Section IV.—Property, rights and interests (Art. 297 and 298)

Note to X, sec. IV

On May 22 the German delegation registered various “objections of principle” to the provisions of the treaty with respect to the treatment of private property (Foreign Relations, The Paris Peace Conference, 1919, v, 865). The use of private property to meet the obligations of the German Government was not only “illegal” in itself, but there were no provisions for reciprocity. Moreover German private property in Russia, China, Austria, Hungary, Bulgaria, and Turkey was to be made available by empowering the Reparation Commission to demand from the German Government the immediate expropriation of these holdings, and the proceeds of these sales could be used for the settlement not only of private claims against Germany and German nationals, but even of private claims against nationals of Germany’s allies, e.g. of British nationals against the Turkish Government and Turkish nationals. All these provisions were declared “opposed to the most elementary conceptions of a plea of Right”. The liquidation by the Allies of German property in their own countries was declared to be confiscatory and calculated to lead to “a general undermining of the fundamental principles of international legal intercourse”.

The Allies, in their general reply of June 16, asserted that the “immediate resources” of Germany were not adequate to meet the obligations of Germany and that just as they had sold foreign investments to meet their foreign obligations, “Germany must do what she has forced her opponents to do” (ibid., vi, 978). The German note was quoted to show that Germany recognized the necessity of doing so. The lack of reciprocity referred only to post-war measures, “exceptional war measures being confirmed on both sides”. For the rest, “the compensation to the German property owners must [Page 597] be made by Germany itself”. The principle of joint liability against which Germany complained had been initiated by Germany itself (e.g. by the seizure of French credit balances in Belgian banks). Nevertheless, the Allies would omit the charge on the property of German nationals to satisfy the unpaid debts of nationals of Germany’s allies. The charge that the Allied demands amounted to confiscation was rejected, since all proceeds from the seizure of German property would be applied to reducing Germany’s debt, and the German Government was required to compensate its own nationals.

In the “Observations” of May 29, the German delegation complained that several states—France, Belgium, China, and Guatemala—had taken advantage of the armistice to institute forcible liquidation proceedings against German private property before agreement had been reached by the treaty (ibid., p. 889). Exceptions were taken to many details of article 297 and the annex. Finally Germany expected that German institutions of research and education in Allied territories would be left with their landed properties.

In reply the Allies offered explanations of the various articles mentioned and argued that they were not unjust (ibid., p. 982). The claim that the property of German institutions for research and education should be wholly exempt from liquidation was rejected “in view of the past activities of some of the institutions which nominally exist for the above purposes”, but “full regard would be paid to the interests of bona fide institutions”. If persons in the Allied States had been guilty of “corrupt or fraudulent machinations” in the liquidation of German property, the Allied Governments would welcome information and evidence from the German Government. Any disputes as regards the amount of claims by Allied nationals in respect of acts committed by Germany between July 31, 1914 and the date at which an Allied or Associated State entered the war could be referred to Gustave Ador, president of the Swiss Confederation in 1919, or to an arbitrator appointed by the Mixed Arbitral Tribunal.

For special application to Alsace-Lorraine, see articles 73 and 74.

Article 297.

The question of private property, rights and interests in an enemy country shall be settled according to the principles laid down in this Section and to the provisions of the Annex hereto.

[Page 598]

(a) The exceptional war measures and measures of transfer (defined in paragraph 3 of the Annex hereto) taken by Germany with respect to the property, rights and interests of nationals of Allied or Associated Powers, including companies and associations in which they are interested, when liquidation has not been completed, shall be immediately discontinued or stayed and the property, rights and interests concerned restored to their owners, who shall enjoy full rights therein in accordance with the provisions of Article 298.

(b) Subject to any contrary stipulations which may be provided for in the present Treaty, the Allied and Associated Powers reserve the right to retain and liquidate all property, rights and interests belonging at the date of the coming into force of the present Treaty to German nationals, or companies controlled by them, within their territories, colonies, possessions and protectorates, including territories ceded to them by the present Treaty.

Text of May 7:

Subject to any contrary stipulations which may be provided for in the present Treaty, the Allied and Associated Powers reserve the right to retain and liquidate all property, rights and interests of German nationals, or companies controlled by them, within their territories, colonies, possessions and protectorates including territories ceded to them by the present Treaty.

The liquidation shall be carried out in accordance with the laws of the Allied or Associated State concerned, and the German owner shall not be able to dispose of such property, rights or interests nor to subject them to any charge without the consent of that State.

German nationals who acquire ipso facto the nationality of an Allied or Associated Power in accordance with the provisions of the present Treaty will not be considered as German nationals within the meaning of this paragraph.

(c) The price or the amount of compensation in respect of the exercise of the right referred to in the preceding paragraph (b) will be fixed in accordance with the methods of sale or valuation adopted by the laws of the country in which the property has been retained or liquidated.

(d) As between the Allied and Associated Powers or their nationals on the one hand and Germany or her nationals on the other hand, all the exceptional war measures, or measures of transfer, or acts done or to be done in execution of such measures as defined [Page 599] in paragraphs 1 and 3 of the Annex hereto shall be considered as final and binding upon all persons except as regards the reservations laid down in the present Treaty.

(e) The nationals of Allied and Associated Powers shall be entitled to compensation in respect of damage or injury inflicted upon their property, rights or interests, including any company or association in which they are interested, in German territory as it existed on August 1, 1914, by the application either of the exceptional war measures or measures of transfer mentioned in paragraphs 1 and 3 of the Annex hereto. The claims made in this respect by such nationals shall be investigated, and the total of the compensation shall be determined by the Mixed Arbitral Tribunal provided for in Section VI or by an Arbitrator appointed by that Tribunal. This compensation shall be borne by Germany, and may be charged upon the property of German nationals within the territory or under the control of the claimant’s State. This property may be constituted as a pledge for enemy liabilities under the conditions fixed by paragraph 4 of the Annex hereto. The payment of this compensation may be made by the Allied or Associated State, and the amount will be debited to Germany.

Note to X, 297 (e)

An agreement between the British and German Governments relating to the operation of this provision was signed at London, November 23, 1921 (8 League of Nations Treaty Series, p. 381).

(f) Whenever a national of an Allied or Associated Power is entitled to property which has been subjected to a measure of transfer in German territory and expresses a desire for its restitution, his claim for compensation in accordance with paragraph (e) shall be satisfied by the restitution of the said property if it still exists in specie.

In such case Germany shall take all necessary steps to restore the evicted owner to the possession of his property, free from all encumbrances or burdens with which it may have been charged after the liquidation, and to indemnify all third parties injured by the restitution.

If the restitution provided for in this paragraph cannot be effected, private agreements arranged by the intermediation of the Powers concerned or the Clearing Offices provided for in the Annex to Section III may be made, in order to secure that the national of the Allied or Associated Power may secure compensation [Page 600] for the injury referred to in paragraph (e) by the grant of advantages or equivalents which he agrees to accept in place of the property, rights or interests of which he was deprived.

Through restitution in accordance with this Article, the price or the amount of compensation fixed by the application of paragraph (e) will be reduced by the actual value of the property restored, account being taken of compensation in respect of loss of use or deterioration.

(g) The rights conferred by paragraph (f) are reserved to owners who are nationals of Allied or Associated Powers within whose territory legislative measures prescribing the general liquidation of enemy property, rights or interests were not applied before the signature of the Armistice.

(h) Except in cases where, by application of paragraph (f), restitutions in specie have been made, the net proceeds of sales of enemy property, rights or interests wherever situated carried out either by virtue of war legislation, or by application of this Article, and in general all cash assets of enemies, shall be dealt with as follows:

(1) As regards Powers adopting Section III and the Annex thereto, the said proceeds and cash assets shall be credited to the Power of which the owner is a national, through the Clearing Office established thereunder; any credit balance in favour of Germany resulting therefrom shall be dealt with as provided in Article 243.

Note to X, 297(h) (1)

A proposal of agreement between Siam and Germany submitted to the Reparation Commission on November 15, 1922 was approved provisionally if ratified before December 31, 1924. By this agreement Siam would renounce any claim to credits under part VIII of the treaty and turn over to the Reparation Commission the Clearing Office balances under article 296, annex, paragraph 2, and article 297 (h) (1), after deduction of at least 1,500,000 ticals to pay for property of the Siamese Government seized in Germany during the war. Though the agreement was not ratified, Siam turned over to the Reparation Commission 3,249,868.14 gold marks. The Arbitral Tribunal of Interpretation on May 29, 1928 decided that these payments were not to be reckoned against the annuities of the Experts’ (Dawes) Plan, since they did not constitute an asset of value in the experts’ estimate of what Germany could pay.

An annex to the provisional economic arrangement between Germany and Siam signed at Berlin, February 28, 1924, and in force [Page 601] February 15, 1925 (32 League of Nations Treaty Series, p. 399), touches the matter in section I, which reads:

(2) As regards Powers not adopting Section III and the Annex thereto, the proceeds of the property, rights and interests, and the cash assets, of the nationals of Allied or Associated Powers held by Germany shall be paid immediately to the person entitled thereto or to his Government; the proceeds of the property, rights and interests, and the cash assets, of German nationals received by an Allied or Associated Power shall be subject to disposal by such Power in accordance with its laws and regulations and may be applied in payment of the claims and debts defined by this Article or paragraph 4 of the Annex hereto. Any property, rights and interests or proceeds thereof or cash assets not used as above provided may be retained by the said Allied or Associated Power and if retained the cash value thereof shall be dealt with as provided in Article 243.

In the case of liquidations effected in new States, which are signatories of the present Treaty as Allied and Associated Powers, or in States which are not entitled to share in the reparation payments to be made by Germany, the proceeds of liquidations effected by such States shall, subject to the rights of the Reparation Commission under the present Treaty, particularly under Articles 235 [Page 602] and 260, be paid direct to the owner. If on the application of that owner, the Mixed Arbitral Tribunal, provided for by Section VI of this Part, or an arbitrator appointed by that Tribunal, is satisfied that the conditions of the sale or measures taken by the Government of the State in question outside its general legislation were unfairly prejudicial to the price obtained, they shall have discretion to award to the owner equitable compensation to be paid by that State.

Note to X, 297 (h) (2)

For an interpretation of this section by the Department of State with respect to proposed Haitian legislation, see Foreign Relations, 1921, ii, 234.

For the states entitled to share in reparation, see note under article 233.

See article 260 for the relation of liquidations under its terms to the application of this provision. The rule was applied on March 4, 1922 to Czechoslovakia and Poland.

(i) Germany undertakes to compensate her nationals in respect of the sale or retention of their property, rights or interests in Allied or Associated States.

(j) The amount of all taxes and imposts upon capital levied or to be levied by Germany on the property, rights and interests of the nationals of the Allied or Associated Powers from November 11, 1918, until three months from the coming into force of the present Treaty, or, in the case of property, rights or interests which have been subjected to exceptional measures of war, until restitution in accordance with the present Treaty, shall be restored to the owners.

Note to X, 297 (j)

The Conference of Ambassadors on March 26, 1924 decided to represent to Germany that its legislation on clearing offices violated this provision.

Note to X, 297, in toto

German estimates of the transfers of values required by the economic provisions of part X were large. In pre-war currency the costs of liquidating property, rights, and interests were said to reach 8,000,000,000 marks and the Russian holdings relinquished were set at 1,500,000,000 marks. Germany made much of a reputed depreciation of 1,500,000,000 marks in values of property, rights, and interests because of the liquidations required by the treaty.

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French and German Bureaus of Private Property and Interests were established for liquidation and restitution by an exchange of notes effected at Berlin, March 20–25, 1920 (1 League of Nations Treaty Series, p. 347). The notes gave effect to resolutions of a Franco-German commission dated February 6, 1920.

Claims of Liberia were filed at $3,977,877.92 and were settled on May 5, 1930 for £29,121 15s. 10½d. by retention of all German property liquidated by Liberia; out of the proceeds of this property £9,410 10s. 3d. had been allocated to meet Liberian claims under part X, section IV, annex, paragraph 4.

An agreement between Germany and Portugal signed at Lisbon, June 29, 1936 and in force December 18 released German property, rights, and interests from the further operation of articles 297, 300 (a), 301, and 306 (Reichsgesetzblatt, 1937, ii, 8).

[Page 604]

COMPENSATION IN RESPECT OF PROPERTY, RIGHTS AND INTERESTS, AS AT MARCH 31, 19321

Claims by Allied Nationals by Reason of Damage Inflicted in German Territory

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

Credited to Germany

Country		Notified to Germany (297 h and e)	Liquidations (297 h)	Property restored (297 f)	Compensation by Mixed Tribunal or agreement (297 e)	Total	German property realized in Allied territory
Great Britain		£ 68,985,114	£ 20,027,734	£ 118,037	£ 14,472,270	£ 34,618,041	£ 66,000,000
France—
Paris Office	}	Fcs. 1,181,191,025	Fcs. 303,435,388	Fcs. 83,742,991	Fcs. 775,459,785	Fcs. 1,162,638,164	Fcs. 2,665,410,098
Strasbourg Office
Siam			Ticals 31,010			Ticals 31,010	Ticals 4,089,266

[Page 605]

Article 298.

Germany undertakes, with regard to the property, rights and interests, including companies and associations in which they were interested, restored to nationals of Allied and Associated Powers in accordance with the provisions of Article 297, paragraph (a) or (f):

(a)

to restore and maintain, except as expressly provided in the present Treaty, the property, rights and interests of the nationals of Allied or Associated Powers in the legal position obtaining in respect of the property, rights and interests of German nationals under the laws in force before the war;

(b)

not to subject the property, rights or interests of the nationals of the Allied or Associated Powers to any measures in derogation of property rights which are not applied equally to the property, rights and interests of German nationals, and to pay adequate compensation in the event of the application of these measures.

Note to X, 298

The Reparation Commission denied on February 25, 1925 a claim of the German Government to credit its payments to German nationals under articles 260 or 297 to the annuities of the Experts’ (Dawes) Plan. They did not, thought the commission, constitute payments emanating from Germany considered as an economic entity nor payments representing an economic advantage during the period of the plan to an Allied or Associated Government or national. Readjustments of the national German economy between that government and its nationals were not to be credited.

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