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Annex III (1 to 9)

Note to VIII, Annex III

The principle that Germany must replace, ton for ton and class for class, all merchant ships and fishing boats lost or damaged was [Page 491]declared by the German delegation to be inconsistent with article 236, which required Germany to apply its economic resources directly to reparation (Foreign Relations, The Paris Peace Conference, 1919, vi, 857). The demand for 146 fishing vessels out of 200 available could not be met because they were needed for the feeding of the population; nor the entire merchant fleet be surrendered. But Germany was ready to construct an even greater tonnage and over a longer period than stipulated, and to surrender not more than 10 percent of the river tonnage.

Reparation of shipping involved the questions of replacing tonnage lost and treatment of seizures. The approximate figures were:

Losses Gross tons Seizures Gross tons
Great Britain 8,000,000 500,000
France 930,000 50,000
United States 430,489 628,000
Brazil 25,000 216,000
9,385,489 1,394,000

In formulating annex III replacement of losses was dealt with, but the disposition of ex-enemy ships was not included owing to the insistence of the United States to retain those in its possession against payment. The “Wilson-Lloyd George Agreement” (p. 845) dealt with that phase of the problem.

On October 12, 1920 the Reparation Commission took note of a reservation presented by the observer (délégué officieux) of the United States, which was in the following terms (file 462.00 R 29/228):

“No objection is made by the United States to the conclusion of the Commission against taking into account pre-war shipping losses in connection with distribution of ships acquired from Germany by the Commission in view of the fact that the United States has not as yet ratified the Treaty of Versailles.

“With reference to the possibility that the principle involved might otherwise be regarded as having some bearing on interpretation of the so-called Wilson-Lloyd George agreement, not yet ratified by the United States, or as affecting in some other way the position of the United States as to the German ships of which possession and title, was during the war, taken by the United States under authority of an Act of Congress, I am instructed, by my Government, to state to the Commission that it now makes all reserves necessary so [Page 492]that the question may remain an open one for consideration by the proper United States authorities when, if ever, it becomes material.

“In addition I am instructed by my Government to call to the attention of the Commission the fact that the principle, that participation in reparation must be confined to losses during the period of belligerency of each nation, tends to the result that nations which did not participate in the war may be unable to collect their legitimate claims against Germany and that nations which did not participate in the whole war may have outstanding legitimate pre-belligerency claims against Germany which cannot be collected. The difficulty in the collection in both cases arising from the fact that the reparation payment is classed as [a first] charge, against the revenues and assets of the German nation leaving nothing available for other claims. This result tends towards unfairness and ill feeling as between nations and has the further unfortunate result of leaving outstanding, against Germany, claims, which, as long as they remain unsettled, will constitute a disturbing factor in all trade relations between Germany and the outside world and will to that extent be a barrier to the economic rehabilitation of Germany and also of those countries whose prosperity depends to a greater or less extent upon business relations with Germany.”

When this statement was presented, the British delegate made a declaration, which the other delegates supported, to the effect that “the commission, in examining proposals of the Maritime Service on methods to be adopted for calculating tonnage losses, is going to continue to take as a basis” the interpretation that “the debt of Germany for reparation payments is limited to the events which took place during the time when the powers asking for reparation were in a state of war.”

Execution of these provisions was entrusted by the Reparation Commission to its Maritime Service, which sat in London until August 31, 1921 and continued with a reduced staff at Paris until May 10, 1922, when its remaining functions were transferred to the Service of Restitution and Reparation in Kind. The Reparation Commission decided to reach an agreement with the German Government concerning the half of the vessels between 1000 and 1600 tons which were to be selected for delivery in this group. The Maritime Service was forced to scrutinize the remeasurement and rebuilding of a considerable number of vessels by the German owners, and found that in some 27 cases the owners were seeking to [Page 493]produce a lower gross tonnage than the registry at the entrance of the treaty into force.

On January 10, 1920 348 ships aggregating 1,771,796 gross tonnage had been delivered.

Owing to an obscurity in the treaty terms, the German delegation contended that Germany was only bound to deliver ships under construction in the state in which they were on January 10, 1920. The Reparation Commission reached an agreement with Germany by which 24 of these steamers of about 225,000 gross tons were completed for the Allies and the remaining 21 vessels of about 100,000 gross tons for the German account.

The German obligation under paragraph 5 (c) to undertake new construction for the year ending April 9, 1921, three months after the treaty was in force, was reduced by an agreement from 200,000 gross tons to 124,260 gross tons. In the following construction year, only 12,000 gross tons of construction was required and programs for the next three years of 40,000 gross tons annually were not actually demanded.

In January 1921 nearly 2,000,000 tons of shipping was in the hands of the Reparation Commission. When the Reparation Commission was obliged to estimate values for the Schedule of Payments of May 1, 1921, it recognized actual tonnage delivered as 2,187,000 gross tons. As of January 10, 1922 1,755,000 tons of ex-German shipping captured, seized, or otherwise obtained was in the hands of Allied and Associated Powers; of this tonnage 579,000 tons was in the hands of the United States Government which had not ratified the Treaty of Peace.

The Reparation Commission had an extraordinarily difficult time in determining, under paragraph 5 (d), the value of tonnage delivered for reparation account. In January 1921 the German Government requested that it be credited with 7,300,000,000 gold marks for the delivery of 4,625,000 gross tons of shipping, which would work out at about $480 a ton. They withdrew this memorandum and in May put in another estimate of 5,688,000,000 gold marks for 3½ million tons.

The cost of shipping construction had advanced rapidly during the war, and the problem of valuation was, therefore, very complex. The commission solved the problem by crediting ships handed over during the armistice period at the actual market price per ton on January 10, 1920, and on the date of physical delivery in the case of ships handed over at later dates. From these prices there were [Page 494]deducted the expenses of delivery, conditioning, and repairs. The credit to Germany on this basis was tentatively fixed at 750,000,000 gold marks, while 10,250,000 gold marks was credited for 200,000 gross tons delivered between May 1 and October 31, 1921.

A further difficulty arose by reason of article 6 of the Inter-Allied Agreement of Spa, July 16, 1920, which permitted sale by the British Empire of ships on the open market, the proceeds of which were to be brought to reparation account. Between September 1920 and January 1922 Lord Inchcape sold 418 vessels aggregating 1,850,000 gross tons for more than £20,000,000 on the British market with an administrative charge of less than one seventh of one per cent. The difference between the receipts from this transaction and the valuations of the Reparation Commission was adjusted by article 12 of the Inter-Allied Financial Agreement of March 11, 1922 which provided for balancing the account with series “C” bonds of the 1921 Schedule of Payments.

1.

Germany recognises the right of the Allied and Associated Powers to the replacement, ton for ton (gross tonnage) and class for class, of all merchant ships and fishing boats lost or damaged owing to the war.

Nevertheless, and in spite of the fact that the tonnage of German shipping at present in existence is much less than that lost by the Allied and Associated Powers in consequence of the German aggression, the right thus recognised will be enforced on German ships and boats under the following conditions:

The German Government, on behalf of themselves and so as to bind all other persons interested, cede to the Allied and Associated Governments the property in all the German merchant ships which are of 1,600 tons gross and upwards; in one-half, reckoned in tonnage, of the ships which are between 1,000 tons and 1,600 tons gross; in one-quarter, reckoned in tonnage, of the steam trawlers; and in one-quarter, reckoned in tonnage, of the other fishing boats.

2.

The German Government will, within two months of the coming into force of the present Treaty, deliver to the Reparation Commission all the ships and boats mentioned in paragraph 1.

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3.

The ships and boats mentioned in paragraph 1 include all ships and boats which (a) fly, or may be entitled to fly, the German merchant flag; or (b) are owned by any German national, company or corporation or by any company or corporation belonging to a country other than an Allied or Associated country and under the control or direction of German nationals; or (c) are now under construction (1) in Germany, (2) in other than Allied or Associated countries for the account of any German national, company or corporation.

4.

For the purpose of providing documents of title for the ships and boats to be handed over as above mentioned, the German Government will:

(a)
Deliver to the Reparation Commission in respect of each vessel a bill of sale or other document of title evidencing the transfer to the Commission of the entire property in the vessel, free from all encumbrances, charges and liens of all kinds, as the Commission may require;
(b)
Take all measures that may be indicated by the Reparation Commission for ensuring that the ships themselves shall be placed at its disposal.

Note to VIII, Annex III (4)

Documents of title were issued by the German Government which, through the Ministry of Restoration issued a declaration on February 18, 1920 asserting title to the ships of German registry. Mortgages and liens against them were canceled in virtue of a law of August 31, 1919 and a declaration of the Ministry of Restoration dated February 28, 1920. Cession of a ship with its accessories was made by the German Government to the Reparation Commission “free and clear of all claims, mortages, as well as of all liens and other charges”. The Reparation Commission was guaranteed and indemnified as against all persons and claims whatsoever.

An agreement was concluded on June 7, 1920 between the Reparation Commission and the representative of the United States for the acquisition by the Standard Oil Company of New Jersey of eight tankers registered by the Deutsch-Amerikanische Petroleum Gesellschaft (Foreign Relations, 1920, ii, 598). This was modified by a further agreement of August 23, 1920.

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5.

As an additional part of reparation, Germany agrees to cause merchant ships to be built in German yards for the account of the Allied and Associated Governments as follows:

(a)
Within three months of the coming into force of the present Treaty, the Reparation Commission will notify to the German Government the amount of tonnage to be laid down in German shipyards in each of the two years next succeeding the three months mentioned above.
(b)
Within two years of the coming into force of the present Treaty, the Reparation Commission will notify to the German Government the amount of tonnage to be laid down in each of the three years following the two years mentioned above.
(c)
The amount of tonnage to be laid down in each year shall not exceed 200,000 tons, gross tonnage.
(d)
The specifications of the ships to be built, the conditions under which they are to be built and delivered, the price per ton at which they are to be accounted for by the Reparation Commission, and all other questions relating to the accounting, ordering, building and delivery of the ships, shall be determined by the Commission.

Note to VIII, Annex III (5)

Up to December 31, 1922 2,598,196 gross tons of shipping, valued at 660,685,416 gold marks, had been delivered. A total deliverable tonnage of 3,204,276 included 639 German ships and 150 others aggregating 584,721 gross tons of ex-Austro-Hungarian shipping. Creditors did not exercise their right to demand construction by Germany for replacement after 1922.

Under paragraphs 1–4 a total of 710,917,640 gold marks net of shipping had been delivered outside of the Dawes Plan up to January 20, 1930 and 545,532 gold marks worth under paragraph 5. Of the total, 432,037,816 gold marks was carried to the “C” bond account. The gross receipts, before deduction of costs of delivery, repair and sale and of non-credited armistice deliveries, were 841,318,200 gold marks.

6.

Germany undertakes to restore in kind and in normal condition of upkeep to the Allied and Associated Powers, within two months of the coming into force of the present Treaty, in accordance with [Page 497]procedure to be laid down by the Reparation Commission, any boats and other movable appliances belonging to inland navigation which since August 1, 1914, have by any means whatever come into her possession or into the possession of her nationals, and which can be identified.

With a view to make good the loss in inland navigation tonnage, from whatever cause arising, which has been incurred during the war by the Allied and Associated Powers, and which cannot be made good by means of the restitution prescribed above, Germany agrees to cede to the Reparation Commission a portion of the German river fleet up to the amount of the loss mentioned above, provided that such cession shall not exceed 20 per cent. of the river fleet as it existed on November 11, 1918.

The conditions of this cession shall be settled by the arbitrators referred to in Article 339 of Part XII (Ports, Waterways and Railways) of the present Treaty, who are charged with the settlement of difficulties relating to the apportionment of river tonnage resulting from the new international regime applicable to certain river systems or from the territorial changes affecting those systems.

Note to VIII, Annex III (6)

The Reparation Commission interpreted the language of this paragraph as excluding river tonnage appertaining to territories or their nationals which were detached from Germany by cession or plebiscite and river craft deliverable by way of restitution.

River boats without means of propulsion were credited at 37 gold marks per ton and those with propulsive machinery at 203.5 gold marks per horsepower.

Deliveries of inland water craft and installations were credited at 23,920,530 gold marks. In addition, inland water craft on the Danube and Elbe assigned to Czechoslovakia was valued at 11,256,741 gold marks. Poland received 415,171 gold marks worth of river craft.

Note to VIII, Annex III (6, par. 2)

The Italian and German Governments on September 21, 1921 concluded an agreement, effective on October 22, by which Germany was to hand over 8 1000-ton barges, 3 suction dredges of 150 registered horsepower, 6 bucket dredges of 110 registered horsepower, 6 tugs of 250 and 4 of 150 registered horsepower. These were in compensation for 17,246 tons of ordinary boats, and 2320 registered horsepower of passenger boats, tugs, and bucket dredgers.

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The agreement with France signed on June 6, 1921 fixed the French losses at 540,000 tons. The agreement called for the delivery of barges of several types, passenger boats, tugs, floating cranes, conveyors and a shipyard at Duisburg.

The agreement with Belgium signed on June 25, 1921 fixed the Belgian losses at the equivalent of 295,000 tons of ordinary boats, plus 2334 horsepower of movable appliances for hydraulic works. The material to be handed over consisted of barges, Rhine boats and tugs of various types, some of which were delivered under the award of the arbitrator, some substituted for original requirements, some to be built and a tonnage of 98,500 of material for construction.

All three agreements entered into force October 22, 1921.

7.

Germany agrees to take any measures that may be indicated to her by the Reparation Commission for obtaining the full title to the property in all ships which have during the war been transferred, or are in process of transfer, to neutral flags, without the consent of the Allied and Associated Governments.

Note to VIII, Annex III (7)

Germany and Poland signed at Bromberg on November 2, 1920 an agreement concerning the restitution of German ships which had been detained by the Polish Government (2 League of Nations Treaty Series, p. 277).

By a ruling in November 1920 the Reparation Commission permitted to stand the transfer of ships under a neutral flag, provided the sale constituted a regular commercial operation in good faith.

8.

Germany waives all claims of any description against the Allied and Associated Governments and their nationals in respect of the detention, employment, loss or damage of any German ships or boats, exception being made of payments due in respect of the employment of ships in conformity with the Armistice Agreement of January 13, 1919, and subsequent Agreements.

The handing over of the ships of the German mercantile marine must be continued without interruption in accordance with the said Agreement.

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Note to VIII, Annex III (8)

An armistice convention of January 17, 1919 dealt with the revictualing of Europe and the use of German tonnage. The first text of that convention was presented for discussion at the first meeting of the Shipping Committee of the Armistice Commission at Trèves on January 15, 1919 (Der Waffenstillstand, 1918–19: das Dokumenten Material der Waffenstillstands-Verhandlungenii, 13, 37). A third negotiation was held at Brussels on March 13–14, 1919 and resulted in a signed memorandum to which appendices of the Finance and Shipping Subcommittees were attached (ibid., p. 179). At the first meeting of the Shipping Subcommittee on March 13 lists of available German ships were introduced and conditions under which the ships would be taken over were discussed, a conclusive statement being reached on the 14th (ibid., pp. 93, 199).

9.

Germany waives all claims to vessels or cargoes sunk by or in consequence of naval action and subsequently salved, in which any of the Allied or Associated Governments or their nationals may have any interest either as owners, charterers, insurers or otherwise, notwithstanding any decree of condemnation which may have been made by a Prize Court of Germany or of her allies.