CFM Files: Lot M88: Box 86: CFM (47) (L) Documents

Proposal by the United Kingdom Delegation to the Council of Foreign Ministers 83

CFM(47) (L)7

Supplementary Principles To Govern the Treatment of Germany

The U.K. Delegation circulates herewith the paper which it tabled originally in Moscow under reference CFM/47/M/89.84

In the text of Part III of the Potsdam Agreement published on 2nd August, 1946,85 were laid down the aims of the Allied occupation of Germany and the political and economic principles to govern the treatment of Germany in the initial control period.

The Controlling Powers reaffirm their acceptance of the Principles contained in this Agreement. It is their purpose to extirpate German militarism and Nazism. It is not their intention to destroy or enslave the German people. It is their intention that the German people should reconstruct their life on a democratic and peaceful basis.

They consider, however, that the development of events calls for a further statement of the principles which should guide them during the second phase, which is now beginning, of the initial control period. They regard this further statement of principles as supplementing in the light of experience the principles contained in the Potsdam Agreement. Where, however, there is any inconsistency between the principles contained in that Agreement and those contained in the present statement, the latter shall prevail. The Controlling Powers are agreed that it will be their main task, and that of the Germans, during that period, to achieve the following aims:—

To establish political conditions which will secure the world against any German reversion to dictatorship and any revival of German aggressive policy.
To establish economic conditions which will enable Germany to become self-supporting and to repay the expenditure incurred on her behalf by the Occupying Powers since the beginning of the occupation; which will enable her to make good the damage done by the war; and will further enable Germans and the world outside Germany to benefit [Page 780] from German industry and resources without re-establishing the economic foundations of an aggressive policy.
To establish constitutional machinery in Germany which will ensure these ends and which will be acceptable to the German people.
To establish, with this end in view, the maximum responsibility for and interest in political, administrative and economic developments along democratic lines on the part of the Germans themselves.

With those aims in view, the Controlling Powers have agreed upon the following principles which shall guide them during the second phase of the initial control period, and in the execution of which Germans shall play a major part.

a.—political principles

1. In furtherance of the policy of decentralising the political structure and developing local responsibility laid down in paragraph 9 of the Potsdam Principles, the objective of the Controlling Powers is to see eventually established in Germany a constitution based on the rules of law and providing for the division of powers between the constituent States or Laender and the Central Government. This division of powers shall be made on the following principles:—

All powers shall be vested in the Laender except such as are expressly delegated to the Central Government, as set out in sub-paragraph (b) below, and subject to the reservations in subparagraph (c) below and to paragraph 8 below. The Laender shall further be charged wherever possible with the execution within their territories of legislation enacted by the Central Government under sub-paragraph (b) below. In particular, the Laender shall be required to pass the legislation necessary to implement international treaties, so far as these cover subjects within the competence of the Laender.
The Central Government shall have legislative and executive responsibility in the subjects essential to secure:—
The necessary political unity, especially; nationality, naturalisation, immigration, emigration and extradition; foreign affairs; and the implementation of Treaties, insofar as these deal with matters which are within the competence of the Central Government.
The necessary legal unity, especially; fundamental principles of criminal, civil and commercial law; copyrights, patents and trademarks; negotiable instruments, bills of lading and other documents of title of goods.
The necessary economic unity, especially; customs and foreign trade; import and export control; the maintenance of certain nationally important communications by road, rail, water, posts and telegraphs; weights and measures.
The necessary financial unity, especially; the issue of currency and coinage; certain powers for the coordination of [Page 781] banking; the national public debt; certain powers of taxation to be agreed; foreign exchange control.
At present acute economic difficulties in Germany make it unavoidable that certain powers in the economic field should be exercised by central governmental machinery under the supervision of the Control Council. These powers refer particularly to the supply of food, the distribution of food and raw materials in short supply, the planning of industry and the control of labour, wages and prices. The Control Council shall decide in due course, after consultation with a German advisory body, by what German bodies these powers shall be exercised, if at all.

2. The following principles shall govern the ultimate form of the Central German Government:—

There shall be a President and two Chambers, one representing the nation as a whole and the other the separate Laender. Both Chambers shall be elected at regular intervals of not longer than five years.
The rights and duties of the President shall be limited to those exercised by a constitutional head of State without independent executive authority. He shall hold office for not more than five years.
The Chamber representing the nation as a whole shall be popularly elected and shall be responsible for initiating central legislation and passing it, subject to such powers of amendment as may be accorded to the second Chamber mentioned in 2(d) below.
The Chamber representing the Laender shall be elected on the basis of equal representation for each Land. Its main concern will be to ensure that legislation takes fully into consideration the interests of the Laender. It shall have powers of absolute veto on international treaties and constitutional matters and suspensory veto on other legislation.
The members of the Central Government need not be members of the Chambers, but shall be individually responsible to the popularly elected Chamber for the exercise of their functions.
A Supreme Court shall be established to safeguard the constitution and determine questions of dispute between any two Laender or between any Land and the Central Government.

3. As pre-conditions for the establishment of the rule of law and for any democratic development in Germany the following rights shall be freely and immediately exercised by all Germans throughout Germany subject to such restrictions as may be decided by agreement within the Control Council: freedom of speech; freedom of the press and radio; freedom of assembly; freedom of movement and communication; freedom in religious affairs; freedom of association for lawful purposes; freedom of the judiciary; freedom from arbitrary arrest and imprisonment.

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Constitutions of the Laender (and as necessary the constitution of the Central Government) shall be so framed as to safeguard these rights.

4. The following shall be the principal stages in the establishment in Germany of a constitutional democracy, as outlined in paragraphs 1 and 2:—

Central Administrations shall be established to discharge the immediate tasks most necessary to ensure the economic unity of Germany.
A German representative body shall be nominated at an early date to advise the Control Council on the general aspects of the work of the central administrations and on the number and size of the Laender, and to work out, within the framework of principles agreed by the Control Council on the basis of paragraphs 1 and 2, the details of a provisional constitution.
The provisional constitution and any recommendations of this advisory body shall be submitted to the Control Council for its approval and in accordance with the provisional constitution as approved by the Control Council elections shall be held and a provisional Government formed to operate the provisional constitution.
When due trial has been made of the provisional constitution it will be amended after taking into account the recommendations of the provisional Government and ratified by the German people and approved by the Control Council. At this stage a new Government will be duly elected.

5. The Central administrative agencies referred to in paragraph 4(a) above shall be established as soon as possible and by a date to be fixed by the Control Council and shall exercise executive functions in the fields of transport and communications, finance, foreign trade and industry, the distribution and production of essential materials and foodstuffs, and such other fields as may be determined by the Control Council. Their executive functions shall extend over the whole of Germany; their agents and any Allied supervisory staff shall be free to travel throughout Germany. It should be brought home to the German people that while these agencies will operate under the policy direction of the Control Council they will have full executive responsibility for the management of the economy of Germany.

6. As soon as the provisional German Central Government has been formed, it will assume the powers of the central administrative agencies insofar as these are consistent with the definition of powers to be delegated to the central government contained in paragraph 1 (b) above.

7. Control at this stage shall be exercised as follows:—

The provisional Central Government, when established, shall [Page 783]
exercise, subject to the approval of the Control Council, legislative powers in the fields assigned to it. The Control Council will, when it thinks the time appropriate, authorize the provisional Central Government to enact legislation in any matters for which it is competent, subject only to veto by the Control Council.
supervise the execution of any such legislation by the appropriate authority and of any instructions of the Control Council in the fields for which the provisional Central Government is competent.
The method of control over the exercise by Land Governments of powers for which they are exclusively competent shall be determined by Zone Commanders. Such control shall be confined to the minimum necessary for safeguarding the general aims of the Allied occupation. In spheres where the Land Government is carrying out policies laid down by the Control Council, control by the Zone Commander shall be confined to measures necessary to ensure the observance of the decisions of the Control Council.

8. The Control Council will reserve to themselves full authority in respect of the following subjects:—

Demilitarisation and disarmament
Prisoners of War and displaced persons
War Criminals
Immunities and requirements of the occupying forces and of the control authority
Foreign relations
Foreign exchange receipts.

In general the Control Council will lay down policy on the above subjects. Its execution shall in general be supervised by the Control Council or by the Zone Commanders as may be appropriate.

9. A quadripartite Allied Inspectorate shall be established to ensure that the work of disarmament and demilitarisation is completed and maintained. The officers and agents of this Inspectorate shall conduct in any and all parts of German territory all necessary inspections, enquiries and investigations.

10. The Controlling Powers will retain forces of occupation in Germany adequate to ensure that Germany is, and remains, disarmed and demilitarised.

11. In order that plans may be made at an early date for the absorption of repatriated persons into the German economy, the Controlling Powers shall furnish to the Control Council not later than 1st June, [Page 784] 1947, their plans for the repatriation to Germany of the German members of the former German armed forces and auxiliary services now under their control. These plans should include provisions whereby such repatriation would be completed by the 31st December, 1948, and should cover any German members of the former German armed forces and auxiliary services who may have been transferred by any of the Controlling Powers to any other Allied Power.

12. The Controlling Powers reaffirm the decision of the Control Council that no German shall be removed to work outside Germany without a contract signed voluntarily and before his removal.

13. (i) The Control Council shall study further the whole question of the transfers of population into Germany with a view to directing to the areas best able to receive them those populations whose transfer to Germany is still to be expected. Account shall be taken in this study of the situation existing in each zone, the contribution already made by each Zone Commander to the solution of the problem and the commitments still outstanding.

(ii) The Control Council shall carry out a re-distribution of refugees and expellees already transferred to the various zones of Germany, in order to effect a more equitable and a more even settlement. A German commission shall be established to study this question. This commission shall be accorded freedom of action and of movement throughout Germany as a whole and shall be responsible for the implementation of its own recommendations, subject to the rights of the government of the Laender being safeguarded and subject to general supervision of the Control Council.

14. Measures for land reform shall be implemented throughout Germany before 1st January, 1948. This reform shall be effected in a manner which does not adversely affect the production of food in Germany.

15. No further territorial re-organisation shall be effected in Germany without the approval of the Control Council.

b.—economic principles

16. It will be the aim of the Controlling Powers during the second phase of the initial control period to complete the elimination of Germany’s war potential; to enable Germany to make good the damage done to the Allies in the war; and subject to restrictions required in the interests of security to effect such further restoration of her economy as may be necessary:—

to achieve as soon as possible a balanced economy which will permit her to pay for her essential imports from the proceeds of exports without external assistance;
to repay as soon as possible to the Controlling Powers the sums advanced, since their armies first occupied German territory, on account of the import requirements of the population of Germany and to pay for external occupation costs;
to play her part in the restoration of a healthy economy in Europe as a whole.

17. On or before 1st July, 1947, the Control Council shall agree upon the details of a scheme for:—

the full and immediate application of paragraph 14 of the principles laid down in the Potsdam Agreement, which relates to the treatment of Germany as an economic whole; and
the sharing between the Controlling Powers of the financial burden already incurred and which may be incurred by them in the future. The financial principles to give effect to this shall be laid down during the present session of the Council of Foreign Ministers.

18. In accordance with paragraph 17 above, as from 1st July, 1947, all restrictions on the movement of goods between the different zones of Germany shall be abolished and, in pursuance of paragraph 15(c) of the Potsdam Principles, the resources of each part of Germany and all goods imported into Germany shall be used for the benefit of Germany as a whole.

19. A common export-import programme for Germany as a whole shall be drawn up with effect from 1st July, 1947. As soon as the appropriate Central German Administration has been established it shall take over this task. This programme, which will allow for the equitable distribution of indigenous resources throughout Germany, shall be designed to achieve as soon as possible a sufficient balance of exports over imports and thus fulfil the objectives set out in paragraph 16 above. It shall take into account the need to maximise coal production and agricultural output, improve housing conditions and restore the transport system. The export-import programme shall be subject to the approval of the Controlling Powers.86

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20. The repayment of sums advanced by the Controlling Powers on account of the import requirements of the population of Germany shall be the first charge on Germany’s foreign exchange resources after her essential needs have been met. The Controlling Powers will furnish the appropriate German Central Administration with an agreed statement, as of the 30th June, 1947, of any sums owing to them under this head. In computing the amounts due to them they will give full credit to Germany for all exports or proceeds of exports which they have received from German current production and stock, whether or not these exports were taken in the first instance under the head of reparation. This statement shall be furnished by the 30th September, 1947.

21. The Controlling Powers shall also furnish to the appropriate German Central Administration agreed statements of their external occupation costs. These sums shall be regarded as debts due from Germany to the Controlling Powers, ranking for repayment after the sums mentioned in paragraph 20 and the manner of their repayment shall be determined in the Peace Treaty.

22. Until Germany has attained a balanced economy and until the sums referred to in paragraphs 20 and 21 above have been repaid to the Controlling Powers, Germany shall not be called upon to make any reparation deliveries from current production or stocks.

23. The acquisition of any interest in an enterprise in Germany by any foreign power or its nationals after 8th May, 1945, shall only be valid if approved by the Control Council. The Control Council shall pass the legislation required to give effect to this provision.

24. All property, rights and interests in Germany owned or acquired by any foreign power or its nationals shall remain subject to the law in force in Germany applicable to property generally, but such Powers and their nationals shall possess all the rights under German law pertaining to their property, rights and interests. Any enterprises so owned or acquired shall remain a part of the economic resources of Germany. The foregoing shall be subject to such exceptions as may be agreed by the Control Council in respect of the property of the Occupying Forces, the Allied Control Authority and its members.

25. The appropriate German Central Administration shall present for the approval of the Control Council proposals for financial reform in Germany. The aim of these proposals shall be to place on a sound basis the German currency, the systems of taxation and banking, the national debt, the foreign exchange rate and the wage and price levels, to diminish the danger of inflation which arises from the present excess of purchasing power, and to provide for an equitable sharing [Page 787] among the German people of the financial burdens of the war and its aftermath.

26. The appropriate German authorities shall put forward as soon as possible for the approval of the Control Council proposals in regard to the breaking up of concentrations of economic power as exemplified by cartels, syndicates, trusts and other monopolistic arrangements. Proposals for the public ownership of certain industries shall be regarded as one method of carrying out this provision.87

c.—reparations and level of industry

27. The Controlling Powers confirm the general principles of the Potsdam Agreement on Reparations. Experience has, however, demonstrated that the Level of Industry Plan of March, 1946, on which the extent of reparations deliveries was assessed, requires substantial alteration. The Level of Industry Plan shall therefore be revised so as to meet both the needs of security and the needs of the German economy; Germany shall be left with sufficient capacity to produce eventually 10 million ingot tons of steel per annum (and this shall also be the permissible production of steel in Germany); the limits on the capacity to be left in Germany of other restricted industries shall [Page 788] also be subject to upward adjustment; and the list of prohibited industries shall be reviewed.88

28. The rehabilitation of German industry shall be effected on a progressive plan having due regard to the necessity of exporting coal to the liberated countries. In particular the rate by which steel production is increased shall be determined in relation to the need for coal exports provided that the burden of cost on the occupying powers is not increased as a result of this consideration.

29. A fresh determination of plant and equipment for removal as reparation shall be made by the Control Council, on the basis of the revised Level of Industry Plan, not later than 1st July, 1947.89

30. The delivery of plant and equipment shall be hastened; and to this end:—

the final list of plant and equipment to be removed from Germany shall be issued by the Control Council not later than 15th August, 1947.90
the liquidation of war plants which have been placed in Category I by the Control Council and the valuation, allocation and dismantling of the general purpose equipment in those plants, shall proceed forthwith and shall not be delayed pending the preparation of the revised level of industry plan;
the Control Council shall put in hand measures to hasten the procedure for the valuation, allocation, dismantling and delivery of capital equipment.

31. Each of the Occupying Powers shall provide for the Council of Foreign Ministers information on the type and amount of reparation removals from its zone up to the present date and thereafter regularly to the Control Council.


32. The Controlling Powers will from time to time consult together for the purpose of reviewing the application of the Potsdam Agreement and the present Supplementary Principles with a view to defining such further principles and to such revision of these Agreements as may be required in the light of experience.

  1. This proposal was discussed by the Council of Foreign Ministers at its 12th through 16th Meetings, December 8–12, 1947; for the reports on these meetings, see pp. 756769 passim. Portions of this proposal which were approved or amended by the Council are indicated in annotations at the appropriate places.
  2. For the text of the British proposal as circulated to the Council of Foreign Ministers in Moscow on March 31, 1947, see Documents on International Affairs, 1947–1948, pp. 453–464.
  3. Foreign Relations, The Conference of Berlin (The Potsdam Conference), 1945, vol. ii, p. 1499.
  4. According to the Provisional Record of Decisions of the 13th Meeting of the Council of Foreign Ministers, December 9, the content of this paragraph was approved subject to the following amendments:

    “The Soviet Delegation proposed that the penultimate sentence of the U.K. text should be amended to read:

    ‘It shall take into account the need to maximise coal production and agricultural output, to develop the peacetime branches of industry, including the production of goods for the German population and for export to other countries, to improve housing conditions and to restore the transport system.’

    “The U.K. Delegation proposed the insertion of the phrase ‘subject to the agreed level of industry’.

    “The French and U.K. Delegations proposed that the references to the setting up of central German administrations should be qualified by the words ‘in accordance with the decisions of the Council of Foreign Ministers’.” (CFM Files: Lot M–88: Box 87: Provisional Records of Decisions)

  5. In document CFM (47)(L) 25, December 11, not printed, the United States Delegation proposed the following addition to the second sentence of this paragraph: “provided such proposals represent the free choice of the German people.” (CFM Files, Lot M–88, Box 86, CFM (47) (L) Documents) At its 15th Meeting, December 11, the Council of Foreign Ministers approved this paragraph as amended by the United States Delegation.

    At its 14th Meeting, December 10, the Council of Foreign Ministers considered a new paragraph (26 bis) proposed by the French Delegation in document CFM (47) (M) 99, April 4, 1947, originally circulated to the Council during its Moscow Session. The proposed paragraph read as follows:

    “The Control Council shall reinforce Allied Control over the distribution of coal, power and steel, and their utilization in Germany. It shall see to it that there is an equitable distribution of coal and power between the various States in proportion to the industries retained. It shall determine the order of priority to be observed in their distribution amongst the various uses.” (CFM Files, Lot M–88, Box 59, CFM (47) (M) Documents)

    At its 15th Meeting, December 11, the Council heard a British proposal for the following alternative wording to this new paragraph 26 bis:

    “The Allied Control Council shall provide that specific amounts and percentages of the German output of products of key importance to European economic recovery, such as coal, coke and power, be exported. It shall take any measures it may consider necessary to ensure that the German Central Administration (or Provisional Government) distribute such resources properly within Germany as between various Länder and industrial priorities.”

    At this same Council meeting, the French Delegation proposed that the second sentence of the British text be amended to read:

    “It shall take any measures it may consider necessary to ensure that the German organization charged with distribution distribute such resources properly within Germany as between various Länder and industrial priorities.” (CFM Files: Lot M–88, Box 87, Provisional Records of Decisions)

    The Council approved this amended text for paragraph 26 bis.

  6. At its 15th Meeting, December 11, the Council approved this paragraph with the amendment that the steel capacity would be fixed at 11.5 million ingot tons. According to the Provisional Record of Decisions of the meeting, the French Delegation made its acceptance of this figure subject to satisfactory decisions being taken by the Council on the questions of security and exports of German coal.
  7. At its 15th Meeting, the Council agreed in principle to a date of March 1, 1948, subject to agreement being reached on the whole matter under discussion.
  8. At its 15th Meeting, the Council agreed in principle to the date of April 15, 1948, subject to the same reservation made for paragraph 29.