Office of the Historian

Section III.—Debts (Art. 296)

Note to X, sec. III

Germany accepted the principle of a clearing system for private debts, but objected that the treaty did not establish reciprocity and that the parties were deprived of freedom of communication and the free right to decide what to do (Foreign Relations, The Paris Peace Conference, 1919, vi, 885). Many individual provisions of article 296 were criticized in detail.

The Allies declined to admit that reciprocity was generally denied, asserting that it was complete as regards individuals, except in the matter of non-payment to Germany of balances due by the Allied and Associated Powers (ibid., p. 980). One minor change was conceded in article 296 (e) by substituting one month for six. A German objection to applying the usual procedure to debts contracted in Alsace-Lorraine before November 1918 (instead of “before the war”) was overruled on the ground that the debts concerned only German nationals and Alsace-Lorrainers who acquired French nationality.

For special application to Alsace-Lorraine, see articles 72 and 74.

For the inapplication to Siam of this article, see note under article 137.

Article 296.

There shall be settled through the intervention of Clearing Offices to be established by each of the High Contracting Parties within three months of the notification referred to in paragraph (e) hereafter the following classes of pecuniary obligations:

(1) Debts payable before the war and due by a national of one of the Contracting Powers, residing within its territory, to a national of an Opposing Power, residing within its territory;

(2) Debts which became payable during the war to nationals of one Contracting Power residing within its territory and arose out of transactions or contracts with the nationals of an Opposing Power, resident within its territory, of which the total or partial execution was suspended on account of the declaration of war;

Note to X, 296 (2)

Great Britain concluded with Belgium and France conventions applying the provisions of section III of part X and article 296 (1) and (2), as to enemy debts, to Belgian and French nationals resident within the United Kingdom, Canada, New Zealand, and India, British colonies not possessing responsible government, and British [Page 582] protectorates with the exception of Egypt. The conventions were signed at London, July 20, 1921 and were effective September 30 (8 League of Nations Treaty Series, pp. 115, 301).

(3) Interest which has accrued due1 before and during the war to a national of one of the Contracting Powers in respect of securities issued by an Opposing Power, provided that the payment of interest on such securities to the nationals of that Power or to neutrals has not been suspended during the war;

Text of May 7:

Interest which has accrued due during the war to a national of one of the Contracting Powers in respect of securities issued by an Opposing Power, provided that the payment of interest on such securities to the nationals of that Power or to neutrals has not been suspended during the war.

(4) Capital sums which have become payable before and during the war to nationals of one of the Contracting Powers in respect of securities issued by one of the Opposing Powers, provided that the payment of such capital sums to nationals of that Power or to neutrals has not been suspended during the war.

Text of May 7:

Capital sums which have become payable during the war to nationals of one of the Contracting Powers in respect of securities issued by one of the Opposing Powers, provided that the payment of such capital sums to nationals of that Power or to neutrals has not been suspended during the war.

The proceeds of liquidation of enemy property, rights and interests mentioned in Section IV and in the Annex thereto will be accounted for through the Clearing Offices, in the currency and at the rate of exchange hereinafter provided in paragraph (d), and disposed of by them under the conditions provided by the said Section and Annex.

The settlements provided for in this Article shall be effected according to the following principles and in accordance with the Annex to this Section:

(a) Each of the High Contracting Parties shall prohibit, as from the coming into force of the present Treaty, both the payment and the acceptance of payment of such debts, and also all communications [Page 583] between the interested parties with regard to the settlement of the said debts otherwise than through the Clearing Offices;

(b) Each of the High Contracting Parties shall be respectively responsible for the payment of such debts due by its nationals, except in the cases where before the war the debtor was in a state of bankruptcy or failure, or had given formal indication of insolvency or where the debt was due by a company whose business has been liquidated under emergency legislation during the war. Nevertheless, debts due by the inhabitants of territory invaded or occupied by the enemy before the Armistice will not be guaranteed by the States of which those territories form a part;

(c) The sums due to the nationals of one of the High Contracting Parties by the nationals of an Opposing State will be debited to the Clearing Office of the country of the debtor, and paid to the creditor by the Clearing Office of the country of the creditor;

(d) Debts shall be paid or credited in the currency of such one of the Allied and Associated Powers, their colonies or protectorates, or the British Dominions or India, as may be concerned. If the debts are payable in some other currency they shall be paid or credited in the currency of the country concerned, whether an Allied or Associated Power, Colony, Protectorate, British Dominion or India, at the pre-war rate of exchange.

For the purpose of this provision the pre-war rate of exchange shall be defined as the average cable transfer rate prevailing in the Allied or Associated country concerned during the month immediately preceding the outbreak of war between the said country concerned and Germany.

If a contract provides for a fixed rate of exchange governing the conversion of the currency in which the debt is stated into the currency of the Allied or Associated country concerned, then the above provisions concerning the rate of exchange shall not apply.

In the case of new States the currency in which and the rate of exchange at which debts shall be paid or credited shall be determined by the Reparation Commission provided for in Part VIII (Reparation);

(e) The provisions of this Article and of the Annex hereto shall not apply as between Germany on the one hand and any one of the Allied and Associated Powers, their colonies or protectorates, or any one of the British Dominions or India on the other hand, unless within a period of one month from the deposit of the ratification of the present Treaty by the Power in question, or of the ratification on behalf of such Dominion or of India, notice to that effect is given [Page 584] to Germany by the Government of such Allied or Associated Power or of such Dominion or of India as the case may be;

Text of May 7:

The provisions of this Article and of the Annex hereto shall not apply as between Germany on the one hand and any one of the Allied and Associated Powers, their colonies or protectorates, or any one of the British Dominions or India on the other hand, unless within a period of six months from the coming into force of the present Treaty notice to that effect is given to Germany by the Government of such Allied or Associated Power or of such Dominion or of India as the case may be.

(f) The Allied and Associated Powers who have adopted this Article and the Annex hereto may agree between themselves to apply them to their respective nationals established in their territory so far as regards matters between their nationals and German nationals. In this case the payments made by application of this provision will be subject to arrangements between the Allied and Associated Clearing Offices concerned.

Note to X, 296 (4) (f)

Belgium and France concluded a convention for the application of these provisions to their respective nationals at Paris, July 24, 1920 (1 League of Nations Treaty Series, p. 311).

France and Greece concluded a convention defining the power and duties of their respective offices at Paris on August 27, 1921 (8 League of Nations Treaty Series, p. 137). As in other cases, notice of the convention was given to Germany, and the six-month period laid down in annex 5, paragraph 1, began from the date of that notice.

Note to X, 296, in toto

By an agreement between the German Government and the Belgian, British, French, Greek, Italian, and Siamese Clearing Offices, signed at London, June 10, 1921, the final date for submitting claims of nationals was September 30, 1921 (8 League of Nations Treaty Series, p. 297).

For the law on the Clearing Office of the Reich (Reichsausgleichsgesetz) see Reichsgesetzblatt, 1923, Teil i, 1135.

For treatment of debts of United States nationals, see note under article 304.

An agreement between the German Government and the Saar Governing Commission signed at Berlin, September 15 and Saarbrucken, September 20, 1924 concerned the application in the Saar [Page 585] Territory of the procedure for the regulation of pre-war debts and claims by way of compensation (30 League of Nations Treaty Series, p. 127).

An agreement regarding the complete and final settlement of the question of reparation was signed at The Hague on January 20, 1930 (104 League of Nations Treaty Series, p. 243) between Germany, Belgium, Great Britain and Northern Ireland, Canada, Australia, New Zealand, Union of South Africa, France, India, Greece, Italy, Japan, Poland, Portugal, Rumania, Czechoslovakia, and Yugoslavia.

Article 3 of the agreement gives effect to section 143 of the report of the Committee of Experts, June 7, 1929, officially known as the New Plan and popularly called the Young Plan, which reads as follows:

“The creditor Governments, under this plan, will be reducing the whole body of their claims arising out of the war or under the treaty of Versailles to a considerable extent. The experts of the creditor countries are aware that past transactions have given or may give rise to claims by Germany, some of which are still unsettled, and, while they are not able to go into the merits of these claims, they consider that the creditor Governments are fully entitled to expect that Germany should waive them in consideration of the consolidation of the creditors’ claims at a reduced figure. Any other course would be inconsistent with their intention that, just as the new annuities cover all the claims defined in Part XI of the Dawes Plan, so they should be paid free of deduction in respect of any past transactions. The committee recognizes, however, that this is entirely a matter for the Governments to deal with.”

Article 3 B of the agreement of January 20, 1930 reads as follows:

  • “(a) In execution of paragraph 143 of the Experts’ Report of June 7, 1929, on the understanding that the following declaration is to be considered as a full compliance with the requirements of that paragraph as to a waiver, Germany declares that she waives every claim as defined by the following list, whether for a payment or for property, which she may have addressed or might hereafter address to the Reparation Commission or to any Creditor Power signatory to the present agreement for any transaction prior in date to the signature of this agreement, connected with the World War, the Armistice conventions, the treaty of Versailles or any agreements made for their execution: [Page 586]
    • “(1) claims relating to property or pecuniary rights of prisoners of war in so far as they have not already been settled by special agreements;
    • “(2) claims seeking to obtain the reimbursement of payments made under paragraph 11 of the Annex to Article 296 of the treaty of Versailles;
    • “(3) claims relating to loans issued by the former German colonies;
    • “(4) any claims, whether for a payment or for property, which the German Government has presented or might present for its own account other than state claims notified, under the clearing procedure provided for under Articles 296 and 72 of the treaty of Versailles, by the Creditor to the Debtor Office.
  • “(b) By way of reciprocity the Creditor Powers accept in conformity with the recommendation of paragraph 96 of the Experts’ Report of June 7, 1929, the payment in full of the annuities fixed thereby as a final discharge of all the liabilities of Germany still remaining undischarged and waive every claim additional to those annuities, either for a payment or for property, which has been addressed or might be addressed to Germany for any past transaction falling under the same heads of claim as those appearing under (1) to (4) above.”

Part 9 of the New (Young) Plan of June 7, 1929 called for “a general liquidation of the financial questions raised by the war and the subsequent Treaty of Peace, a liquidation which alone can ensure the definite return of Europe to normal financial and economic conditions”. Nine instruments to carry out this recommendation, with the consequent effect of halting the execution of part X of this treaty, were concluded as follows by Germany:

Agreement with Belgium concerning German property, rights and interests in Belgium, Berlin, July 13, 1929;

Agreement with Belgium for the definitive regulation of questions resulting from part X, sections III–VII, of the Treaty of Versailles, Brussels, January 16, 1930;

Arrangement with Poland, Warsaw, October 31, 1929;

Agreement with the United Kingdom, London, December 28, 1929;

[Page 587]

Agreement with France concerning the liquidation of German property, Paris, December 31, 1929;

Agreement with Canada, The Hague, January 14, 1930;

Agreement with Australia regarding the release of property, rights, and interests of German nationals subject to the charge created in pursuance of the Treaty of Versailles, The Hague, January 17, 1930;

Agreement with New Zealand regarding the release of property, rights, and interests of German nationals subject to the charge created in pursuance of the Treaty of Versailles, The Hague, January 17, 1930;

Agreement with Italy for the definitive regulation of any unsolved questions relating to part X of the Treaty of Versailles, The Hague, January 20, 1930.

The German law putting these agreements in force with respect to Germany was promulgated on March 18, 1930 (Reichsgesetzblatt, 1930, ii, 539). All of them went into force with the New (Young) Plan, May 17, 1930.

[Page 588]

“ENEMY DEBTS” AS AT MARCH 31, 19321

(British Commonwealth accounts complete; Belgian and Italian figures not available)

Owing to Allied Creditors by German Debtors

Claims notified to German Clearing Office Admitted by German Clearing Office Contested, withdrawn, or disallowed by Mixed Arbitral Tribunal Under consideration Cash
Country No. Amount No. Total (Principal and interest) From German Clearing Office Paid to Allied Creditors
Great Britain 94,833 £ 67,348,761 74,916 £ 52,030,440 £ 25,025,577 £ 30,907 £ 23,659,677 £ 52,030,440
France—
Paris Office 126,352 Fcs. 1,426,207,597 92,748 Fcs. 904,787,322 Fcs. 605,004,839 Fcs. 58,257,768 Fcs. 375,638,335 Fcs. 893,093,673
Strasbourg Office 203,409 Fcs. 1,439,327,417 184,175 Fcs. 896,267,252 Fcs. 569,201,741 Fcs. 27,938,538 Fcs. 251,288,517 Fcs. 887,319,385
Greece 2,005 Dr. 318,111,907 576 Dr. 36,736,088 Dr. 284,767,393 Dr. 465,000 Dr. 912,984 Dr. 24,811,185
Siam 75 Ticals 1,131,464 64 Ticals 295,885 Ticals 835,579 Nil Ticals 188,163 Ticals 295,885
[Page 589]

Owing to German Creditors by Allied Debtors

Claims notified to Allied Clearing Office Admitted to German Clearing Office Contested Under consideration
Country No. Amount No. Total (Principal and interest)
Great Britain 266,191 £ 63,199,925 173,892 £ 22,218,709 £ 46,485,432 Nil
France—
Paris office 179,931 Fcs. 784,047,990 162,289 Fcs. 380,347,363 Fcs. 425,464,117 Fcs. 50,776,964
Strasbourg office 163,607 Fcs. 424,082,992 145,219 Fcs. 120,456,747 Fcs. 298,414,469 Fcs. 15,258,010
Greece 7,012 Dr. 118,452,662 5,929 Dr. 21,838,403 Dr. 98,233,863 Dr. 166,266
Siam 495 Ticals 2,785,375 390 Ticals 454,920 Ticals 2,330,455 Nil
[Page 590]

The credit balance of the Greek Clearing Office closed June 30, 1928 at 28,186,455.43 drachmas, charged to the German Government.

Contents

  1. The French text of this clause reads: “3° Les intérèts échus avant et pendant la guerre, et dus à un ressortissant d’une des Puissances Contractantes”…↩
  2. Adapted from United Kingdom, 12th Annual Report of the Controller of the Clearing Office, 12, 13 (51–22–0–32).↩