Foreign Relations of the United States, 1948, Germany and Austria, Volume II

Editorial Note

In accordance with agreed document TRI/18 (Final), May 31 of the London Conference on Germany (page 307) included as Annex E to the Final Report of the Conference, June 1 (page 309) a six-power Intergovernmental Working Party met in Paris between October 25 and November 11, 1948 to discuss the safeguarding of foreign interests in Western Germany. Assistant Secretary of State Willard L. Thorp was the United States representative at these meetings, and Covey T. Oliver served as his alternate. The other principal representatives at these meetings were as follows: France—Hervé Alphand and François de Panafieu; United Kingdom—Sir Henry Gregory; Netherlands—M. Kohnstamm; Belgium—Fernand Seynaeve; Luxembourg—Lionel Albert Wehrer. Documentation on the preparations for, and the transactions of, these meetings is included in Department of State file 362.005. Other related documentation is included in file 740.00119 Control (Germany). Minutes of the fourteen numbered meetings of the working party are included in CFM Files, Lot M–88, Box 122.

The “Report and Recommendations of the Intergovernmental Working Group on the Protection of Foreign Interests in Germany” was approved on November 26 by the representatives of the governments participating in the meetings. Copies of the Report and Recommendations were transmitted to the Department of State as enclosures to despatch 1473, December 16, from Paris, not printed (362.005/12–1648). Under cover of a note dated January 12, 1949, the French Embassy submitted to the Department a certified copy of the Report and Recommendations which conformed with the original deposited with the French Ministry for Foreign Affairs (362.005/1–1249). In a review appearing in issue No. 180, December 6, 1948, of the Department of State classified weekly publication Current Economic Developments, the most important recommendations of the Intergovernmental Working Party on Foreign Investments were described as follows:

“Removal of Controls and Resumption of Ownership Rights It was agreed that UN property owners should resume to the fullest extent possible the control of their property and property rights in Germany, subject only to compelling requirements with regard to the over-all economic position in Germany. The desire of the Military Governors that UN owners should quickly take control of this property was noted. It is recommended that foreign owners should not be subject to any restrictions not applicable to property owners in general as far as management, appointment of personnel and use and disposal of funds and property in Germany is concerned. It is recognized that special regulations may have to be applied on acquisition of new or increased interests in critical industries or where undue concentration of economic power might result and to transfers of property in Germany between persons both of whom are resident outside Germany; but these should be as liberal as possible. The Group recommends that goods in Germany belonging to UN nationals manufactured for them in Germany under prepaid contracts, sent into Germany for processing, or in transit through that country, all as of the time of the capitulation, should be exportable by the owner without his having to pay for them again in dollars, as is presently insisted upon by OMGUS.

“War Damage and Equalization of Burdens Recognizing that the amount of war damage compensation must await a peace treaty, it is recommended that foreign interests in Germany should participate before then on the same basis as German interests in any compensation provided by German or Military Government legislation. The power to determine the extent to which special levies or equalization of burdens taxes should apply to UN property should be reserved to the Military Governors. It was agreed that UN property should not be subject to taxes levied expressly for the specific purpose of meeting charges arising out of the war. With reference to the present situation in Germany, the problematical character of equalization of burdens tax legislation was noted, as was the possibility that the Germans might include both war losses and currency reform losses among the burdens to be equalized. Should this be the case, the Group was of the opinion that the tax and the corresponding lien should be only provisionally imposed on the property in Germany of non-German nationals and corporations and of corporations organized under the laws of Germany but wholly owned by such non-German nationals. While the Intergovernmental Group recognizes the discrimination which has occurred through blocking bank accounts of UN nationals and the consequent effect of monetary reform, it believes this problem must await the peace settlement for treatment. A bizonal ordinance that plant and equipment may be removed under Land orders from one concern to another to equalize reparation effects should not be applied to UN-owned concerns except where of paramount necessity and in all cases adequate compensation should be paid.

“Public Ownership and Deconcentration The Group’s fundamental recommendation of public ownership and land reform follows the US Directive to General Clay: the Military Governors should not permit such measures to become effective regarding foreign interests until satisfied that suitable provisions have been made for prompt, adequate and effective compensation. Should nationalization (i.e., by a German central government) of German heavy industries or natural resources be involved, the Group recommends prior consultations between the six governments concerned pursuant to Annex A, Paragraph 4 of the Report of the London Talks on Germany. All delegations but the UK agreed upon the desirability of international adjudication or arbitration of disputed compensation claims not settled by the exhaustion of the remedies provided in Germany. In accepting the general principle that foreign interests could be taken into public ownership if provision were made for compensation, the French delegation declared that its position on the question of the ultimate ownership of the coal, iron and steel industries of the Ruhr was not thereby prejudiced.

“Various fears and objections to the deconcentration laws were met by a recommendation that the UN interests be permitted to present or to comment upon reorganization plans and that these plans as finally adopted should provide for the UN shareholders in the dissolved corporation to be given a priority (i.e., pre-emptive rights) to holdings in the new companies comparable in value to their old holdings.

“Mines, Iron and Steel Military Governors should invite UN stockholders in companies organized under the trusteeship plan to submit requests for participation on an equitable basis in the new companies formed and the Military Governors should study the possibility of carrying out corporate reorganizations under the trusteeship plan in a way to prevent forced reduction in over-all percentage of UN ownership in the industries which remain in private ownership. These recommendations also apply in carrying out the deconcentration of I. G. Farben. Account should be taken of the desirability of reestablishing, to the extent possible under the regulations governing allocation of German coal, deliveries of coal to UN owners from their mines in Germany as they took place before the Nazi regime. The Intergovernmental Group recommended an examination as soon as possible by experts of the Aachen coal mines to make recommendations as to whether a higher price than that for Ruhr coal should be permitted, as was the case prior to 1934. UN ownership interests in the Ruhr-Aachen coal field should not be jeopardized by Laender claims for advances required as a result of the coal pricing policy up to August, 1948, and this should be considered also in connection with UN interests in the iron and steel producing industry.

“Monetary Reform Under the monetary reform, a UN creditor presently has the option of accepting payment of a reichsmark debt in deutschmarks at the 10-to-1 rate or of refusing to accept payment and keep whatever rights he has in suspense. A number of the countries complained that their nationals had no way of knowing which course they should follow, as it was clear that the final determination of the extent to which foreign creditors should be satisfied would depend on the peace treaty. To eliminate this situation, it is recommended that foreign creditors should be given the right to accept the deutschmark payment without waiving their rights in a final settlement and that those who have already refused payment shall be permitted to withdraw their refusals. France and the Benelux countries made a determined effort to modify the effect of the currency reform laws insofar as they applied to reduce as 10-to-1 the deposits in Germany of their nationals forced to deposit in German banks during the war. They also sought to have externally held reichsmarks brought into Germany for conversion into deutschmarks and to have some pre-treaty redress for forced investments in German public securities. All members of the Group finally agreed that the foregoing questions could not be finally settled prior to a peace treaty; France and Benelux thought that all of them should be further studied before a peace treaty; the US thought only the externally held reichsmark matter might be so studied; and the UK delegation thought that all of them except the forced investments question might be earlier studied. No delegation dissented from the view that the obligations under discussion were claims against the whole Third Reich, but France and the Benelux countries emphasized the prejudice to Allied nationals caused by delay in reaching final settlement.

“Maintenance of Contractual Relationships In line with the general position written into the satellite peace treaties, it is recommended that the status of original contracts remain unaltered, with occurrence of war not relieving a debtor from the obligation to pay his debts in accordance with the terms of the original contract. It is also recommended that the Military Governors study the matter of periods of prescription and limitation of rights of action since, during the war, many persons were unable to comply within the time limit to the necessary legal formalities to keep their claims alive. These problems should be studied with a view to safeguarding rights still current or reinstating those which expired during the war. The rights of foreign creditors should continue to exist until proper payment has been met in the case of debts expressed in foreign currency where before and during the war, the Konversionskasse received or required payments in reichsmarks but did not make out-payments in foreign exchange. In the future a foreign creditor should be allowed to accept payment for these debts in deutschmarks if it is offered. Because of complexities arising out of the disintegration or zonal separation of certain German debtors, such as the Potash Syndicate, it is recommended that the views of interested creditor organizations should be invited with a view to making proposals for the Military Governors to consider. Because of US opposition no recommendation was made on obligations written with a ‘gold mark’ clause, but the various positions taken were set forth in the Group’s report.

“Most-Favored-Nation Treatment It is recommended that foreign countries and their nationals shall enjoy national and most-favored-nation treatment in all matters relating to commerce. As regards establishments and the conduct of business, the Group recommends the most-favored-nation principle and that the Military Governors be directed to eliminate as rapidly as consistent with problems of internal administration, shortages of facilities and the needs of the Occupation, any existing discrimination against foreign interests in this regard. Review was asked for a, JEIA instruction allegedly discriminating against non-German shipping and forwarding companies. The Group ratified the statement on reciprocity for Germany in Annex E of the Report of the London Talks on Germany.

“Miscellaneous In view of the fact that German authorities are becoming less and less subject to the direct control of the Military Governors and particularly in view of Germany’s long history of unsatisfactory treatment of foreign property and concerns in Germany, it is recommended that the terms of any Occupation Statute reserve to the Military Governors the powers necessary to secure the safeguarding of UN interests in Germany and the maintenance of the principle of non-discrimination.

“A study of the problem involved in reestablishment of rights under prewar commercial treaties should be made, A study should be made now of the claims of UN nationals against German social insurance organizations. Consideration should be given to steps to prevent double taxation. The Military Governors should take steps to ensure protection in Germany of the industrial, literary and artistic rights belonging to foreign nationals. It is recommended that, for a period of two years, UN insurers should be permitted to resume business in Germany without being required to reconstitute guarantee reserves which disappeared during the war. It is further recommended that the governments should keep under continuous review the question of ensuring non-discrimination and safeguarding foreign interests in Germany and that they consider the calling of further intergovernmental meetings for the study of matters of principle if requested by any of the governments represented.”