agreement of January 14, 1925 was applied under the Dawes Plan.

On the other hand, it was not impossible that seizures for which restitution as such could not be made should also give rise to damage within the categories for which reparation was due (part VIII, annex I).

The Reparation Commission was charged with the duties of effecting restitution and of determining the difference between restitution and reparation.

Procedures of restitution developed promptly from the terms of the armistice, for it was realized that speed in many instances was [Page 444]necessary to secure proper restitution. The final protocol of the Financial Subcommittee of the International Armistice Commission, Spa, December 1, 1918, provided for the restitution of documents, cash, securities, and works of art; one of January 10, 1919, completed by another of February 2, 1919, provided for the restitution of industrial and agricultural material; a further one of March 25, 1919, supplementing the armistice of November 11, 1918, provided for the restitution of stationary railway material. These armistice provisions did not make the distinction established by the treaty of peace between reparation and restitution, and they dealt only with property taken away from the invaded territories of Belgium and France. Moreover, they did not touch livestock, rolling stock, river shipping, and household furniture.

Restitution under the armistice was entrusted by the C.I.P.A. (Commission Interalliée Permanente d’Armistice) to the following inter-Allied or national bodies:

The C.I.R.F. (Commission Interalliée de Récuperation de Matériel Fixe de Chemin de Fer) charged with executing protocol 666–T of March 25, 1919 and composed of Belgian, British, French, and United States representatives;

The C.I.R.M. (Commission Interalliée de Récuperation de Matériel Roulant de Chemin de Fer) which was charged with receiving the rolling stock deliverable under Clause VII of the Armistice Convention of November 11, 1918, also composed of Belgian, British, French, and United States representatives;

The Restitution Services, being Belgian and French bodies concerned with the restitution by Germany of industrial material under the protocol of February 2, 1919, of agricultural material under the protocol of January 16, 1919, and of furniture, works of art, and securities under the final protocol of the Financial Subcommittee of the International Armistice Commission, Spa, December 1, 1918. Corresponding German services operated at Frankfurt.

The deficits in deliveries at the entry into force of the treaty of peace are set forth in the protocol of January 10, 1920 (see p. 743).

Immediately the treaty of peace was in force, the Organization Committee of the Reparation Commission and the Allied Restitution Services set about the preparation of a complete program to secure the full restitution provided for in article 238. General protocol “A” of restitution was notified to Germany on September 1, 1920 (Report on the Work of the Reparation Commission from 1920 to 1922, p. 199). This protocol provided that “the onus of and the responsibility [Page 445]for restitution must be entirely borne by Germany under the terms of Article 238.” The Office of the Reparation Commission at Wiesbaden (O.R.C.W.) was set up and the German organ at Frankfurt dealt directly with it. Protocol “A” was supplemented by four others as follows:

  • B for livestock, December 20, 1920;
  • C for industrial material and rolling stock, January 21, 1921;
  • D for cash, securities, works of art, furniture, April 26, 1921 and June 20, and;
  • E for river shipping, July 12, 1921.

Under the protocols, National Services were set up by Italy, Poland, Rumania, and the Serb-Croat-Slovene State, in addition to those of France and Belgium, the latter of which looked after the interests of Great Britain. These National Services took over the work undertaken by the inter-Allied bodies, the C.I.R.F. and the C.I.R.M. To them was also entrusted the business arising out of deliveries in kind under part VIII, annex IV. In consequence, this extension of duties resulted in the continuance of the Wiesbaden Office of the Reparation Commission until June 1922, when it was superseded by the Service of Restitution and Reparation in Kind (S.R.R.K.) at Paris. In the meantime, restitution had been completed under the five protocols of September 1920, or had been provided for in agreement with Germany, notably by Belgium and France, by September 1, 1922.

The Arbitral Tribunal of Interpretation on March 24, 1926 decided that identical restitution in virtue of article 238 was not comprised in the annuities under the Experts’ (Dawes) Plan.

Under article 5 of the Finance Ministers’ Agreement of January 14, 1925 the percentages of annuities assigned to restitution were distributed as follows:

Belgium 30.667
France 61.333
Great Britain 1.383
Poland 1.778
Italy 1.185
Rumania 2.667
Serbia 0.987

The following table shows the restitution obligations of Germany under the armistice, the protocols or substitution contracts:

[Page 446]

RESTITUTION BY GERMANY UNDER ARMISTICE AND OTHER OBLIGATIONS

November 11, 1918—September 1, 1922. 1

Country Material Bonds, cash, art works, etc. (approximate) Livestock Stationary ry material Rolling stock River craft
Industrial Agricultural
Tons
France 273,840,350 1,762 machines
2,000 wagons
209,644 tools
24,488,000 F. frs.
(1914)
23,161 horses,
2,399 mules and asses,
3,345 cattle,
4,888 sheep.
1,286 tons 11 engines
15,682 trucks
Belgium 94,857,580 714 machines Cash,
1,700,000,000 p.m.
Bonds, 16,706,000
paper B. frs.;
Works of Art,
2,103,000 francs
(1914)
6,917 horses,
54 cattle
526 tons 417 engines
34,910 trucks
40 Bayern barges,
41,936 tons;
3 schooner tank barges, 1,475 tons.
Italy 67, 195 8,503 horses,
1,021 heifers.
302 trucks
Poland 4,324,579 12,408 horses 8 engines
2,000 trucks
Roumania 90 5,361,650 paper frs. 4,522 horses 22 engines
3,884 trucks
10 engines
2 barges, 1,200 tons.
Serb–Croat–Slovene State 143 tons
1 steam engine
26 machines
identified
66,635 paper dinars,
12,900 paper levas.
409 trucks
7 tenders
Great Britain 5,615 59,000 paper B. frs; and 503 cases of miscellaneous goods. 17 Drughorn barges, 26,253 tons;
1 Drughorn tug, 600 h.p.
[Page 447]

For restitution of property in Germany to nationals of Allied or Associated Powers, see articles 297 (f), (g), and (h), and 300 (f).

Germany undertook to facilitate restitution in kind of identifiable items to Poland by no. V of the German-Polish agreements signed at Paris, January 9, 1920. On May 3, 1920 the Reparation Commission safeguarded that right by demanding that Germany prevent the alienation, destruction, or transformation of such objects.

Belgium and Poland in signing a convention concerning certain questions relating to private property, rights, and interests at Brussels, December 30, 1922 regulated the transfers involving their own nationals which resulted from the application of article 238 and the system of part X, section IV, including recognition of awards by Mixed Arbitral Tribunals affecting their nationals in connection with territorial transfers (21 League of Nations Treaty Series, p. 201). The convention entered into force on October 20, 1923, simultaneously with a commercial treaty between Belgium and Luxembourg and Poland (ibid., p. 183).

According to article 238 the Reparation Commission carried on from the situation created by the operation of the series of armistice conventions, protocols, agreements, and notes beginning with the main convention of November 11, 1918. The elaborate German publication is Der Waffenstillstand, 1918–19; das Dokumenten-Material der Waffenstillstands-Verhandlung en von Compiègne, Spa, Trier and Brüssel; Notemoechsel, Verhandhmgsprotokolle, Verträge, Gesamttätigkeitsbericht, issued in three volumes at Berlin in 1928. It contains most of the instruments, which have not been published as a whole.

A reference list of the instruments follows:

  • Convention of armistice, November 11, 1918 by the Allied and Associated Powers with Germany (Treaties, Conventions, etc., 1910–23, iii, 3307; Der Waffenstillstand, i, 74);
  • Additional declaration on the eventual occupation of Heligoland (Treaties, Conventions, etc., 1910–23, iii, 3315; Der Waffenstillstand, i,87);
  • Annexed note No. 1, on the evacuation of the invaded countries (Treaties, Conventions, etc., 1910–23, iii, 3313; Der Waffenstillstand, i, 81);
  • Annexed note No. 2 on conditions affecting ways of communications (Treaties, Conventions, etc., 1910–23, iii, 3313; Der Waffenstillstand, i, 84);
  • Agreement dated at Spa, December 17, 1918 for execution of clauses on the delivery of railroad material in Note No. 2 (P.I.A.C. 117/T);
  • Protocol dated at Spa, March 25, 1919 for execution of article IV b, Note No. 2 (P.I.A.C, 666 T; Der Waffenstillstand, iii, 339);
  • “Industrial” protocol relative to the execution of article VI, paragraph 5, of the convention of armistice and note, signed at Luxembourg, December 25, 1918 (Der Waffenstillstand, ii, 254);
  • Final protocol, dated at Spa, December 1, 1918 of the Financial Subcommission of the Permanent Inter-Allied Armistice Commission, signed by the French, Belgian, and German delegates (ibid., i, 318);
  • Agreement, dated at Spa, December 17, 1918 for execution of certain articles concerning restitution of art objects (P.I.A.C. 110G and WAKO 3116);
  • Additional convention for renewal of the armistice, dated at Trier, December 13, 1918 (Treaties, Conventions, etc., 1910–23, iii, 3315; Der Waffenstillstand, i, 130);
  • Financial protocol, dated at Trier, December 13, 1918 (Treaties, Conventions, etc., 1910–23, iii, 3322; Der Waffenstillstand, i, 329);
  • Additional convention concerning prolongation of the armistice, dated at Trier, January 16, 1919 (Treaties, Conventions, etc., 1910–23, iii, 3323; Der Waffenstillstand, i, 182);
  • Protocol dated at Spa, January 30, 1919 regulating conditions of execution of the additional convention (Der Waffenstillstand, iii, 350);
  • Agreement dated at Trier, January 17, 1919 relative to measures taken for revictualing of Germany and the use of German tonnage (ibid., ii, 37);
  • Protocol dated at Spa, February 1, 1919 for execution of the armistice clauses relative to the restitution of industrial material (ibid., p. 304);
  • Protocol of the Spa Conference of February 6–8, 1919 concerning the supplying of Germany with foodstuffs (ibid., iii, 239);
  • Protocol dated at Brussels, March 23, 1919 for execution of the clauses relative to the restitution of industrial material (ibid., ii, 317);
  • Protocol of the Financial Conference, Trier, February 14–16, 1919 (ibid., p. 70);
  • Additional convention concerning prolongation of the armistice, [Page 449]Trier, February 16, 1919 (Treaties, Conventions, etc., 1910–23, iii, 3326; Der Waffenstillstand, i, 260);
  • Financial arrangement, dated at Trier, February 16, 1919, for the payment for foodstuffs (Der Waffenstillstand, ii, 64);
  • Supplementary agreement dated at Trier, February 16, 1919 concerning the revictualing of Germany (ibid., p. 67);
  • Protocol of the Brussels Conference March 13–14, 1919 and annexed agreements relative to the revictualing of Germany and delivery of the merchant fleet (ibid., pp. 179–209);
  • Convention for execution of article III of financial protocol of Trier, December 13, 1918, dated at Kehl, April 12, 1919 (ibid., i, 336);
  • Protocol dated at Spa, April 4, 1919 applying article XVI of the armistice to passage of Allied troops through Germany, and annex (Treaties, Conventions, etc., 1910–23, iii, 3327; Der Waffenstillstand, ii, 363).

Article 239.

The German Government undertakes to make forthwith the restitution contemplated by Article 238 and to make the payments and deliveries contemplated by Articles 233, 234, 235 and 236.

Article 240.

The German Government recognizes the Commission provided for by Article 233 as the same may be constituted by the Allied and Associated Governments in accordance with Annex II, and agrees irrevocably to the possession and exercise by such Commission of the power and authority given to it under the present Treaty.

The German Government will supply to the Commission all the information which the Commission may require relative to the financial situation and operations and to the property, productive capacity, and stocks and current production of raw materials and manufactured articles of Germany and her nationals, and further any information relative to military operations which in the judgment of the Commission may be necessary for the assessment of Germany’s liability for reparation as defined in Annex I.

The German Government will accord to the members of the Commission and its authorised agents the same rights and immunities as are enjoyed in Germany by duly accredited diplomatic agents of friendly Powers.

[Page 450]

Germany further agrees to provide for the salaries and expenses of the Commission and of such staff as it may employ.

Note to VIII, 240

Paragraph 4 of the protocol of June 28, 1919 provides that the Reparation Commission “cannot require trade secrets or other confidential information to be divulged”.

Article 241.

Germany undertakes to pass, issue and maintain in force any legislation, orders and decrees that may be necessary to give complete effect to these provisions.

Note to VIII, 241

The application of this article by the Reparation Commission was limited by the following statements in the reply of the Allied and Associated Powers to the observations of the German delegation on the conditions of peace dated June 16, 1919:

“The provisions of Article 241, by which the German Government is to invest itself with such powers as may be needed to carry out its obligations, are not to be misconstrued as giving the Commission powers to dictate the domestic legislation of Germany. Nor does paragraph 12 (b) of annex II give the Commission powers to prescribe or enforce taxes or to dictate the character of the German budget.

“It is only to examine the latter for two specified purposes.

“This is necessary in order that it may intelligently and constructively exercise the discretion accorded to it in Germany’s interest, particularly by Article 234, with regard to extending the date and modifying the form of payments. … It is further to be observed that the power of modification accorded by the said Article 236 is expressly designed to permit of a modification in Germany’s interest of a schedule of payments which events may demonstrate to be beyond Germany’s reasonable capacity.”

Articles 6 and 7 of the Schedule of Payments of May 5, 1921 provided for a special Committee of Guarantees consisting of representatives of the states composing the Reparation Commission, including the representative of the United States if it desired. The United States did designate an unofficial representative.

The committee was provided for in expectation that German bonds would be issued to the public and the committee was consequently [Page 451]originally intended to watch over the interests of the creditors with respect to the securities pledged by the debtor. For that reason, the committee was empowered to co-opt three other representatives, nationals of other states, whenever it appeared that such a portion of the bonds was held by nationals of such states as to justify their representation on the committee. The committee was charged with the duty of securing the application of articles 241 and 248 of the treaty, the first of which relates to Germany’s obligation to maintain adequate legislation, and the second of which makes reparation the first charge on all German assets and revenues.

The Committee of Guarantees was appointed on May 27, 1921 and was composed of representatives of France, Great Britain, Italy, Belgium, and the United States unofficial observer. It paid a first visit to Berlin in June 1921 and on the 28th sent Germany five notes containing important decisions. A note on general principles dealt with the German resources which were to be devoted to the service of the bonds; a second note was an interpretation of the word “exports” and replacement of the “exports” index; the third dealt with the levy of 25 percent on German exports; the fourth with the assignment of customs receipts as guaranty for the bonds; and the fifth note related to organization of the “contrôle” or supervision (Official Documents Relative to the Amount of Payments to be Effected by Germany under Reparation Account, May 1, 1921–July 1, 1922). In the fifth note the committee announced its intention to maintain a delegation at Berlin and informed Germany that it would exercise rights to require from German officials all information, to enter all administrative premises, and to possess all facilities for gaining a complete knowledge of all parts of the services which it was to supervise.

In June 1921, the Committee of Guarantees found the exchange then current was 14 paper marks to 1 gold mark. On a second visit to Berlin, made from September 23 to October 14, 1921, it found that the rate was 30 paper marks to 1 gold mark, and in consequence undertook a complete review of the situation. The committee found that the German budget was running a net deficit of 96,000,000,000 paper marks. It, therefore, concluded that the methods used to procure foreign bills and the condition of the balance of payments indicated the necessity for the German Government to take special emergency measures to cover the reparation instalments due in January, February, and April of 1922.

[Page 452]

The Reparation Commission, after examining the second report of the Committee of Guarantees (ibid., p. 25), called upon Germany to inform it of what steps were being taken to ensure payment of the January–February instalments. In a letter of December 14 the German Chancellor informed the commission that it was uncertain as to how those payments could be made, unless through a foreign loan; he requested an extension of the time-limit and stated that similar difficulties would arise in connection with subsequent payments. On March 21, 1922 the Reparation Commission limited Germany’s payments in 1922 on account of reparation and armies of occupation to 720 million gold marks in cash, as against 2 billion gold marks called for by article 4 of the Schedule of Payments, and credited against this amount the 281,948,920.49 gold marks already paid in 1922 in kind; the equivalent in goods of 1,450,000,000 gold marks was also to be remitted.

The Chancellor of the German Reich on April 7, 1922 reported that since December 14 “Germany’s financial difficulties have exceeded all forecast”. The dollar had been at 180 marks on the Berlin exchange in January, had gone to 200 in February, and was then above 300. The cost of living had risen sixty-fold or more, with bread at 25 times the pre-war prices. The German Government asked the Reparation Commission to reconsider its decision of March 21 and to undertake a further examination of Germany’s capacity. Nevertheless, it stated that “the German Government cannot consent to any form of supervision incompatible with Germany’s independence”, adding that no government “could allow a foreign country to exercise any definite influence in the creation and application of legislative measures”.

On the 13th the commission informed the German Government that it “had in no way trespassed upon the powers of initiative or the responsibilities in matters of taxation or of expenditure either of the German Government or of the German legislature”. It simply insisted on Germany’s making adequate provision for meeting its obligations and of putting them in a proper priority with respect to domestic expenditures. It reminded Germany that its government had petitioned for postponement of its obligations and that its intransigent attitude was assumed against proposals made for the purpose of realizing that request. Having been told this, the Chancellor of the Reich by May 9 declared that the German [Page 453]Government was convinced of the necessity of taking immediate steps to prevent further monetary inflation, and expressed “satisfaction that the Reparation Commission recognizes the sovereignty of Germany in questions of public expenditure, taxation and financial policy generally”. It undertook to use its best endeavors to comply with the conditions laid down by the commission, though it was not too optimistic concerning its ability to do so. Following the Genoa Conference, a full statement of the budgetary condition was transmitted on May 28, and on May 31 the Reparation Commission on this basis confirmed the provisional postponement granted on March 21 of a portion of payments due for the year 1922.

In view of this decision, the German Government was informed on June 14 that the Committee of Guarantees would consider with it the following subjects:

(1)
Supervision of the receipts and expenditure of the Reich;
(2)
Abusive export of capital;
(3)
Statistics.

The permanent delegation of the Committee of Guarantees was set up at Berlin in June 1922. It divided into five sections and embarked on an arduous task of daily supervision, as the Reparation Commission put it, of “the minutiae of the finances of one of the largest and most complicated of European States”. The conclusion of those deliberations was set forth in a body of correspondence dated July 18, 1922 (Report on the Work of the Reparation Commission from 1920 to 1922, pp. 267–278).

The French delegation presented to the Reparation Commission a searchingly critical memorandum on Germany’s request for a moratorium (Reparation Commission, Official Documents, vi).

Article 242.

The provisions of this Part of the present Treaty do not apply to the property, rights and interests referred to in Sections III and IV of Part X (Economic Clauses) of the present Treaty, nor to the product of their liquidation, except so far as concerns any final balance in favour of Germany under Article 243 (a).

Text of May 7:

The provisions of this Part of the present Treaty do not apply to the property, rights and interests referred to in Sections III and IV [Page 454]of Part X (Economic clauses) of the present Treaty, except so far as concerns any final balance in favour of Germany under Article 243 (a).

Article 243.

The following shall be reckoned as credits to Germany in respect of her reparation obligations:

(a) Any final balance in favour of Germany under Section V (Alsace-Lorraine) of Part III (Political Clauses for Europe) and Sections III and IV of Part X (Economic Clauses) of the present Treaty;

(b) Amounts due to Germany in respect of transfers under Section IV (Saar Basin) of Part III (Political Clauses for Europe), Part IX (Financial Clauses), and Part XII (Ports, Waterways and Railways);

Text of May 7:

Amounts due to Germany in respect of transfers under Part IX (Financial Clauses), Part XII (Ports, Waterways and Railways) and Section IV (Saar Basin) of Part III (Political Clauses in Europe).

(c) Amounts which in the judgment of the Reparation Commission should be credited to Germany on account of any other transfers under the present Treaty of property, rights, concessions or other interests.

In no case however shall credit be given for property restored in accordance with Article 238 of the present Part.

Note to VIII, 243

The articles under which credits were given to Germany were:

a.
Articles 53, 58, 59, 66, 73, 74 (part III), 296, 297 (part X);
b.
Articles 50 (part III), 250, 254, 260, 261 (part IX), 339, 352, 357 (part XII);
c.
Articles 107, 124, 125, 130, 134, 145, 156, 157, 169, 184, 192, 202, 254, 256, 297.

Paragraph 2 of the protocol of June 28, 1919 provides that Germany be credited on the reparation account with sums paid by it to German nationals to indemnify them in respect of the interests which they may be found to possess in the railways and mines referred to in article 156, paragraph 2.

[Page 455]

Article 4, column debits f, of the Spa agreement provides for the exclusion of final balances under sections III and IV of part X and of sums applied to the Belgian priority in virtue of article 5 of that agreement.

By article 10, 2, of that agreement sums credited to Germany under articles 92 and 243 from Poland were entered in suspense accounts.

See annex II, paragraph 16.

Article 244.

The transfer of the German submarine cables which do not form the subject of particular provisions of the present Treaty is regulated by Annex VII hereto.


  1. Adapted from the Report on the Work of the Reparation Commission from 1920 to 1922, p. 204.