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[p5] THE COURT,
composed as above,
having heard the observations and conclusions of the Parties,
delivers the following judgment:
[1] The Government of the German Reich, by an Application instituting
proceedings filed with the Registry of the Court on February 8th, 1927, in
conformity with Article 40 of the Statute and Article 35 of the Rules of
Court, has submitted to the Permanent Court of International Justice a suit
concerning the reparation which, in the contention of the Government of the
Reich, is due by the Polish Government for the damage suffered by the
Oberschlesische Stickstoffwerke A.-G. (hereinafter designated as the
Oberschlesische) and the Bayerische Stickstoffwerke A.-G. (hereinafter
designated as the Bayerische) in consequence of the attitude adopted by that
Government towards those Companies in taking possession of the nitrate
factory situated at Chorzów, which attitude has been declared by the Court
in Judgment No. 7 (May 25th, 1926) not to have been in conformity with the
provisions of Article 6 and the following articles of the Convention
concerning Upper Silesia concluded at Geneva on May 13th, 1922, between
Germany and Poland (hereinafter described as the Geneva Convention).
[2] On receipt of the German Government's Case in the suit, on March 3rd,
1927, the Polish Government, on April 14th, 1927, raised a preliminary
objection denying the Court's jurisdiction to hear the suit brought before
it and submitting that the Court should, "without entering into the merits,
declare that it had no jurisdiction".
[3] The Court dealt with this plea in its Judgment No. 8 given on July 26th,
1927, by which it overruled the preliminary objection raised by the Polish
Government and reserved for judgment on the merits the suit brought on
February 8th, 1927, by the German Government.
[4] Furthermore, under the terms of this judgment, the President was
instructed to fix the times for the filing of the Counter-Case, Reply and
Rejoinder on the merits. These times, which were in the first place fixed to
expire on [p6] September 30th, November 15th and December 30th, 1927, were
subsequently extended by successive decisions until November 30th, 1927,
February 20th and May 7th, 1928, respectively.
[5] The documents of the written proceedings were duly filed with the
Registrar of the Court within the times finally fixed and were communicated
to those concerned as provided in Article 43 of the Statute.
[6] In the course of hearings held on June 21st, 22nd, 25th, 27th and 29th,
1928, the Court has heard the oral statements, reply and rejoinder submitted
by the above-mentioned Agents for the Parties.
* * *
[7] The submissions made in the German Government's Application of February
8th, 1927, were as follows:
It is submitted:
[Translation.]
(1) that by reason of its attitude in respect of the Oberschlesische
Stickstoffwerke and Bayerische Stickstoffwerke Companies, which attitude has
been declared by the Court not to have been in conformity with the
provisions of Article 6 and the following articles of the Geneva Convention,
the Polish Government is under an obligation to make good the consequent
damage sustained by the aforesaid Companies from July 3rd, 1922, until the
date of the judgment sought;
(2) that the amount of the compensation to be paid by the Polish Government
is 59,400,000 Reichsmarks for the damage caused to the Oberschlesische
Stickstoffwerke Company and 16,775,200 Reichsmarks for the damage caused to
the Bayerische Stickstoffwerke Company;
(3) in regard to the method of payment:
(a) that the Polish Government should pay within one month from the date of
judgment, the compensation due to the Oberschlesische Stickstoffwerke
Company for the taking possession of the working capital (raw material,
finished and half-manufactured products, stores, etc.) and the compensation
due to the Bayerische Stickstoffwerke Company for the period of exploitation
from July 3rd, 1922, to the date of judgment;
(b) that the Polish Government should pay the sums remaining unpaid by April
15th, 1928, at latest; [p7]
(c) that, from the date of 3judgment, interest at 6 % per annum should be
paid by the Polish Government;
(d) that the payments mentioned under (a)-(c) should be made without
deduction to the account of the two Companies with the Deutsche Bank at
Berlin;
(e) that, until June 30th, 1931, no nitrated lime and no nitrate of ammonia
should be exported to Germany, to the United States of America, to France or
to Italy.
[8] These submissions have, in the course of the written or oral
proceedings, undergone modifications which will be indicated below. As the
Court has not in the present suit availed itself of the right conferred upon
it under Article 48 of the Statute to make orders as to "the form and time
in which each Party must conclude its arguments", it, in this case, allows
the Parties, in accordance with established precedent, to amend their
original submissions, not only in the Case and Counter-Case (Article 40 of
the Rules), but also both in the subsequent documents of the written
proceedings and in declarations made by them in the course of the hearings
(Article 35 of the Rules), subject only to the condition that the other
Party must always have an opportunity of commenting on the amended
submissions.
[9] Submission No. I of the Application has not been subsequently amended.
[10] On the other hand, with regard to submission No. 2, important
amendments have been made. In the Case this submission is worded as follows:
It is submitted: ....
[Translation.]
(2) that the amount of the compensation to be paid by the Polish Government
is 75,920,000 Reichsmarks, plus the present value of the working capital
(raw materials, finished and half-manufactured products, stores, etc.) taken
over on July 3rd, 1922, for the damage caused to the Oberschlesische
Stickstoffwerke Company, and 20,179,000 Reichsmarks for the damage caused to
the Bayerische Stickstoffwerke Company.
[11] In comparing submission (2) of the Case with submission (2) of the
Application, regard must be had to the following facts resulting from the
Case: [p8]
(a) that the total of 59,400,000 mentioned in the Application as the figure
representing the damage suffered by the Oberschlesische is calculated as on
July 3rd, 1922;
(b) that this sum includes the sum of 1 million for raw materials, finished
and half-manufactured products, stores, etc.
(c) that the. sum of 75,920,000 mentioned in the Case as the figure
representing the damage suffered by the Oberschlesische is made up of
58,400,000 for damages as on July 3rd, 1922, and 17,520,000 for interest at
6% on 58,400,000 for the period July 3rd, 1927, to July 2nd, 1927;
(d) that this sum does not include an amount for "working capital",
compensation for the "present value" of this capital being in the Case
sought in general terms;
(e) that the sum of 16,775,200 mentioned in the Application as the figure
representing the damage suffered by the Bayerische is calculated as on July
3rd, 1922;
(f) that the sum of 20,179,000 mentioned in the Case as representing the
damage suffered by the Bayerische is calculated as on July 2nd (or 3rd),
1927, at a rate of interest of 6 % the amount for the Bayerische indicated
in the Application is said to contain an error of calculation.
[12] Lastly, submission (2) of the Application has been amended in the
German Agent's oral reply as concerns the compensation claimed for the
damage suffered by the Oberschlesische. This submission runs as follows in
the submissions read by the Agent at the conclusion of his oral Reply:
It is submitted:
[Translation.]
that the total of the compensation to be paid to the German Government is
58,400,000 Reichsmarks, plus 1,656,000 Reichsmarks, plus interest at 6% on
this sum as from July 3rd, 1922, until the date of judgment (for the damage
done to the Oberschlesische Stickstoffwerke A.-G.);
that the total of the compensation to be paid to the German Government is
20,179,000 Reichsmarks for the damage done to the Bayerische Stickstoffwerke
A.-G.
[13] It follows that, as regards the Oberschlesische, the German Government
(a) reverts to the sum of 58,400,000 as on [p9] July 3rd, 1922; (b) fixes as
1,656,000 the value of the working capital on that date; (c) claims on these
two sums interest at 6% until the date of judgment, thus abandoning the
claim for a lump sum made in the Case.
[14] As regards submission (3) of the German Government's Application,
amendments both of form and of substance are to be noted in the course of
the subsequent procedure.
[15] As regards form, paragraph (e) of submission (3) of the Application
constitutes by itself a new third submission in the Case, whilst the
substance of paragraphs (a)-(d) of submission No. 3 of the Application has
been embodied in a new submission No. 4 (a)-(d) in the Case. In these
circumstances, it is preferable to trace back the modifications made to each
of the paragraphs of the original third submission.
[16] Paragraph 3 (a) is worded as follows in the Case (where it is numbered
4 (a)):
[Translation.]
that the Polish Government should pay, within one month from the date of
judgment, the compensation due to the Oberschlesische Stickstoffwerke
Company for the taking possession of the working capital and the
compensation due to the Bayerische Stickstoffwerke Company for the period of
exploitation from July 3rd, 1922, to the date of judgment.
[17] As compared with the Application, therefore, this paragraph has
undergone a purely superficial modification (deletion of an explanatory
remark in parenthesis), and it has not subsequently been amended.
[18] Paragraph 3 (b) is worded as follows in the Case (where it is numbered
4 (b)):
[Translation.]
that the Polish Government should pay the remaining sums by April 15th,
1928, at latest;
in the alternative, that, in so far as payment may be effected in
instalments, the Polish Government shall deliver, within one month from the
date of judgment, bills of exchange for the amounts of the instalments,
including interest, payable on the respective dates on which they fall due
to the Oberschlesische Stickstoffwerke Company and to the Bayerische
Stickstoffwerke Company. [p10]
[19] Thus to the main original submission has been added an alternative
contemplating the possibility of payment by instalments.
[20] The same paragraph is couched in the following terms in the oral reply:
[Translation.]
It is submitted that the Polish Government should pay the remaining sums at
latest within fifteen days after the beginning of the financial year
following the judgment; in the alternative that, in so far as payment may be
effected by instalments, the Polish Government should, within one month from
the date of judgment, give bills of exchange for the amounts of the
instalments, including interest, payable on maturity to the Oberschlesische
Stickstoffwerke A.-G. and to the Bayerische Stickstoffwerke A.-G.
[21] The modification as compared with the previous version consists in the
substitution for the date April 15th, 1928, which had already passed, a
time-limit fixed in relation to the beginning of the Polish financial year.
[22] Paragraph 3 (c) of the submissions of the Application (4 (c) of the
Case) has undergone no subsequent modification.
[23] On the other hand, paragraph 3 (d) of the Application appears in the
Case in the following form (No. 4 (d) of the Case)
[Translation.]
that the Polish Government is not entitled to set off, against the
above-mentioned claim for indemnity of the German Government, its claim in
respect of social insurances in Upper Silesia; that it may not make use of
any other set-off against the above-mentioned claim for indemnity; and that
the payments mentioned under (a)-(c) should be made without any deduction to
the account of the two Companies with the Deutsche Bank at Berlin.
[24] The original submission is contained in the last part of this
paragraph, the principal clause of which now seeks a declaration excluding
any possibility of extra-judicial set-off.
[25] The wording of the Case is retained both in the written and in the oral
reply, except that a new alternative submission is added in regard to the
question of the prohibition of extra-judicial set-off. This addition runs as
follows: [p11]
[Translation.]
In the alternative it is submitted that set-off is only permissible if the
Polish Government puts forward for this purpose a claim in respect of a debt
recognized by the German Government or established by a judgment given
between the two Governments.
[26] Turning lastly to paragraph 3 (e) of the submissions in the
Application, it is to be observed that this reappears unchanged in
submission 3 of the Case. On the other hand, in the written Reply, whilst
the submission of the Application is repeated, the following alternative is
added:
[Translation.]
It is submitted that the Polish Government should be obliged to cease the
exploitation of the factory and of the chemical equipment for the
transformation of nitrate of lime into ammonium nitrate, etc.
[27] With this addition, this submission also appears in the oral reply in
the following form:
[Translation.]
in the alternative, should the Court not adopt the points of view set out in
paragraphs 55 and 57 of the Reply, it is submitted that the Polish
Government should be obliged to cease the exploitation of the factory or of
the chemical ,equipment for the production of ammonium nitrate, etc.
* * *
[28] In connection with certain submissions made by the Polish Government in
regard to the compensation of the Oberschlesische, the German Government has
not merely asked the Court to reject these submissions but has also
formulated two other submissions, namely:
[Translation.]
(1) that the Polish Government is not entitled to refuse to pay compensation
to the German Government on the basis of arguments drawn from Article 256
and for motives of respect for the rights of the Reparation Commission and
other third parties;
(2) that the Polish Government's obligation to pay the indemnity awarded by
the Court is in no way set aside by a judgment given or to be given by a
Polish municipal court in a suit concerning the question of the ownership of
the factory at Chorzów. [p12]
[29] These submissions, which were made in the written Reply and in the
first oral statement of the German Agent respectively, have been maintained
unaltered in the oral reply.
[30] Apart from the two additional claims just referred to, the final
submissions of the German Government are therefore as follows :
[Translation.]
(1) that by reason of its attitude in respect of the Oberschlesische
Stickstoffwerke and Bayerische Stickstoffwerke Companies, which attitude has
been declared by the Court not to have been in conformity with the
provisions of Article 6 and the following articles of the Geneva Convention,
the Polish Government is under an obligation to make good the consequent
injury sustained by the aforesaid Companies from July 3rd, 1922, until the
date of the judgment sought;
(2) (a) that the amount of the compensation to be paid to the German
Government is 58,400,000 Reichsmarks, plus 1,656,000 Reichsmarks, plus
interest at 6 % on this sum as from July 3rd, 1922, until the date of
judgment (for the damage caused to the Oberschlesische Stickstoffwerke
A.-G.);
(b) that the amount of the compensation to be paid to the German Government
is 20,179,000 Reichsmarks for the damage caused to the Bayerische
Stickstoffwerke A.-G. ;
(3) that until June 30th, 1931, no nitrated lime and no nitrate of ammonia
should be exported to Germany, to the United States of America, to France or
to Italy;
in the alternative, that the Polish Government should be obliged to cease
from exploiting the factory or the chemical equipment for the production of
nitrate of ammonia, etc.;
(4) (a) that the Polish Government should pay, within one month from the,
date of judgment, the compensation due to the Oberschlesische
Stickstoffwerke A.-G. for the taking possession of the working capital and
the compensation due to the Bayerische Stickstoffwerke A.-G. for the period
of exploitation from July 3rd, 1922, to the date of judgment;
(b) that the Polish Government should pay the remaining sums at latest
within fifteen days after the beginning of the financial year following the
judgment; in the alternative, that, in so far as payment may be effected by
instalments, the Polish Government should within one month from the date of
judgment, give bills of exchange for the amounts of the instalments,
including interest, payable on maturity to the Oberschlesische
Stickstoffwerke A.-G. and to the Bayerische Stickstoffwerke A.-G. ;
(c) that from the date of judgment, interest at 6 % per annum should be paid
by the Polish Government; [p13]
(d) that the Polish Government is not entitled to set off against the
above-mentioned claim for indemnify of the German Government, its claim in
respect of social insurances in Upper Silesia; that it may not make use of
any other set-off against the said claim for indemnity; and that the
payments mentioned under (a) to (c) should be made without any deduction to
the account of the two Companies with the Deutsche Bank at Berlin;
in the alternative, that set-off is only permissible if the Polish
Government puts forward for this purpose a claim in respect of a debt
recognized by the German Government or established by a judgment given
between the two Governments.
[31] The Polish Government has made no formal objection to the amendments
successively made in the original submissions of the German Government.
* * *
[32] The submissions formulated by the Polish Government in reply to those
set out in the Application and Case of the German Government are worded as
follows in the Counter-Case:
It is submitted:
[Translation.]
A. In regard to the Oberschlesische:
(1) that the applicant Government's claim should be dismissed;
(2) in the alternative, that the claim for indemnity should be provisionally
suspended;
(3) as a further alternative, in the event of the Court awarding some
compensation, that such compensation should only be payable: (a) after the
previous withdrawal by the said Company of the action brought by it and
pending before the German-Polish Mixed Arbitral Tribunal in regard to the
Chorzów factory and after the formal abandonment by it of any claim against
the Polish Government in respect of the latter's taking possession and
exploitation of the Chorzów factory; (b) when the civil action brought
against the said Company by the Polish Government in respect of the validity
of the entry of its title to ownership in the land register has been finally
decided in favour of the Oberschlesische.
(4) In any case, it is submitted that the German Government should, in the
first place, hand over to the Polish Government the whole of the shares of
the Oberschlesische [p14] Stickstoffwerke Company, of the nominal value of
110,000,000 Marks, which are in its hands under the contract of December
24th, 1919.
B. In regard to the Bayerische:
(1) (a) that the applicant Government’s claim for compensation in respect of
the past, in excess of 1,000,000 Reichsmarks, should be dismissed;
(b) that, pro futuro, an annual rent of 250,000 Reichsmarks, payable as from
January 1st, 1928, until March 31st, 1941, should be awarded;
(c) that these indemnities should only be payable after previous withdrawal
by the said Company of the claim pending before the German-Polish Mixed
Arbitral Tribunal in respect of the Chorzów factory and after the formal
abandonment by it of any claim against the Polish Government in respect of
the latter's taking possession and exploitation of the Chorzów factory ;
(2) that the applicant Government's third submission to the effect that
until June 30th, 1931, no exportation of nitrated lime or nitrate of ammonia
should take place to Germany, the United States of America, France or Italy,
should be dismissed.
C. In regard to the Oberschlesische and Bayerische jointly:
that submission No. 4 – to the effect that it is not permissible for the
Polish Government to set off, against the abovementioned claim for indemnity
of the German Government, its claim in respect of social insurances in Upper
Silesia, that it may not make use of any other set-off against the
abovementioned claim for indemnity, and that the payments mentioned under 4
(a)-(c) should be made without any deduction to the account of the two
Companies with the Deutsche Bank at Berlin-should be rejected.
[33] These submissions have not subsequently been amended except that
submission A, 3 (b), was withdrawn by means of a declaration contained in
the written Rejoinder.
[34] The German Government having disputed the right of the Polish
Government to withdraw this submission (the rejection of which had been
demanded by the former) at the stage of the proceedings reached when the
withdrawal took place, the latter Government maintained its withdrawal.
[35] For the reasons given above, the Court holds that there is nothing to
prevent the Polish Government for its part from [p15] amending its original
submissions, especially seeing that this amendment occurred while the
written proceedings were still in progress and took the form of the
abandonment of a part of its submissions. In the Court's opinion, the second
of the "additional claims" of the German Government mentioned above, was
doubtless designed to meet the Polish submission which has been thus
abandoned.
*
[36] The Court therefore considers that the final submissions of the Polish
Government may be set down as under:
"It is submitted :
A. As regards the Oberschlesische:
(1) that the claim of the applicant Government should be dismissed;
(2) in the alternative, that the claim for indemnity should be provisionally
suspended;
(3) as a further alternative, in the event of the Court awarding some
compensation, that such compensation should only be payable after the
previous withdrawal by the said Company of the action brought by it and
pending before the German-Polish Mixed Arbitral tribunal in regard to the
Chorzów factory, and after the formal abandonment by it of any claim against
the Polish Government in respect of the latter's taking possession and
exploitation of the Chorzów factory.
(4) In any case, it is submitted that the German Government should, in the
first place, hand over to the Polish Government the whole of the shares of
the Oberschlesische Stickstoffwerke Company, of the nominal value of
110,000,000 Marks, which are in its hands under the contract of December
24th, 1919.
B. As regards the Bayerische:
(1) (a) that the applicant Government's claim for compensation in respect of
the past, in excess of 1,000,000 Reichsmarks, should be dismissed;
(b) that, pro futuro, an annual rent of 250,000 Reichsmarks, payable as from
January 1st, 1928, until March 31st, 1941, should be awarded;
(c) that. these indemnities should only be payable after previous withdrawal
by the said Company of the claim pending before the German-Polish Mixed
Arbitral [p16] Tribunal in respect of the Chorzów factory and after the
formal abandonment by it of any claim against the Polish Government in
respect of the latter's taking possession and exploitation of the Chorzów
factory;
(2) that the applicant Government's third submission to the effect that
until June 30th, 193,I, no exportation of nitrate of lime or nitrate of
ammonia should take place to Germany, the United States of America, France
or Italy.
C. As regards the Oberschlesische and Bayerische jointly:
that submission No. 4-to the effect that it is not permissible for the
Polish Government to set off against the abovementioned claim for indemnity
of the German Government its claim in respect of social insurances in Upper
Silesia, that it may not make use of any other set-off against the
abovementioned claim for indemnity, and that the payments mentioned under 4
(a)-(c) should be made without any deduction to the account of the two
Companies with the Deutsche Bank at Berlin-should be rejected.
* * *
[37] A comparison between the German and Polish final submissions as thus
set out leads to the following results :
I. (A) as regards the first German submission: that the Parties are at
variance except in regard to the reparation of the damage sustained by the
Bayerische;
(B) as regards submission No. 2 a of the German Government that the Polish
Government asks that it should be dismissed ; and, in the alternative, that
the claim for indemnity should be provisionally suspended; it is doubtless
the alternative claim thus put forward by Poland in reply to submission No.
2 a of the German Government that the first of the "additional claims" of
the latter Government mentioned above is intended to meet;
(C) as regards submission No. 2 b of the German Government: that the Polish
Government asks that it should be dismissed except as regards the award, in
respect of [p17] the past, of a sum not exceeding 1,000,000 Reichsmarks for
the future, of an annual rent of 250,000 Reichsmarks payable as from January
1st, 1928, until March 31st, 1941;
(D) as regards the German submission No. 3: that the Polish Government asks
that the German Government's principal submission should be dismissed but
does not formulate a definite submission with regard to the alternative
submission under this number;
(E) as regards the German submissions Nos. 4 (a)-(c): that the Polish
Government does not say anything specific concerning these submissions
except in so far as it formulates its submission A 3, regarding the
suspension of payment;
(F) as regards the German Government's submission No. 4 (d): that the Polish
Government submits that the principal submission under this number should be
rejected, but does not formulate any definite submission regarding the
alternative German submission.
II. As regards the Polish submissions: that submission A 4, which goes
beyond the scope of the German submissions, has given rise to a claim for
its rejection on the part of 'the German Government, formulated during the
oral proceedings.
* * *
[38] It is therefore solely with the points of divergence as set out above
that the Court has to deal in the judgment which it is about to deliver. It
is true that the Parties have, both in the written and oral proceedings,
formulated yet other claims. In so far, however, as these claims do not
constitute developments of the original submissions, or alternatives to
them, the Court cannot regard them otherwise than - to use the expression of
the Agent of the German Government-as "subsidiary arguments" or as mere
suggestions as to the procedure to be adopted; this is certainly the case as
regards the numerous requests with a view to the consultation of experts or
the hearing of witnesses. There is no occasion for the Court [p18] to pass
upon all these requests; it may therefore confine itself to taking them into
account, in so far as may be necessary during the discussion of the
arguments advanced by the parties in support of their submissions, for the
purposes of stating the reasons of the judgment.
* * *
[39] The Parties have presented to the Court numerous documents either as
annexes to the documents of the written proceedings or in the course of the
hearings, or, lastly, in response to requests made or questions put by the
Court. (Annex.)
THE FACTS.
[40] The facts underlying the present suit have already been succinctly
stated or referred to in judgments Nos. 6, 7, 8 and 11, given by the Court
on August 25th, 1925, May 25th, 1926, July 26th, 1927, and December 16th,
1927.
[41] The present judgment, however, must deal with the so-called case of the
factory at Chorzów from a point of view with which the Court has not
hitherto had to concern itself, namely, that of the nature - and, if
necessary, the amount and method of payment - of the reparation which may be
due by Poland in consequence of her having, as established by the Court in
Judgment No. 7, adopted an attitude not in conformity with the Geneva
Convention of May 13th, 1922. Accordingly, it is necessary, before
approaching the point of law raised by the German Application of February
8th, 1927, briefly to trace out the relevant facts from this particular
standpoint.
[42] On March 5th, 1915, a contract was concluded between the Chancellor of
the German Empire, on behalf of the Reich, and the Bayerische, according to
which that Company undertook "to establish for the Reich and forthwith to
begin the construction of", amongst other things, a nitrate factory at
Chorzów in Upper Silesia. The necessary lands were to be acquired on [p19]
behalf of the Reich and entered in its name in the land register. The
machinery and equipment were to be in accordance with the patents and
licences of the Company and the experience gained by it, and the Company
undertook to manage the factory until March 31st, 1941, making use of all
patents, licences, experience gained, innovations and improvements, as also
of all supply and delivery contracts of which it had the benefit. For this
purpose, a special section of the Company was to be formed which was, to a
certain extent, to be subject to the supervision of the Reich, which had the
right to a share of the profits resulting from the working of the factory
during each financial year. The Reich had the right, commencing on March
31st, 1926, to terminate the contract for the management of the factory by
the Company on March 31st of any year upon giving fifteen months' notice.
The contract could be determined as early as March 31st, 1921, always on
condition of fifteen months' notice being given, if the Reich's share of the
surplus did not reach a fixed level.
[43] This contract was subsequently supplemented by a series of seven
additional contracts, of which, however, only the second and seventh,
concluded on November 16th, 1916, and November 22nd, 1918, respectively,
relate to the Chorzów factory. On May 14th, 1919, the Bayerische brought an
action against the Reich, claiming that the latter was bound to compensate
the Company for the damage said to have been suffered by it, owing to
certain alleged shortcomings with respect to the fulfilment of the contract
of March 5th, 1913, and the additional contracts. This matter was, however,
settled out of court by an arrangement concluded on October 24th, 1919,
between the Reich and the Bayerische, an arrangement which replaced the
fifth additional contract and did not relate to the Chorzów factory.
[44] On December 24th, 1919, a series of legal instruments were signed and
legalized at Berlin with a view to the formation of a new Company, the
Oberschlesische Stickstoffwerke A.-G., with a share capital of 250,000
marks, increased subsequently to 110 millions of marks, and the sale by the
Reich to this Company of the factory at Chorzów, that is to say, the whole
of the land, buildings and installations belonging thereto, with all
accessories, reserves, raw material, equipment and stocks. The [p20]
management and working of the factory were to remain in the hands of the
Bayerische, which, for this purpose, was to utilize its patents, licences,
experience gained and contracts. These relations between the two Companies
were confirmed by means of letters dated December 24th and 28th, 1919,
exchanged between them. The Oberschlesische was duly entered, on January
29th, 1920, at the Amtsgericht of Königshütte, in the Chorzów land register,
as owner of the landed property constituting the nitrate factory at Chorzów.
The registered office of the Oberschlesische which, under the memorandum of
association, was established at Chorzów, was subsequently, by an amendment
executed on January 14th, 1920, transferred to Berlin.
[45] In the contract of December 24th, 1919, between the Reich and the newly
created Oberschlesische, a second limited liability company, founded the
same day and known as the Stickstoff Treuhand Gesellschaft m. b. H.
(hereinafter called the "Treuhand") was also concerned. This Company had a
share capital of 300,000 marks, subsequently increased to 1,000,000 marks.
Under the contract, the whole of the factory for the production of nitrated
lime, with the accessory installations, situated at Chorzów, was ceded by
the Reich to the Oberschlesische at the price of approximately 110 million
marks, - which price was calculated according to certain data indicated in
the contract itself, - the Treuhand taking over, in the place of the
Oberschlesische, as sole and independent debtor, all the obligations imposed
by the contract upon the latter in regard to the Reich, and obtaining in
consideration thereof, without payment, shares of the Oberschlesische - to
the nominal value of 109,750,000 marks. Later, the Treuhand also acquired
the rest of the shares of the Oberschlesische, thus becoming the sole
shareholder of that Company. As guarantee for the sums due to the Reich
under the contract, the Treuhand undertook to obtain for the Reich a lien on
all the shares of the Oberschlesische. The Treuhand was to liquidate the
purchase price exclusively by paying to the Reich the dividends on the
shares of the Oberschlesische. Nevertheless, the Treuhand was authorized to
pay at any time the whole or a part of the purchase price ; this would have
the effect of removing the lien on shares of a nominal value corresponding
to the payment [p21] made. The Reich was authorized itself to exercise all
the rights resulting from the possession of the shares, and in particular
the right to vote at the general meeting of shareholders, but agreed that
the management. of the exploitation of the Oberschlesische should be left in
the hands of the Bayerische. An alienation of the shares so pledged would be
authorized only with the approval of the Reich, even after the lien had
expired. As a guarantee for the fulfilment of this obligation, the Reich
would, even after expiration of the lien, retain possession of the shares
and the exercise of all rights resulting from such possession. The price
realized in the event of a sale of the shares was in the first place to be
devoted to the liquidation of the balance of the Reich's claim. Of any
surplus, the Reich was to receive either 85% - If the sale were effected by
the Treuhand - or 90% - if it were effected by the Reich; in both cases, the
balance only would fall to the Treuhand which, however, in the second case,
would obtain a right to acquire the shares at the price at which the Reich
wished that they should be disposed of.
[46] On May 15th, 1922, was signed at Geneva between Germany and Poland the
Convention concerning Upper Silesia.
[47] After the signature of this Convention but before the actual cession of
Polish Upper Silesia to Poland, the Treuhand, by a letter dated May 26th,
1922, offered to a Swiss company, the Compagnie d'azote et de fertilisants
S. A. at Geneva, an option until the end of the year for the purchase, at a
price of five million Swiss francs, to be paid by January 2nd, 1923, at
latest, of one half (55 million marks) of the shares of the Oberschlesische,
in consideration of which the Genevese Company would, amongst other things,
acquire the right to take part in the negotiations with the Polish
Government. This offer came to nothing.
[48] On July 1st, 1922, the Polish Court of Huta Krolewska, which had
replaced the Amtsgericht of Königshütte, gave a decision to the effect that
the registration with this Court of the Oberschlesische as owner of the
factory, which was declared null and void, was to be cancelled and the
previously existing situation restored and that the right of ownership in
the landed property in question was to be registered in the name of the
[p22] Polish Treasury. This decision, which cited Article 256 of the Treaty
of Versailles and the Polish laws of July 14th, 1920, and June 16th, 1922,
was carried into effect on the same day.
[49] On July 3rd, 1922, M. Ignacy Moscicki, who was delegated with full
powers to take charge of the factory at Chorzów by a Polish ministerial
decree of June 24th, 1922, took possession of the factory and took over the
management in accordance with the terms of the decree. The German Government
contended, and the Polish Government did not deny, that the said delegate,
in undertaking the control of the working of the factory, at the same time
took possession of the movable property, patents, licences, etc.
[50] After having taken over the factory, the Polish Government entered it
in the list of property transferred to it under Article 256 of the Treaty of
Versailles, which list was duly communicated to the Reparation Commission.
The Polish Government alleges that after the pronouncement of Judgment No. 7
by the Court, the German Government asked that the factory should be struck
out of the list in question; the former Government has not, however, been
informed whether this has been done.
[51] In the meantime, the Oberschlesische, on November I5th, 1922, had
brought an action before the German-Polish Mixed Arbitral Tribunal at Paris,
claiming, amongst other things, that the Polish Government should be ordered
to restore the ,factory. This action, notice of which was served upon the
respondent Government on January 17th, 1923, was withdrawn by the
Oberschlesische in June 1928, before the Tribunal had been able to give a
decision.
[52] The Oberschlesische, on November 24th, 1922, instituted a parallel
action in regard to the movable property existing at Chorzów at the time of
the taking over of the factory, against the Polish Treasury before the Civil
Court of Katowice, with a view to obtaining either the restitution to the
Oberschlesische or the Bayerische of such property, or the payment of the
equivalent value. This action however led to no decision on the merits.
[53] As regards the Bayerische, that Company also, on March 25th, 1925,
brought an action before the German-Polish Mixed [p23] Arbitral Tribunal
against the Polish Treasury with a view to obtaining an annual indemnity
until the restitution of the factory to the Oberschlesische, and to causing
the possession and management of the factory to be restored to it. Notice of
this action was served on the respondent Government on December 16th, 1925 ;
but the case was withdrawn in June 1928, at the same time as the action
brought by the Oberschlesische and in the same circumstances.
[54] The Court's Judgment No. 7 was given on May 75th, 1926. This judgment
was the source of developments tending in two different directions.
[55] On the one hand, at the initiative of the German Government, it formed
the starting point for direct negotiations between the two Governments
concerned. In regard to these negotiations, it is only necessary here to
note that, on January 14th, 1927, the German Government had recognized that
the factory could no longer be restored in kind and that consequently the
reparation due must, in principle, take the form of the payment of
compensation, a statement which is moreover formally repeated in the Case.
The negotiations were unsuccessful owing, amongst other things, to the fact
that, in the opinion of the Polish Government, certain claims which Poland
was said to have against Germany, must be set off against the indemnity to
be awarded to Germany. The failure of the negotiations resulted in the
institution of the present proceedings.
[56] On the other hand, the Court's Judgment No. 7 gave rise on the part of
the Polish Government to the bringing of an action before the Polish Court
of Katowice against the Oberschlesische in order to obtain a declaration
that that Company had not become owner of the landed property at Chorzów;
that the entry in the land register made in its favour on January 29th,
1922, was not valid, and that-independently of the laws of July 14th, 1920,
and June 16th, 1922, - the ownership of the landed property in question fell
to the Polish Treasury. The judgment of the Court in this action¬ which was
given by default - was published on November 12th, 1927, and took effect on
January 2nd, 1928 ; it admitted all the submissions of the claimant. [p24]
[57] Meanwhile, on October 18th, 1927, the Court had received a fresh
application from the German Government which, relying on the terms of
Article 60 of the Statute and Article 66 of the Rules of Court, prayed the
Court to give an interpretation of its Judgments Nos. 7, of May 25th, 1926,
and 8, of July 26th, 1927, alleging that a divergence of opinion had arisen
between the two Governments in regard to the meaning and scope of these two
judgments in connection with the point which had given rise to the
proceedings before the Court of Katowice.
[58] The Court, on December 16th, 1927, delivered its judgment in this suit
(No. II). According to this judgment the Court's intention in Judgment No. 7
had been to recognize, with binding effect between the Parties concerned and
in respect of that particular case, amongst other things, the right of
ownership of the Oberschlesische in the Chorzów factory under municipal law.
[59] Whilst the proceedings in connection with the request for an
interpretation were in progress, the German Government, by means of a
Request dated October 14th, 1927, and filed with the Registry on November
15th, besought the Court to indicate to the Polish Government that it should
pay to the German Government, as a provisional measure, the sum of 30
million Reichsmarks.
[60] The Court gave its decision upon this request, which was submitted
under the terms of Article 41 of the Statute, in the form of an Order made
on November 21st, 1927. It held that effect could not be given to the
request of the German Government, since it was to be regarded as designed to
obtain not the indication of measures of protection, but judgment in favour
of a part of the claim formulated in the Application of February 8th, 1927.
[p25]
* * *
THE LAW.
I.
[61] The Court, before proceeding to consider the Parties' submissions, must
determine the import of the application which has given rise to the present
proceedings, in order to ascertain its nature and scope. In the light of the
results of this investigation, it will then proceed to consider the
submissions made in the course of the written and oral proceedings.
[62] In the application the Court is asked:
(1) to declare that the Polish Government, by reason of its attitude in
respect of the Oberschlesische and Bayerische Companies, which attitude the
Court had declared not to be in conformity with the Geneva Convention, is
under an obligation to make good the consequent damage sustained by those
Companies;
(2) to award compensation, the amount of which is indicated in the
application, for the damage caused to each of the respective Companies;
(3) to fix the method of payment, and amongst other things to order the
payments to be made by the Polish Government to be effected to the account
of the two Companies with the Deutsche Bank at Berlin.
[63] In the course of the oral proceedings, a difference of opinion between
the two Parties became apparent as to the nature and scope of the
application. The Agent for the German Government argued in his address to
the Court that a government may content itself with reparation in any form
which it may consider proper, and that reparation need not necessarily
consist in the compensation. of the individuals concerned. The following
passage should especially be noted:
[Translation.]
"It is in fact a question of the German Government's own rights. The German
Government has not brought this suit as representative of the individuals
who have suffered injury, but it may estimate the damage for which it claims
reparation on its own behalf, according to the measure provided by the
losses suffered by the companies whose case it has [p26] taken up. The
German Government may claim the payment of this compensation at any locus
solutionis which it may think fit in this case, whether it be a public or a
private office.
The present dispute is therefore a dispute between governments and nothing
but a dispute between governments. It is very clearly differentiated from an
ordinary action for damages, brought by private persons before a civil
court, as the Polish Government has said in its Rejoinder."
[64] The Agent for the Polish Government in his Rejoinder submitted that
this method of regarding the question involved a modification of the subject
of the dispute and, in some sort also, of the nature of the application,
for, according to Poland's view, the subject of the dispute had been defined
by Germany as the obligation to compensate the two Companies. But damage and
compensation being interdependent conceptions, the German claim assumed
another aspect if it was no longer a question of compensating the Companies,
but of compensating the State for the injury suffered by it. The Agent for
the Polish Government disputed the German Government's right to make this
change at that stage of the proceedings and refused to accept it.
[65] Even should it be possible to construe the terms of the application and
of the subsequent submissions of the Applicant as contemplating compensation
due directly to the two Companies for damages suffered by them and not
reparation due to Germany for a breach of the Geneva Convention, it follows
from the conditions in which the Court has been seized of the present suit,
and from the considerations which led the Court to reserve it by Judgment
No. 8 for decision on the merits, that the object of the German application
can only be to obtain reparation due for a wrong suffered by Germany in her
capacity as a contracting Party to the Geneva Convention.
[66] The present application is explicitly and exclusively based on Judgment
No. 7 which declared that the attitude of the Polish Government in respect
of the two Companies, the Oberschlesische and Bayerische, was not in
conformity with, Article 6 and the following articles of the said
Convention. Already in Judgment No. 6, establishing the Court's jurisdiction
to deal with the alleged violation of the Geneva Convention, the [p27] Court
recognized that - as had been maintained by the Applicant - the matter was
exclusively a dispute between States as to the interpretation and
application of a convention in force between them. Article 23 of the Geneva
Convention only contemplates differences of opinion respecting the
interpretation and application of Articles 6 to 22 of the Geneva Convention
arising between the two Governments. The Court in fact declared itself
competent to pass upon the claim for reparation because it regarded
reparation as the corollary of the violation of the obligations resulting
from an engagement between States. This view of the matter, which is in
conformity with the general character of an international tribunal which, in
principle, has cognizance only of interstate relations, is indicated with
peculiar force in this case for the specific reason that the Geneva
Convention, with its very elaborate system of legal remedies, has created or
maintained for certain categories of private claims arbitral tribunals .of a
special international character, such as the Upper Silesian Arbitral
Tribunal and the German-Polish Mixed Arbitral Tribunal. It was on the basis,
amongst other things, of. the purely interstate character of the dispute
decided by Judgment No. 7 that the Court reserved the case for judgment,
notwithstanding the fact that actions brought by the two Companies were
pending before one of the arbitral tribunals above mentioned, actions which
related to the same act of dispossession which led to the filing with the
Court of the German Government's Application now before it.
[67] The Court, which by Judgment No. 8 reserved the present application for
judgment on the merits, could only do so on the grounds on which it had
already based its Judgment No. 7 which constitutes the starting point for
the claim for compensation now put forward by Germany. Accordingly the
declarations of the Applicant in the present proceedings must be construed
in the light of this conception and this method must also have been followed
even if that Party had not stated its contention as explicitly as it has
done in the German Agent's address to the Court.
[68] It is a principle of international law that the reparation of a wrong
may consist in an indemnity corresponding to the damage which the nationals
of the injured State have suffered [p28] as a result of the act which is
contrary to international law. This is even the most usual form of
reparation; it is the form selected by Germany in this case and the
admissibility of it has not been disputed. The reparation due by one State
to another does not however change its character by reason of the fact that
it takes the form of an indemnity for the calculation of which the damage
suffered by a private person is taken as the measure. The rules of law
governing the reparation are the rules of international law in force between
the two States concerned, and not the law governing relations between the
State which has committed a wrongful act and the individual who has suffered
damage. Rights or interests of an individual the violation of which rights
causes damage are always in a different plane to rights belonging to a
State, which rights may also be infringed by the same act. The damage
suffered by an individual is never therefore identical in kind with that
which will be suffered by a State; it can only afford a convenient scale for
the calculation of the reparation due to the State.
[69] International law does not prevent one State from granting to another
the right to have recourse to international arbitral tribunals in order to
obtain the direct award to nationals of the latter State of compensation for
damage suffered by them as a result of infractions of international law by
the first State. But there is nothing - either in the terms of Article 23 or
in the relation between this provision and certain others of a
jurisdictional character included in the Geneva Convention - which tends to
show that the jurisdiction established by Article 23 extends to reparation
other than that due by one of the contracting Parties to the other in
consequence of an infraction of Articles 6 to 22, duly recognized as such by
the Court.
[70] This view is moreover readily reconcilable with the submissions of the
Applicant. The first of its submissions, throughout all stages of the
proceedings, aims at the establishment of an obligation to make reparation.
The indemnities to be paid to the German Government, according to No. 2 of
the final submissions, constitute, in the terms of submission 4d, as set out
in both the Case and the oral reply, a debt due to that Government. The
claim formulated in the same submission, to the effect that payment should
be made to the account of the [p29] two Companies with the Deutsche Bank at
Berlin, is interpreted by the Agent for the German Government as solely
relating to the locus solutionis.
[71] The Court therefore is of opinion that the Applicant has not altered
the subject of the dispute in the course of the proceedings.
* * *
[72] It follows from the foregoing that the application is designed to
obtain, in favour of Germany, reparation the amount of which is determined
by the damage suffered by the Oberschlesische and Bayerische. Three
fundamental questions arise:
(1) The existence of the obligation to make reparation.
(2) The existence of the damage which must serve as a basis for the
calculation of the amount of the indemnity.
(3) The extent of this damage.
[73] As regards the first point, the Court observes that it is a principle
of international law, and even a general conception of law, that any breach
of an engagement involves an obligation to make reparation. In Judgment No.
8, when deciding on the jurisdiction derived by it from Article 23 of the
Geneva Convention, the Court has already said that reparation is the
indispensable complement of a failure to apply a convention, and there is no
necessity for this to be stated in the convention itself. The existence of
the principle establishing the obligation to make reparation, as an element
of positive international law, has moreover never been disputed in the
course of the proceedings in the various cases concerning the Chorzów
factory.
[74] The obligation to make reparation being in principle recognized, it
remains to be ascertained whether a breach of an international engagement
has in fact taken place in the case under consideration. Now this point is
res judicata. The nonconformity of Poland's attitude in respect of the two
Companies with Article 6 and the following articles of the Geneva Convention
is established by No. 2 of the operative provisions of Judgment No. 7. The
application of the principle to the present case is therefore evident. [p30]
[75] As regards the second point, the question whether damage has resulted
from the wrongful act which is common ground, is in no wise settled by the
Court's previous decisions relating to the Chorzów case. The Applicant
having calculated the amount of the reparation claimed on the basis of the
damage suffered by the two Companies as a result of the Polish Government's
attitude, it is necessary for the Court to ascertain whether these Companies
have in fact suffered damage as a consequence of that attitude.
[76] As regards the Bayerische, Poland admits the existence of a damage
affording ground for reparation; the Parties only differ as to the extent of
this damage and the mode of reparation; on the other hand, Poland denies the
existence of any damage calling for reparation in the case of the
Oberschlesische and consequently submits that Germany's claim should be
dismissed. The fact of the dispossession of the Oberschlesische is in no way
disputed. But notwithstanding this, in the contention of the Polish
Government, that Company has suffered no damage: it argues, first, that the
right of ownership claimed by the Oberschlesische was null and void or
subject to annulment, and, secondly, that the contract of December 24th,
1919, attributed to the Reich rights and benefits so considerable that any
possible damage would not materially affect the Company. In the alternative,
the Polish Government contends that these same circumstances at all events
have the effect of essentially diminishing the extent of the damage to be
taken into account in so far as the said Company is concerned.
[77] Apart from these preliminary objections, the Parties are at issue as to
the amount and method of payment of any compensation which may be awarded.
[78] In these circumstances, the Court must first of all consider whether
damage affording ground for reparation has ensued as regards not only the
Bayerische but also the Oberschlesische. [p31]
II.
[79] On approaching this question, it should first be observed that, in
estimating the damage caused by an unlawful act, only the value of property,
rights and interests which have been affected and the owner of which is the
person on whose behalf compensation is claimed, or the damage done to whom
is to serve as a means of gauging the reparation claimed, must be taken into
account. This principle, which is accepted in the jurisprudence of arbitral
tribunals, has the effect, on the one hand, of excluding from the damage to
be estimated, injury resulting for third parties from the unlawful act and,
on the other hand, of not excluding from the damage the amount of debts and
other obligations for which the injured party is responsible. The damage
suffered by the Oberschlesische in respect of the Chorzów undertaking is
therefore equivalent to the total value - but to that total only - of the
property, rights and interests of this Company in that undertaking, without
deducting liabilities.
[80] The Polish Government argues in the first place that the
Oberschlesische has suffered no loss as a result of its dispossession,
because it was not the lawful owner, its right of ownership having never
been valid and having in any case ceased to be so in virtue of the judgment
given on November 12th, 1927, by the Court of Katowice; so that from that
date at all events no damage for which reparation should be made could ensue
as regards that Company.
[81] In regard to this the Court observes as follows: the Court has already,
in connection with Judgment No. 7, had to consider as an incidental and
preliminary point, the question of the validity of the transactions in
virtue of which the ownership of the Chorzów factory passed from the Reich
to the Oberschlesische. It then arrived at the conclusion that the various
transactions in question were genuine and bona fide; that is why it was able
to regard the Chorzów factory as belonging to a company controlled by German
nationals, namely, the Oberschlesische. Whatever the effect of this
incidental decision may be as regards the right of ownership under municipal
law, it is evident that the fact that the [p32] Chorzów factory belonged to
the Oberschlesische was the necessary condition precedent to the Court's
decision that the attitude of the Polish Government in respect of the
Oberschlesische was not in conformity with Article 6 and the following
articles of the Geneva Convention. For if the factory did not belong to the
Oberschlesische Stickstoffwerke, not only would that Company not have
suffered damage as a result of dispossession, but furthermore it could not
have been subjected to a dispossession contrary to the Geneva Convention,
but the Court established by Judgment No. 7 that such was the case. It
should be noted that the Court in Judgment No. 7 has not confined itself to
recording the incompatibility with the Geneva Convention of the application
of the law of July 14th, 1920, to properties entered in the land register in
the name of companies controlled by German nationals, but has, in replying
to the objections put forward by the Respondent, also had to deal with the
question whether such entry was the outcome of fictitious and fraudulent
transactions or of genuine and bona-¬fide transactions. Poland herself
objected in connection with the second submission of the German Application
of May 15th, 1925, that the entry of the Oberschlesische in the land
register was in any case not valid as it was based on a fictitious and
fraudulent transaction and thus caused the Court to deal with this point.
[82] As the application now under consideration is based on the damage
established by Judgment No. 7, it is impossible that the Oberschlesische's
right to the Chorzów factory should be looked upon differently for the
purposes of that judgment and in relation to the claim for reparation based
on the same judgment. The Court, having been of opinion that the
Oberschlesische's right to the Chorzów factory justified the conclusion that
the Polish Government's attitude in respect of that Company was not in
conformity with Article 6 and the following articles of the Geneva
Convention, must necessarily maintain that opinion when the same situation
at law has to be considered for the purpose of giving judgment in regard to
the reparation claimed as a result of the act which has been declared by the
Court not to be in conformity with the Convention.
[83] The Polish Government now points out that, after Judgment No. 7 had
been rendered, the Civil Court of Katowice [p33] which, under International
Law, doubtless has jurisdiction in disputes at civil law concerning
immovable property situated within its district, has declared the entry of
the Oberschlesische in the land register as owner not to be valid under the
municipal law applicable to the case, and this apart from the Polish laws of
July 14th, 1920, and June 16th, 1922; it further contends that the Court, in
now giving judgment on the question of damages, should bear in mind this new
fact.
[84] There is no need for the Court to consider what would have been the
situation at law as regards the Geneva Convention, if dispossession had been
preceded by a judgment given by a competent tribunal. It will suffice to
recall that the Court in Judgment No. 8 has said that the violation of the
Geneva Convention consisting in the dispossession of an owner protected by
Article 6 and following of the Geneva Convention could not be rendered
non-existent by the judgment of a municipal court which, after dispossession
had taken place, nullified the grounds rendering the Convention applicable,
which grounds were relied upon by the Court in Judgment No. 7. The judgment
of the Tribunal of Katowice given on November 12th, 1927, - which judgment
was given by default as regards the Oberschlesische, the Reich not being a
Party to the proceedings, - does not contain in the text known to the Court
the reasons for which the entry of the property in the name of the
Oberschlesische was declared null and void; but it appears from the
application upon which this judgment was given that the reasons advanced by
the Polish Treaty are essentially the same as those already discussed before
the Court on the basis of the Polish Government's submissions in the
proceedings leading up to Judgment No. 7, which reasons, in the opinion of
the Court, did not suffice to show that the Oberschlesische did not fall
within the scope of Article 6 and the following articles of the Geneva
Convention. If the Court were to deny the existence of a damage on the
ground that the factory did not belong to the Oberschlesische, it would be
contradicting one of the reasons on which it based its Judgment No. 7 and it
would be attributing to a judgment of a municipal court power indirectly to
invalidate a judgment of an international court, which is impossible.
Whatever the [p34] effect of the judgment of the Tribunal of Katowice of
November 12th, 1927, may be at municipal law, this judgment can neither
render inexistent the violation of the Geneva Convention recognized by the
Court in Judgment No. 7 to have taken place, nor destroy one of the grounds
on which that judgment is based.
[85] It is to the objection dealt with above and to a submission connected
therewith which the Polish Government made in its Counter-Case but
subsequently withdrew, that the following submission of the German
Government relates:
[Translation.]
that the obligation of the Polish Government to pay the indemnity awarded by
the Court is in no way set aside by a judgment given or to be given by a
Polish municipal court in a suit concerning the question of the ownership of
the factory situated at Chorzów.
[86] This submission has been maintained notwithstanding the withdrawal of
the Polish submission referred to.
[87] The Court, being of opinion that this latter submission is to be
regarded as having been validly withdrawn, but that, nevertheless, the
objection to which it referred still subsists, considers that there is no
need expressly to deal with the submission in regard thereto made by the
German Government, save in order to dismiss the submission of the Polish
Government based on the judgment of the Tribunal of Katowice.
* * *
[88] The Polish Government not only disputes the existence of a damage for
the reason that the Oberschlesische is not or is no longer owner of the
factory at Chorzów, but also contends from various points of view that the
rights possessed by the Reich in the undertaking, having passed into the
hands of Poland, cannot be included amongst the assets to be taken into
account in the calculation of the damage sustained on which calculation will
depend the amount of the reparation due by Poland to Germany.
[89] The Polish Government, admitting, for the sake of argument, that the
contract of December 24th, 1919, was not null and void, but must be regarded
as a genuine and valid legal instrument, holds that, according to that
contract, the German [p35] Government is the owner of the whole of the
shares of the Oberschlesische representing the sole property of that
Company, namely the factory. It deduces from this that the transaction
consists in the transformation of an ordinary State enterprise into a State
enterprise with a share capital, and as it holds that the property of a
German company, the whole of the shares of which belong to the Reich, falls
within the category of "property and possessions belonging to the Empire"
acquired by Poland under Article 256 of the Treaty of Versailles, it
considers that it is "difficult to see what the rights of the
Oberschlesische were which had been infringed by the Polish Government".
[90] In developing this argument, it has laid special stress on the
allegation that the Oberschlesische is in reality a company controlled by
the German Government and not a company controlled by German nationals, or
even a private enterprise in which the Reich merely possesses preponderating
interests.
[91] Even if this should not be the case and if the instrument of December
24th, 1919, were, for argument's sake, to be regarded as an effective and
genuine contract for the sale of the factory by the Reich to the
Oberschlesische, the Polish Government contends that it is impossible not to
take into .account the circumstance that the German State retained a whole
complex of rights and interests in the undertaking. As the indemnity claimed
by the German Government is calculated, amongst other things, on the extent
of the damage presumed to have been sustained by the Oberschlesische, it
would not be "logically correct to award to that Company compensation for
rights and interests in the Chorzów undertaking which belonged to the
Reich". These rights should therefore be eliminated from the rights of the
Oberschlesische, which, if this were done, would amount simply to a nudum
jus domini.
[92] The Polish Government also alleges that, under Article 256 of the
Treaty of Versailles, the rights and interests of the German Government in
the Chorzów undertaking are transferred to the Polish State, at latest as
from the date of the transfer to Poland of sovereignty over the part of
Upper Silesia allotted to her, and that, on the supposition that the
.contract of December 24th, 1919, gave the German State [p36] the whole of
the shares of the Oberschlesische, as guarantee for its rights, and to
enable it to exercise those rights, these shares, on the possession of which
depend the rights of the Reich, should be transferred to Poland. If the
contract of December 24th, 1919, is to be regarded as genuine and effective,
the Polish Government holds that, in order to determine the indemnity which
may be due to the Oberschlesische, the rights of the Reich must first be
eliminated; and as it is of opinion that this can only be done in one way,
namely, by the handing over by Germany to Poland of the shares of the
Oberschlesische to the nominal value of 110 million marks, the Polish
Government has in regard to this point made the following submission (No. A
4) in its Counter-Case:
[Translation.]
"In any case, it is submitted that the German Government should, in the
first place, hand over to the Polish Government the whole of the shares of
the Oberschlesische Company of the nominal value of 110,000,000 marks, which
are in its hands under the contract of December 24th, 1919."
[93] The German Government in its Reply made the following observations in
regard to this submission:
[Translation.]
"In the first place, the Polish Government cites no provision on which it is
possible to base the Court's jurisdiction to take cognizance of this
question, which arises from the interpretation of Article 256. In the
previous proceedings, the Polish Government strongly maintained that the
interpretation of this article would not be admissible even as a question
incidental and preliminary to the interpretation of Articles 6 to 22 Of the
Geneva Convention.
The German Government does not know whether the Polish Government has on
mind the general treaty of arbitration signed at Locarno - according to
which any dispute of a legal nature must be submitted to arbitration, and,
unless some special arbitral tribunal is agreed upon, to the Permanent Court
of International Justice. But, however that may be, the German Government,
being animated by a wish to ensure that full scope shall be given to the
Treaty of Locarno, without pausing to debate questions as to the procedure
therein provided for, and also to see the Chorzów case settled once and for
all, abstains from undertaking a detailed examination of the questions of
lack of jurisdiction or prematurity, even though these questions might enter
into account in connection with the counter-claim which, in the German
Government's [p37] contention, is formulated in submission A 4 of the
Counter-Case. It will simply refer to Article 40, paragraph 2, No. 4, of the
Rules of Court, according to which the Court may give judgment on
counter-claims in so far as the latter come within its jurisdiction. As
between Germany and Poland this applies in respect of any question of law in
dispute between them. The only point which might be disputed is the question
whether, for the application of this article of the Rules, the conditions
respecting forms and times must also be fulfilled, or whether it is enough
that the material conditions should be fulfilled. This point, however, may
be left open, since the German Government accepts the jurisdiction of the
Court in regard to the question raised in the Counter-Case. In the course of
the negotiations in regard to the Chorzów case, the German plenipotentiary
had already proposed to the Polish plenipotentiary that this question should
be referred to the Court."
[94] In the subsequent proceedings, the Polish Government has not made any
statement in regard to the question of the Court's jurisdiction. It is
impossible, therefore, to say whether it accepts the view of the German
Government according to which it may be inferred that such jurisdiction
exists under the Convention between Germany and Poland initialled at Locarno
on October 16th, 1925, or whether it contends that the Court has
jurisdiction on sortie other basis. In any case, it is certain that it has
not withdrawn its claim and that, consequently, it wishes the Court to give
judgment on the submission in question. For its part the German Government,
though basing the Court's jurisdiction on the Locarno Convention, seems
above all anxious that the Court should give judgment on the submission in
the course of the present proceedings.
[95] The Parties therefore are agreed in submitting to the Court for
decision the question raised by this submission. As the Court has said in
Judgment No. 12, concerning certain rights of minorities in Upper Silesia,
Article 36 of the Statute establishes the principle that the Court's
jurisdiction depends on the will of the Parties ; the Court therefore is
always competent once the latter have accepted its jurisdiction, since there
is no dispute which States entitled to appear before the Court cannot refer
to it, save in exceptional cases where a dispute may be within the exclusive
jurisdiction of some other body. [p38]
[96] But this is not the case as regards the submission in question.
[97] The Court also observes that the counter-claim is based on Article 256
of the Versailles Treaty, which article is the basis of the objection raised
by the Respondent, and that, consequently, it is juridically connected with
the principal claim.
[98] Again, Article 40 of the Rules of Court, which has been cited by the
German Government, lays down amongst other things that counter-cases shall
contain:
“4ş conclusions based on the facts stated ; these conclusions may include
counter-claims, in so far as the latter come within the jurisdiction of the
Court."
[99] The claim having been formulated in the Counter-Case, the formal
conditions required by the Rules as regards counter-claims are fulfilled in
this case, as well as the material conditions.
[100] As regards the relationship existing between the German claims and the
Polish submission in question, the Court thinks it well to add the
following: Although in form a counterclaim, since its object is to obtain
judgment against the Applicant for the delivery of certain things to the
Respondent - in reality, having regard to the arguments on which it is
based, the submission constitutes an objection to the German claim designed
to obtain from Poland an indemnity the amount of which is to be calculated,
amongst other things, on the basis of the damage suffered by the
Oberschlesische. It is in fact a question of eliminating from the amount of
this indemnity a sum corresponding to the value of the rights and interests
which the Reich possessed in the enterprise under the contract of December
24th, 1919, which value, according to the Polish Government, does not
constitute a loss to the Oberschlesische because these rights and interests
are said to belong to the Polish Government itself under Article 256 of the
Treaty of Versailles. The Court, having by Judgment No. 8 accepted
jurisdiction, under Article 23 of the Geneva Convention, to decide as to the
reparation due for the damage caused to the two Companies by the attitude of
the Polish Government towards them, cannot dispense with an examination of
the objections the [p39] aim of which is to show either that no such damage
exists or that it is not so great as it is alleged to be by the Applicant.
This being so, it seems natural on the same grounds also to accept
jurisdiction to pass judgment on the submissions which Poland has made with
a view to obtaining the reduction of the indemnity to an amount
corresponding to the damage actually sustained.
*
[101] Proceeding now to consider the above-mentioned objections of the
Polish Government, the Court thinks it well first of all to define what is,
in its opinion, the nature of the rights which the German Government
possesses in respect of the Chorzów under-taking under the contract of
December 24th, 1919, the main features of which have been described above.
Referring to this description, the Court points out that the Treuhand, a not
the Reich, is legally the owner of the shares of the Oberschlesische. The
Reich is the creditor of the Treuhand and in this capacity has a lien on the
shares. It also has, besides this lien, all rights resulting from possession
of the shares, including the right to the greater portion of the price in
the event of the sale of these shares. This right, which may be regarded as
preponderating, is, from an economic standpoint, very closely akin to
ownership, but it is not ownership; and even from an economic point of view
it is impossible to disregard the rights of the Treuhand.
[102] Such being the situation at law, to endeavour now to identify the
Oberschlesische with the Reich-the effect of which would be that the
ownership of the factory would have passed to Poland under Article 256 of
the Treaty of Versailles-would be in conflict with the view taken by the
Court in Judgment No. 7 and reaffirmed above, on which view is based the
decision to the effect that Poland's attitude as regards both the
Oberschlesische and Bayerische was not in conformity with the provisions of
the Geneva Convention.
[103] The same applies in regard to the contention that the Oberschlesische
is a company controlled not by German nationals but by the Reich. It is
true, as the Polish Government has recalled, that the Court in Judgment No.
7 has declared [p40] that there was no need for it to consider the question
whether the Oberschlesische, having regard to the rights conferred by the
contract of December 24th, 1919, on the Reich, should be considered as
controlled by the Reich, and, should this be the case, what consequences
would ensue as regards the application of the Geneva Convention. But the
reason for this was that the Court held that the Polish, Government had not
raised this question, and that, apart from its contention as to the
fictitious character of the instruments of December 24th, 1919, that
Government did not seem to have disputed that the Company was controlled by
German nationals.
[104] At all events, it is clear that only by regarding the said Company as
a company controlled by German nationals within the meaning of Article 6 of
the Geneva Convention, was the Court able to declare that the attitude of
the Polish Government towards that Company was not in conformity with the
terms of Article 6 and the following articles of the said Convention.
[105] Even if the question were still open and the Court were now free once
more to consider it, it would be bound to conclude that the Oberschlesische
was controlled by the Bayerische. For seeing that, under the contract of
December 24th, 1919, the Reich had declared that it agreed to leave the
management of the Chorzów undertaking in the hands of the Bayerische, under
the conditions previously settled with the Reich, and that, under the
subsequent contract concluded on November 25th, 1920, between the Bayerische
and the Treuhand, it had been stipulated that for this purpose the
Bayerische was to appoint at least two members of its own board as members
of the board of the Oberschlesische, the Court considers that the
Bayerische, rather than the Reich, controls the Oberschlesische.
[106] The Court, therefore, arrives at the conclusion that the Polish
contention to the effect that the Oberschlesische has not suffered damage,
because that Company is to be regarded as identifiable with the Reich, and
that the property of which the said Company was deprived by the action of
the Polish Government has passed to Poland under Article 256 of the Treaty
of Versailles, is not well founded. [p41]
*
[107] Alternatively, the Polish Government has contended that, even if the
rights possessed by the Reich under the contract of December 24th, 1919, in
the Chorzów undertaking are not to be considered as involving ownership of
the shares of the Oberschlesische, the value of these rights, which fall
within the scope of Article 256 of the Treaty of Versailles, should
nevertheless be deducted from the indemnity claimed as regards the
Oberschlesische. The Court is likewise unable to admit this contention.
[108] In this respect, it should be noted that Article 256 contains two
conditions, namely, that the "property and possessions" with which it deals
must belong to the Empire or to the German States, and that such "property
and possessions" must be "situated" in German territory ceded under the
Treaty.
[109] It must therefore be ascertained, amongst other things, whether the
rights of the Reich under the contract of December 24th, 1919, are
"situated" in the part of Upper Silesia ceded to Poland. In so far as these
rights consist in a claim against the Treuhand, it is clear that this claim
cannot be regarded as situated in Polish Upper Silesia, since the Treuhand
is a company whose registered office is in Germany and whose shares belong
to companies which also have their registered office in Germany and which
are undeniably controlled by German nationals. The fact that this claim is
guaranteed by a lien on the shares on which the profit, as well as the price
obtained in the event of sale, is to be devoted to the payment of this
claim, does not, in the Court's opinion, justify the view that. the rights
of the Reich are situated in Polish Upper Silesia where the factory is.
These are only rights in respect of the shares; and these rights, if not
regarded as situated where the shares are, must be considered as localized
at the registered office of the Company which in this case in at Berlin and
not in Polish Upper Silesia. The transfer of the registered office of the
Oberschlesische from Chorzów to Berlin after the coming into force of the
Treaty of Versailles cannot be regarded as illegal and null: [p42] the
reasons for which the Court, in Judgment No. 7, held that alienations of
public property situated in the plebiscite zone were not prohibited by that
Treaty, apply a fortiori in respect of the transfer by a company of its
registered office from this zone to Germany.
[110] It is also in vain that the Polish Government cites paragraph 10 of
the Annex to Articles 297 and 298 of the Treaty of Versailles, which
paragraph lays down that Germany shall deliver "to each Allied or Associated
Power all securities, certificates, deeds, or other documents of title held
by its nationals and relating to property, rights or interests situated in
the territory of that Allied or Associated Power, including any shares,
stock, debentures, debenture stock, or other obligations of any company
incorporated in accordance with the laws of that Power". Even disregarding
the circumstances that the Oberschlesische was constituted under German law
and has not been "incorporated" in accordance with the laws of Poland, the
clause quoted has nothing to do with Article 256 and relates only to the
articles to which it is annexed.
*
[111] Since, as has been shown above, Article 256 of the Treaty of
Versailles is not, in the Court's opinion, applicable to the rights
possessed by the Reich under the contract of December 24th, 1919, it follows
that the Polish Government's contention-based on the applicability of that
article - to the effect that the value of these rights should be eliminated
from the amount of the indemnity to be awarded, must be rejected. The same
is true as regards the Polish Government's submission that the whole of the
shares of the Oberschlesische should be handed over to Poland, a submission
the aim of which is precisely to bring about the elimination referred to.
For this submission is likewise based solely on the alleged applicability of
the same article of the Treaty of Versailles. [p43]
* * *
[112] Alternatively, and also in regard to the claim for an indemnity based
on the damage sustained by the Oberschlesische, the Polish Government has
asked the Court "provisionally to suspend" its decision on the claim for
indemnity.
[113] The reasons for which it seeks this suspension appear to be as
follows:
[114] The Polish Government has notified the Reparation Commission of the
taking over of the Chorzów factory, under Article 236 of the Treaty of
Versailles, by entering it on the list of German State property acquired
under that article. It is for the Reparation Commission to fix the value of
such -property, which value is to be paid to the Commission by the
succession State and credited to Germany on account of the sums due for
reparations. Now after the Court had delivered Judgment No. 7, the German
Government asked the Reparation Commission to strike out the Chorzów factory
,from the list of property transferred to Poland, but the Commission has not
yet taken any decision in regard to this. The question whether Poland is to
be debited with the value of the factory therefore remains undecided, and
the Polish Government considers that, until this question has been decided
.and the Reparation Commission has struck the Chorzów factory off the list,
it - the Polish Government - cannot be compelled to make a payment in favour
of the Oberschlesische.
[115] In addition to these considerations, the Polish Government also cites
the Armistice Convention and Article 248 of the Treaty of Versailles. The
latter lays down that, "subject to such exceptions as the Reparation
Commission may approve, a first charge upon all the assets and revenues of
the German Empire and its constituent States shall be the cost of reparation
and all other costs arising under the present Treaty or any treaties or
agreements supplementary thereto or under arrangements concluded between
Germany and the Allied and Associated Powers during the armistice or its
extensions". The Polish Government says that in Judgment No. 7 the Court has
decided first that Poland, not having been a party [p44] to the Armistice
Convention, is not entitled to avail itself of the terms of that instrument
in order to establish that the alienation of the factory is null and void,
and secondly, that that country cannot, on her own account, cite Article 248
of the Treaty of Versailles for the same purpose. It would seem, however,
that the said Government contends that, in view of the right which the
States signatory to the Armistice Convention may have to oppose the sale of
the factory and in view of the right of the Reparation Commission to ensure
the discharge of reparation debts in general and especially in view of the
right reserved to it under Article 248, Poland's obligation to pay to
Germany an indemnity in favour of the Oberschlesische is dependent on the
previous approval of the said States and of the Reparation Commission.
[116] The German Government, for its part, whilst disputing the justice of
these objections of the Polish Government, has accepted the jurisdiction of
the Court to decide upon them has preliminary points in regard to the
questions of form, amount and methods of payment of the indemnities claimed
by it, questions with which the Court has already declared itself competent
to deal". It has asked the Court to dismiss the Polish alternative
submission and to decide:
"that the Polish Government is not justified in refusing to pay compensation
to the German Government on the basis of arguments drawn from Article 256 or
for motives of respect for the rights of the Reparation Commission or other
third parties".
[117] The Court considers that there is no doubt as to its jurisdiction to
pass judgment upon the Polish submission in question, but that this
submission must be rejected as not well-founded.
[118] In this respect, it should be observed in the first place that the
facts cited by Poland cannot prevent the Court, which now has before it a
claim for indemnity based on its Judgment No. 7, from passing judgment upon
this claim in so far as concerns the fixing of an indemnity corresponding,
amongst other things, to the amount of the damage sustained by the
Oberschlesische, of which damage the most important element is represented
by the loss of the factory. For the Court, when it declared in Judgment No.
7 that the attitude [p45] of the Polish Government in regard to the
Oberschlesische was not in conformity with the provisions of Article 6 and
the following articles of the Geneva Convention - which attitude consisted
in considering and treating the Chorzów factory as acquired by Poland under
Article 256 of the Treaty of Versailles-established that, as between the
Parties, that article was not applicable to the Chorzów factory. Again it
appears from the documents submitted to the Court by the Parties that the
Reparation Commission does not claim to be competent to decide whether any
particular property is or is not acquired by a succession State under the
said article. The Commission accepts in this respect the solution arrived at
in regard to this question either by the means at the disposal of those
concerned - diplomatic negotiations, arbitration, etc. - or as the result of
a unilateral act on the part of the succession State itself. The fact that
the Parties are now agreed that Poland must retain the factory has nothing
to do with Article 256 of the Treaty of Versailles, but is owing to the
impracticability of returning it. In these circumstances there seems to be
no doubt that Poland incurs no risk of having again to pay the value of the
factory to the Reparation Commission, if, in accordance with Germany's
claim, she pays this value to that State.
[119] With regard to the Armistice Convention and Article 248 of the Treaty
of Versailles, the question assumes a different aspect. The Armistice
Convention appears to have been cited in order to reserve the possibility of
getting the sale of the factory to the Oberschlesische declared invalid by
means of an action to be brought to that end by the States signatory to that
Convention. As, however, the Court, in Judgment No. 7, has held that Poland
cannot avail itself of the provisions of the said Convention to which she is
not a party, the Court cannot without inconsistency admit that country's
right to invoke the Convention in order to delay making reparation for the
damage resulting from her adoption of an attitude not in conformity with her
obligations under the Geneva Convention.
[120] As has already been said, the Court in Judgment No. 7 has declared
that Poland cannot on her own account rely on Article 248 of the Treaty of
Versailles in order to obtain the [p46] annulment of the sale of the
factory. Furthermore, the Court has stated that this article does not
involve a prohibition of alienation, and that the rights reserved to the
Allied and Associated Powers in the article are exercised through the
Reparation Commission. But it would be difficult to understand how these
rights could be affected by the payment to the Reich, as an indemnity, of
the value of the factory, seeing that, without such a payment, the rights of
the Reich in the enterprise would probably lose all value. The objection
based on this article must therefore also be overruled.
[121] The Court considers that it should confine itself to rejecting the
submission whereby the Polish Government asks for a suspension, since by so
doing and by overruling the objections raised by the Polish Government on
the basis of Article 256 of the Treaty of Versailles, it is deciding in
conformity with the German submission to the extent that that submission is
well-founded; the Court cannot, in fact, consider the submission in question
in so far as it relates to third parties who are not specified.
III.
[122] The existence of a damage to be made good being recognized by the
respondent Party as regards the Bayerische, and the objections raised by the
same Party against the existence of any damage that would justify
compensation to the Oberschlesische being set aside, the Court must now lay
down the guiding principles according to which the amount of compensation
due may be determined.
[123] The action of Poland which the Court has judged to be contrary to the
Geneva Convention is not an expropriation - to render which lawful only the
payment of fair compensation would have been wanting; it is a seizure of
property, rights and interests which could not. be expropriated even against
compensation, save under the exceptional conditions fixed by Article 7 of
the said Convention. As the Court has expressly declared in Judgment No. 8,
reparation is in this case the consequence not of the application of
Articles 6 to 22 of the Geneva Convention, but of acts contrary to those
articles. [p47]
[124] It follows that the compensation due to the German Government is not
necessarily limited to the value of the undertaking at the moment of
dispossession, plus interest to the day of payment. This limitation would
only be admissible if the Polish Government had had the right to
expropriate, and if its wrongful act consisted merely in not having paid to
the two Companies the just price of what was expropriated; in the present
case, such a limitation might result in placing Germany and the interests
protected by the Geneva Convention, on behalf of which interests the German
Government is acting, in a situation more unfavourable than that in which
Germany and these interests would have been if Poland had respected the said
Convention. Such a consequence would not only be unjust, but also and above
all incompatible with the aim of Article 6 and following articles of the
Convention - that is to say, the prohibition, in principle, of the
liquidation of the property, rights and interests of German nationals and of
companies controlled by German nationals in Upper Silesia - since it would
be tantamount to rendering lawful liquidation and unlawful dispossession
indistinguishable in so far as their financial results are concerned.
[125] The essential principle contained in the actual notion of an illegal
act - a principle which seems to be established by international practice
and in particular by the decisions of arbitral tribunals - is that
reparation must, as far as possible, wipe-¬out all the consequences of the
illegal act and re-establish the situation which would, in. all probability,
have existed if that act had not been committed. Restitution in kind, or, if
this is not possible, payment of a sum corresponding to the value which a
restitution in kind would bear; the award, if need be, of damages for loss
sustained which would not be covered by restitution in kind or payment in
place of it-such are the principles which should serve to determine the
amount of compensation due for an act contrary to international law.
[126] This conclusion particularly applies as regards the Geneva Convention,
the object of which is to provide for the maintenance of economic life in
Upper Silesia on the basis of respect for the status quo. The dispossession
of an industrial undertaking - the expropriation of which is prohibited by
the [p48] Geneva Convention - then involves the obligation to restore the
undertaking and, if this be not possible, to pay its value at the time of
the indemnification, which value is designed to take the place of
restitution which has become impossible. To this obligation, in virtue of
the general principles of international law, must be added that of
compensating loss sustained as the result of the seizure. The impossibility,
on which the Parties are agreed, of restoring the Chorzów factory could
therefore have no other effect but that of substituting payment of the value
[p49] of the undertaking for restitution ; it would not be in conformity
either with the principles of law or with the wish of the Parties to infer
from that agreement that ,the question of compensation must henceforth be
dealt with as though an expropriation properly so called was involved.
* * *
[127] Such being the principles to be followed in fixing the compensation
due, the Court may now consider whether the damage to be made good is to be
estimated separately for each of the two Companies, as the Applicant has
claimed, or whether it is preferable to fix a lump sum.
[128] If the Court were dealing with damage which, though caused by a single
act, had affected persons independent the one of the other, the natural
method to be applied would be a separate assessment of the damage sustained
by each of them; the total amount of compensation thus assessed would then
constitute the amount of reparation due to the State.
[129] In the present case, the situation is different. The economic unity of
the Chorzów undertaking, pointed out by the Court in its Judgment No. 6, is
shown above all in the fact that the interests possessed by the two
Companies in the said undertaking are interdependent and complementary; it
follows that they cannot simply be added together without running the risk
of the same damage being compensated twice over; for all that the Bayerische
would have obtained from its participation in the undertaking (sums due and
shares in the profits) would have been payable by the Oberschlesische. The
value of the Bayerische's option on the factory depended also on the value
of the undertaking. The whole damage suffered by the one or the other
Company as the result of dispossession, in so far as concerns the cessation
of the working and the loss of profit which would have accrued, is
determined by the value of the undertaking as such; and, therefore,
compensation under this head must remain within these limits.
[130] On the other hand, it is clear that the legal relationship between the
two Companies in no way concerns the international proceedings and cannot
hinder the Court from adopting the system of a lump sum corresponding to the
value of the undertaking, if, as is the Court's opinion, such a calculation
is simpler and gives greater guarantees that it will arrive at a just
appreciation of the amount, and avoid awarding double damages.
[131] One reservation must, however, be made. The calculation of a lump sum
referred to above concerns only the Chorzów undertaking, and does not
exclude the possibility of taking into account other damage which the
Companies may have sustained owing to dispossession but which is outside the
undertaking itself. No damage of such a nature has been alleged as regards
the Oberschlesische, and it seems hardly conceivable that such damage should
exist, for the whole activity of the Oberschlesische was concentrated in the
undertaking. On the other hand, it is possible that damage of such a nature
may be shown to exist as regards the Bayerische, which possesses or works
other factories of the same nature as Chorzów; the Court will consider later
whether such damage must be taken into account in fixing the amount of
compensation.
[132] Faced with the task of determining what the sum must be awarded to the
German Government in order to enable it to place the dispossessed Companies
as far as possible in the economic situation in which they would probably
have been if the seizure had not taken place, the Court considers that it
cannot be satisfied with the data for assessment supplied by the Parties.
[p50]
[133] The cost of construction of the Chorzów factory, which the Applicant
has taken as a basis for his calculation as regards compensation to the
Oberschlesische, gave rise to objections and criticisms by the Respondent
which are perhaps not without some foundation. Without entering into this
discussion and without denying the importance which the question of cost of
construction may have in determining the value of the undertaking, the Court
merely observes that it is by no means impossible that the cost of
construction of a factory may not correspond to the value which that factory
will have when built. This possibility must more particularly be considered
when, as in the present case, the factory was built by the State in order to
meet the imperious demands of public necessity and under exceptional
circumstances such as those created by the war.
[134] Nor yet can the Court, on the other hand, be satisfied with the price
stipulated in the contract of December 24th, 1919, between the Reich, the
Oberschlesische and the Treuhand, or with the offer of sale of the shares of
the Oberschlesische to the Geneva Compagnie d'azote et de fertilisants made
on May 26th, 1922. It has already been pointed out above that the value of
the undertaking at the moment of dispossession does not necessarily indicate
the criterion for the fixing of compensation. Now it is certain that the
moment of the contract of sale and that of the negotiations with the
Genevese Company belong to a period of serious economic and monetary crisis;
the difference between the value which the undertaking then had and that
which it would have had at present may therefore be very considerable. And
further, it must be considered that the price stipulated in the contract of
1919 was determined by circumstances and accompanied by clauses which in
reality seem hardly to admit of its being considered as a true indication of
the value which the Parties placed on the factory; and that the offer to the
Genevese Company is probably to be explained by the fear of measures such as
those which the Polish Government in fact adopted afterwards against the
Chorzów undertaking, and which the Court has judged not to be in conformity
with the Geneva Convention. [p51]
[135] And finally as regards the sum agreed on at one moment by the two
Governments during the negotiations which followed Judgment No. 7 - which
sum, moreover, neither Party thought fit to rely on during the present
proceedings it may again be pointed out that the Court cannot take into
account declarations, admissions or proposals which the Parties may have
made during direct negotiations between themselves, when such negotiations
have not led to a complete agreement.
*
[136] This being the case, and in order to obtain further enlightenment in
the matter, the Court, before giving any decision as to the compensation to
be paid by the Polish Government to the German Government, will arrange for
the holding of an expert enquiry, in conformity with Article 50 of its
Statute and actually with the suggestions of the Applicant. This expert
enquiry, directions for which are given in an Order of Court of to-day's
date, will refer to the following questions:
I. A. What was the value, on July 3rd, 1922, expressed in Reichsmarks
current at the present time, of the undertaking for the manufacture of
nitrate products of which the factory was situated at Chorzów in Polish
Upper Silesia, in the state in which that undertaking (including the lands,
buildings, equipment, stocks and processes at its disposal, supply and
delivery contracts, goodwill and future prospects) was, on the date
indicated, in the hands of the Bayerische and Oberschlesische
Stickstoffwerke?
B. What would have been the financial results, expressed in Reichsmarks
current at the present time (profits or losses), which would probably have
been given by the undertaking thus constituted from July 3rd, 1922., to the
date of the present judgment, if it had been in the hands of the said
Companies?
II. What would be the value at the date of the present judgment, expressed
in Reichsmarks current at the present time, of the same undertaking
(Chorzów) if that undertaking (Including lands, buildings, equipment,
stocks, available processes, supply and delivery contracts, goodwill and
future prospects) had remained in the hands of the Bayerische and
Oberschlesische Stickstoffwerke, and had either remained substantially as it
was in 1922 or had been developed proportionately on [p52] lines similar to
those applied in the case of other undertakings of the same kind, controlled
by the Bayerische, for instance, the undertaking of which the factory is
situated at Piesteritz?
[137] The purpose of question 1 is to determine the monetary value, both of
the object which should have been restored in kind and of the additional
damage, on the basis of the estimated value of the undertaking including
stocks at the moment of taking possession by the Polish Government, together
with any probable profit that would have accrued to the undertaking between
the date of taking possession and that of the expert opinion.
[138] On the other hand, question II is directed to the ascertainment of the
present value on the basis of the situation at the moment of the expert
enquiry and leaving aside the situation presumed to exist in 1922.
[139] This question contemplates the present value of the undertaking from
two points of view: firstly, it is supposed that the factory had remained
essentially in the state in which it was on July 3rd, 1922, and secondly,
the factory is to be considered in the state in which it would
(hypothetically but probably) have been in-the hands of the Oberschlesische
and Bayerische, if, instead of being taken in 1922 by Poland, it had been
able to continue its supposedly normal development from that time onwards.
The hypothetical nature of this question is considerably diminished by the
possibility of comparison with other undertakings of the same nature
directed by the Bayerische, and, in particular, with the Piesteritz factory,
the analogy of which with Chorzów, as well as certain differences between
the two, have been many times pointed out during the present proceedings.
[140] In regard to this, it should be observed that the Agent for the German
Government, at the public sitting of June 21st, 1928, handed in two
certificates by notaries containing a summary of contracts concluded on
April 16th, 1925, and August 27th, 1927, between the Mitteldeutsche
Stickstoffwerke A.-G. and the Bayerische, and adhered to by the Vereinigte
Industrie-Unternehmungen A.-G., under which contracts the Mitteldeutsche
leased to the Bayerische the landed properties at Piesteritz belonging to
it, together with all installations, etc., connected therewith. The Agent
for the Polish Government [p53], however, in his speech on June 25th, said
that, not being acquainted with the contracts and being entirely unable to
form an opinion as to whether the summaries in question contained all the
data necessary for accurate calculations, he formally objected to the said
summaries being taken as a basis in the present proceedings.
[141] As regards the lucrum cessans, in relation to question II, it may be
remarked that the cost of upkeep of the corporeal objects forming part of
the undertaking and even the cost of improvement and normal development of
the installation and of the industrial property incorporated therein, are
bound to absorb in a large measure the profits, real or supposed, of the
undertaking. Up to a certain point, therefore, any profit may be left out of
account, for it will be included in the real or supposed value of the
undertaking at the present moment. If, however, the reply given by the
experts to question I B should show that after making good the deficits for
the years during which the factory was working at a loss, and after due
provision for the cost of upkeep and normal improvement during the following
years, there remains a margin of profit, the amount of such profit should be
added to the compensation to be awarded.
[142] On the other hand, if the normal development presupposed by question
II represented an enlargement of the undertaking and an investment of fresh
capital, the amount of such sums must be deducted from the value sought for.
[143] The Court does not fail to appreciate the difficulties presented by
these two questions, difficulties which are however inherent in the special
case under consideration, and closely connected with the time that elapsed
between the dispossession and the demand for compensation, and with the
transformations of the factory and the progress made in the industry with
which the factory is concerned. In view of these difficulties, the Court
considers it preferable to endeavour to ascertain the value to be estimated
by several methods, in order to permit of a comparison and if necessary of
completing the results of the one by those of the others. The Court,
therefore, reserves every right to review the valuations referred to in the
different formulć; basing itself on the results of the said valuations and
of facts and documents submitted to it, it will then [p54] proceed to
determine the sum to be awarded to the German Government, in conformity with
the legal principles set out above.
*
[144] It must be stated that the Chorzów factory to be valued by the experts
includes also the chemical factory.
[145] Besides the arguments which, in the Polish Government's opinion, tend
to show that the working of the said factory was not established on a
profitable basis-arguments which it will be for the experts to consider-that
Government has claimed that the working depended on a special authorization,
which the Polish authorities were entitled to refuse. But the Court is of
opinion that this argument is not well-founded.
[146] The authorization referred to seems to be that envisaged by paragraph
18 of the Prussian law of 1861, under which, failing international treaty
provisions to the contrary, moral persons of foreign nationality cannot
engage in industry without the authorization of the Government. In the
present case, it is certain that the Geneva Convention does actually
constitute the international treaty which, guaranteeing to industrial
undertakings the continuation of their activities, does away with any
necessity for the special authorization required by the law of 1861.
[147] The fact that the chemical factory was not only not working, but not
even completed, at the time of transfer of the territory to Poland, can be
of no importance; for chemical industry of all kinds was expressly mentioned
in the articles of the Oberschlesische Company as one of the objects of that
Company's activities, and the sections and plant of the chemical factory,
which were, moreover, closely connected with the sections and plant
producing nitrate of lime, had already been provided for and mentioned in
the contract for construction and exploitation of March 5th, 1915 ; thus,
the entry into working of the factory was only the normal and duly foreseen
development of the industrial activity which the Oberschlesische had the
right to exercise in Polish Upper Silesia. [p55]
* * *
[148] In the Court's Opinion, the value to which the above questions relate
will be sufficient to permit it with a full knowledge of the facts to fix
the amount of compensation to which the German Government is entitled, on
the basis of the damage suffered by the two Companies in connection with the
Chorzów undertaking.
[149] It is true that the German Government has pointed out several times
during the written and oral proceedings that fair compensation for damage
suffered by the Bayerische could not be limited to the value of what has
been called the "contractual rights", namely, the remuneration provided for
in the contracts between the Reich or the Oberschlesische and the said
Company for having made available its patents, licences and experience
gained, for the management and for the organization of the sale of the
finished products. The reason given is that this remuneration, which was
accepted in view of the special relationship -between the Parties, would
hardly correspond to the fair remuneration which the Bayerische might have
claimed from any third party, like the Polish Government, for the same
consideration. It was on these grounds that the German Government proposed
to take as a basis for the calculation of damage suffered by the Bayerische
a licence supposed to be granted by the said Company to a third party under
fair and normal conditions.
[150] The method adopted by the Court in putting the questions set out above
to the experts meets the German Government's contention, in so far as that
contention is justified. For if the Bayerische had demanded a larger sum or
additional payments in its favour, or if it had stipulated for other
conditions to its advantage, the value to the Oberschlesische of its
participation would to the. same extent be diminished; this shows that the
relation between value given and value received does not enter into
consideration in calculating the worth of the enterprise as a, whole. If the
Bayerische had not merely managed but also owned the undertaking, this
amount would still be the same ; in fact, all the elements constituting the
[p56] undertaking-the factory and its accessories on the one hand, the
non-corporeal and other values supplied by the Bayerische on the other-are
independent of the advantages which, under its contracts, each of the two
Companies may derive from the undertaking.
[151] For this reason, any difference which might exist between the
conditions fixed in the contracts of 1913, 1919 and 1920 and those laid down
in a contract supposed to be concluded with a third party, is of no
importance in estimating the damage.
* * *
[152] It therefore only remains to be considered whether, in conformity with
the reservation. made above, the Bayerische has, owing to the dispossession,
suffered damage, other than that sustained by the undertaking, such as might
be considered in calculating the compensation demanded by the German
Government.
[153] Although the position taken up on this subject by the German
Government does not seem clear to it, the Court is, in a position to state
that this Government has not failed to draw attention to certain
circumstances which are said to prove the existence of damage of such a
nature. The possibility of competition injurious to the Bayerische's
factories by a third party, alleged to have unlawfully become acquainted
with and have obtained means of making use of that Company's processes, is
certainly the circumstance which is most important and easiest to appreciate
in this connection.
[154] The Court must however observe that it has not before it the data
necessary to enable it to decide as to the existence and extent of damage
resulting from alleged competition of the Chorzów factory with the
Bayerische factories ; the Court is not even in a position to say for
certain whether the methods of the Bayerische have been or are still being
employed at Chorzów, nor whether the products of that factory are to be
found in the markets in which the Bayerische sells or might sell products
from its own factories. In these circumstances, the Court can only observe
that the damage alleged to have resulted from competition is insufficiently
proved. [p57]
[155] Moreover, it would come under the heading of possible but contingent
and indeterminate damage which, in accordance with the jurisprudence of
arbitral tribunals, cannot be taken into account.
[156] This is more especially the case as regards damage which might arise
from the fact that the field in which the Bayerische can carry out its
experiments, perfect its processes and make fresh discoveries has been
limited, and from the fact that the Company can no longer influence the
market in the manner that it have done if it had continued to work the
Chorzów factory.
[157] As the Court has discarded for want of evidence, indemnity for damage
alleged to have been sustained by the Bayerische outside the undertaking, it
is not necessary to consider whether the interests in question would be
protected by Articles 6 to 22 of the Geneva Convention.
* * *
[158] In addition to pecuniary damages for the benefit of the Bayerische,
the German Government asks the Court to give judgment :
"that, until June 30th, 1931, no nitrated lime and no nitrate of ammonia
should be exported to Germany, to the United States of America, to France or
to Italy;
in the alternative, that the Polish Government should be obliged to cease
working the factory or the chemical equipment for the production of nitrate
of ammonia, etc."
[159] In regard to these submissions, it should be observed in the first
place that they cannot contemplate damage already sustained, but solely
damage which the Bayerische might suffer in the future.
[160] If the prohibition of export is designed to prevent damage arising
from the competition. which the Chorzów factory might offer to the
Bayerische factories, this claim must be at once dismissed, in view of the
result arrived at above by the Court. To the reasons on which this result
was based, it is to be added, in so far as the prohibition of export is
concerned, that the Applicant has furnished no information [p58] enabling
the Court to satisfy itself as to the justification for the German
submission naming certain countries to which export should not be. allowed
and stating a definite period for which this prohibition should be in force.
[161] It must further be observed that if the object of the prohibition were
to protect the industrial property rights of the Bayerische and to prevent
damage which the latter might suffer as a result of the use of these rights
by Poland, in conflict with licences granted by the Bayerische to other
persons or companies, the German Government should have furnished definite
data as regards the existence and duration of the patents or licences in
question. But notwithstanding the express requests made in this respect by
the Polish Government, the German Government has produced no such data. The
explanation no doubt is that the German Government does not appear to wish
to base its claim respecting a prohibition of export upon the existence of
these patents and licences.
[162] On the contrary, the German Government's claim seems to present the
[p59] prohibition of export as a clause which should have been included in a
fair and equitable licensing contract concluded between the Bayerische and
any third party; in this connection the following remarks should be made:
[163] The mere fact that the produce of any particular undertaking is
excluded from any particular market cannot evidently in itself be in the
interests of such undertaking, nor of the persons who, as such, are
interested therein. If the Bayerische -which, whilst participating with the
Oberschlesische in the Chorzów undertaking, constitutes an entirely separate
undertaking from that of Chorzów and one that may even to a certain extent
have interests conflicting with those of Chorzów -were to Emit in its own
favour, by contract, the number of the markets of that factory, it would
follow that the profit which it would draw from its share in the Chorzów
undertaking might be correspondingly diminished. The Court having, as is
said above, adopted, in calculating the compensation to be awarded to the
German Government, a method by which such compensation shall include the
total value of the undertaking, it follows that the profits of the
Bayerische will be estimated without deducting the advantages which that
Company might draw from a clause limiting export. The prohibition of export
asked for by the German Government cannot therefore be granted, or the same
compensation would .be awarded twice over.
[164] This being so, the Court need not deal with the question whether such
a prohibition, although customary in contracts between individuals, might
form the subject of an injunction issued by the Court to a government, even
if that government were working, as a State enterprise, the factory of which
export was to be limited, nor if the prohibition asked for would be fair and
appropriate in the circumstances.
[165] As regards the German Government's alternative claim for a prohibition
of exploitation, it may be added that this seems hardly compatible with the
award of compensation representing the present value of the undertaking; for
when that compensation, which is to cover future prospects and will consist
in a sum of money bearing interest, has been paid, the Polish Government
will have acquired the right to continue working the undertaking as valued,
more especially as the Parties agree that the factory shall remain in the
hands of the Polish Government. This agreement cannot, in fact, be construed
as meaning that the factory should remain inoperative or be adapted to some
other purpose, if the reparation contemplated did not include, in addition
to a pecuniary indemnity, the prohibition of export sought for. It is
moreover very doubtful whether, apart from any other consideration,
prohibition of exploitation is admissible under the Geneva Convention, the
object of which is to provide for the maintenance of industrial
undertakings, and which, for this purpose, even permits them, in exceptional
cases, to be expropriated (Article 7)
IV.
[166] The Court thinks it preferable not to proceed at this stage to
consider the Parties' submissions concerning certain conditions and methods
in regard to the payment of the indemnity to be awarded, which conditions
and methods are closely connected either with the amount of the sum to be
paid or with circumstances which may exist when the time comes for payment.
This applies more especially as regards the [p60] German submission No. 4
(a)-(b)-(c), and the Polish submissions A 3 and B 1 (c), which the Court
therefore reserves for the judgment fixing the indemnity.
[167] On the other hand, it is possible and convenient at once to decide the
so-called question of set-off to which submission No. 4 (d) of the Applicant
and submission C of the Respondent respectively relate.
[168] The claim of the German Government in regard to this matter has, in
the last instance, been couched in the following terms:
[Translation.]
"It is submitted that the Polish Government is not entitled to set off,
against the above-mentioned claim for indemnity of the German Government,
its claim in respect of social insurances in Upper Silesia; that it may not
make use of any other set-off against the above-mentioned claim for
indemnity; in the alternative, that set-off is only permissible if the
Polish Government puts forward for this purpose a claim in respect of a debt
recognized by the German Government or established by a judgment given
between the two Governments.”
[169] The Polish Government, for its part, has simply asked for the
rejection of this submission.
[170] If the German submission is read literally, it is possible to regard
it as mainly designed to prevent a specific case of setoff, that is to say,
the setting-off in this case of the claim which the Polish Government
contends that it possesses in respect of social insurances in Upper Silesia,
and which was the cause of the failure of the negotiations between the two
Governments following Judgment No. 7. But, if we consider the submission in
the light of the observations contained in the Case and more especially in
the Reply, it is easy to see that the claim in respect of social insurances
in Upper Silesia is only taken as an example. In reality, the German
Government asks the Court for a decision of principle the effect of which
would be either to prevent the set-off of any counterclaim against the
indemnity fixed in the judgment to be given by the Court, or, alternatively,
only to allow such set-off in certain defined circumstances.
[171] Though, as has been seen, the Polish Government for its part confines
itself in its submission to asking the Court to reject the German
submission, the arguments advanced in [p61] support of its claim clearly
show that it considers the said German submission to be both premature and
inadmissible, and that the Court has therefore no power to deal with it.
[172] The question of the Court's jurisdiction is thus clearly raised. Since
there is no agreement between the Parties to submit to the Court the
so-called question of set-off, it remains first of all to be considered
whether the Court has jurisdiction to pass judgment on the German submission
No. 4 (d) in virtue of any other provision, which, in the present case,
could only be Article 23 of the Geneva Convention.
[173] It is clear that the question whether international law allows claims
to be set-off against each other, and if so, under what conditions such
set-off is permitted, is, in itself, outside the jurisdiction derived by the
Court from the said article. But the German Government contends that the
question raised by it only relates to one aspect of the payment which the
Polish Government must make and that, this being so, it constitutes a
difference of opinion covered by the arbitration clause contained in the
article.
[174] The Court considers that this argument must be interpreted in the
sense that the prohibition of set-off is asked for in order to ensure that
in the present case reparation shall be really effective.
[175] It may be admitted, as the Court has said in Judgment No. 8, that
jurisdiction as to the reparation due for the violation of an international
convention involves jurisdiction as to the forms and methods of reparation.
If the reparation consists in the payment of a sum of money, the Court may
therefore determine the method of such payment. For this reason it may well
determine to whom the payment shall be made, in what place and at what
moment; in a lump sum or maybe by instalments; where payment shall be made;
who shall bear the costs, etc. It is then a question of applying to a
particular case the general rules regarding payment, and the Court's
jurisdiction arises quite naturally out of its jurisdiction to award
monetary compensation.
[176] But this principle would be quite unjustifiably extended if it were
taken as meaning that the Court might have cognizance of any question
whatever of international law [p62] even quite foreign to the convention
under consideration, for the sole reason that the manner in which such
question is decided may have an influence on the effectiveness of the
reparation asked for. Such an argument seems hardly reconcilable with the
fundamental principles of the Court's jurisdiction, which is limited to
cases specially provided for in treaties and conventions in force.
[177] The German Government's standpoint however is that the power of the
Court to decide on the exclusion of set-off is derived from the power which
it has to provide that reparation shall be effective. Now, it seems clear
that this argument can only refer to a plea of set-off raised against the
beneficiary by the debtor, of such a nature as to deprive reparation of its
effectiveness. Such for instance would be the case if the claim put forward
against the claim on the score of reparation was in dispute and was to lead
to proceedings which would in any case have resulted in delaying the entry
into possession by the person concerned of the compensation awarded to him.
On the contrary, if a liquid and undisputed claim is put forward against the
reparation claim, it is not easy to see why a plea of set-off based on this
demand should necessarily prejudice the effectiveness of the reparation. It
follows that the Court's Jurisdiction under Article 23 of the Geneva
Convention could in any case only be relied on in regard to a plea raised by
the respondent Party.
[178] Now it is admitted that Poland has raised no plea of set-off in regard
to any particular claim asserted by her against the German Government.
[179] It is true that in the negotiations which followed Judgment No. 7
Poland had put forward a claim to set off a part of the indemnity which she
would have undertaken to pay the German Government, against the claim which
she put forward in regard to social insurances in Upper Silesia. But the
Court has already had occasion to state that it can take no account of
declarations, admissions or proposals which the Parties may have made during
direct negotiations between them. Moreover, there is nothing to justify the
Court- in thinking that the Polish Government would wish to put forward,
against a judgment of the Court, claims which it may have thought [p63] fit
to raise during friendly negotiations which the Parties intended should lead
to a compromise. The Court must also draw attention in this connection to
what it has already said in Judgment No. 1 to the effect that it neither can
nor should contemplate 'the contingency of the judgment not being complied
with at the expiration of the time fixed for compliance.
[180] In these circumstances the Court must abstain from passing upon the
submissions in question.
* * *
[181] For these reasons,
The Court,
having heard both Parties,
by nine votes to three,
(1) gives judgment to the effect that, by reason of the attitude adopted by
the Polish Government in respect of the Oberschlesische Stickstoffwerke and
Bayerische Stickstoffwerke Companies, which attitude has been declared by
the Court not to have been in conformity with the provisions of Article 6
and the following articles of the Geneva Convention, the Polish Government
is under an obligation to pay, as reparation to the German Government, a
compensation corresponding to the damage sustained by the said Companies as
a result of the aforesaid attitude;
(2) dismisses the pleas of the Polish Government with a view to the
exclusion from the compensation to be paid of an amount corresponding to all
or a part of the damage sustained by the Oberschlesische Stickstoffwerke,
which pleas are based either on the judgment given by the Tribunal of
Katowice on November 12th, 1927, or on Article 256 of the Treaty of
Versailles;
(3) dismisses the submission formulated by the Polish Government to the
effect that the German Government should in the first place hand over to the
Polish Government the whole of the shares of the Oberschlesische
Stickstoffwerke Company, of the nominal value of 110,000,000 [p64] marks,
which are in the hands of the German Government under the contract of
December 24th, 1919;
(4) dismisses the alternative submission formulated by the Polish Government
to the effect that the claim for indemnity, in so far as the Oberschlesische
Stickstoffwerke Company is concerned, should be provisionally suspended;
(5) dismisses the submission of the German Government asking for judgment to
the effect that, until June 30th, 1931, no nitrated lime and no nitrate of
ammonia should be exported to Germany, to the United States of America, to
France or to Italy, or, in the alternative, that the Polish Government
should be obliged to cease working the factory or the chemical equipment for
the production of nitrate of ammonia, etc.
(6) gives judgment to the effect that no decision is called for on the
submissions of the German Government asking for judgment to the effect that
the Polish Government is not entitled to set off, against the
above-mentioned claim for indemnity of the German Government, its claim in
respect of social insurances in Upper Silesia; that it may not make use of
any other set-off against the said claim for indemnity, and, in the
alternative, that set-off is only permissible if the Polish Government puts
forward for this purpose a claim in respect of a debt recognized by the
German Government or established by a judgment given between the two
Governments;
(7) gives judgment to the effect that the compensation to be paid by the
Polish Government to the German Government shall be fixed as a lump sum;
(8) reserves the fixing of the amount of this compensation for a future
judgment, to be given after receiving the report of experts to be appointed
by the Court for the purpose of enlightening it on the questions set out in
the present judgment and after hearing the Parties on the subject of this
report;
(9) also reserves for this future judgment the conditions and methods for
the payment of the compensation in so far as concerns points not decided by
the present judgment. [p65]
[182] Done in French and English, the French text being authoritative, at
the Peace Palace, The Hague, this thirteenth day of September nineteen
hundred and twenty-eight, in three copies, one of which is to be placed in
the archives of the Court, and the others to be forwarded to the Agents of
the applicant and respondent Parties respectively.
(Signed) D. Anzilotti
President.
(Signed) Paul Ruegger
Deputy-Registrar.
[183] M. de Bustamante, Judge, declares that he is unable to concur in the
judgment of the Court as regards No. 8 of the operative portion; he
considers that the questions numbered I B and II in the judgment should not
be put to the experts.
[184] M. Altamira, Judge, declares that he is unable to concur in the
judgment of the Court as regards No. 6 of the operative portion.
[185] M. Rabel, National Judge, desires to add to the judgment the remarks
which follow hereafter.
[186] Lord Finlay, Judge, and M. Ehrlich, National judge, declaring that
they cannot concur in the judgment of the Court and availing themselves of
the right conferred on them by Article 57 of the Statute, have delivered the
separate opinions which follow hereafter.
[187] M. Nyholm, Judge, being unable to concur in the result arrived at by
the judgment, desires to add the remarks which follow hereafter.
(Initialled) D. A.
(Initialled) P. R.
[p66] Observations by M. Rabel.
[188] Whilst in general agreement with the judgment delivered by the Court,
I find myself, to my regret, compelled to disagree with it in regard to some
points, one of which I feel it my duty to deal with below (No. II). Before
doing so, I wish briefly to explain my point of view in accepting the
solution adopted by the Court in regard to the main question concerning the
fixing of the indemnity due by the Respondent (No. I).
[189] I. In Chapter III, the judgment begins by saying that if the
expropriation effected by the Polish Government had been lawful, the
compensation due by it therefore should correspond to the value of the
undertaking at the time of dispossession, plus interest on this sum to the,
date of payment. The judgment goes on to say that this limitation of the
compensation is not admissible in the present case because the Polish
Government had no right of expropriation and that, consequently, the German
Government is entitled to be compensated for all the losses suffered by its
nationals as a result of the seizure of the undertaking.
[190] Being convinced of the justice of these arguments, I have accepted
them, believing that the principles resulting from the unlawful nature of
the expropriation, which principles are subsequently set out in the
judgment, are applicable in practice whenever the damage caused appears
greater than the compensation which would be due if expropriation had been
lawful, as may be the case in the present suit.
[191] It is in fact obvious that the expropriator's responsibility must be
increased by the fact that his action is unlawful. Nevertheless, it is in my
opinion also obvious that the unlawful character of his action can never
place the expropriator in a more favourable position, nor the expropriated
Party in a more unfavourable position, either by reducing the indemnity due
or by increasing the burden of proof resting upon the Applicant. This point
of view, with which the Court in its judgment has not thought fit expressly
to deal, appears to me to be in accordance with the general principles of
law. [p67]
[192] It corresponds to the notion which has been very clearly, established,
for instance in the application of German civil law, namely that the fact
that an act is of an unlawful character - in the same way as if it were of a
deceptive or defective character - though in principle aggravating the
consequences of the act, nevertheless leaves intact, in favour of the
injured Party, and to be asserted by him should he choose to do so, the
rights to which the act would have given rise if it had been lawful or less
culpable.
[193] It appears to me therefore that the obligation resulting from an
unlawful seizure may be simply expressed as follows: A government which has
expropriated an object - with no right to do so - is obliged to pay the
value of the object at the moment of dispossession plus interest on this
value, and it is also responsible for damage caused in so far as such damage
exceeds the amount mentioned above.
[194] The questions put by the Court to the experts meet this view, though,
in my opinion, they are not in all points necessary or expedient.
[195] II. I cannot concur in the Court's decision in regard to the so-called
question of set-off.
[196] 1. This question first arose in a note of the Polish Government of
February 1st, 1927, to the effect that that Government had claims against
Germany in respect of various amounts, one of which, arising out of social
insurances in Upper Silesia, had been fixed by an award of the League of
Nations at 25 million Reichsmarks. In these circumstances, it contended that
the respective claims should be set off against each other. It is to be
observed that this statement related to the note and aide-memoire of the
German Government, dated January 19th, 1927, which "in regard to the
question of the method, of payment, which tended more and more to become the
main question", demanded "in principle a full and immediate payment" and
proposed, as regards some portions of the payment, the delivery of bills of
exchange.
[197] As will be seen, the Polish Government, in asserting its right to
set-off, did not specify the claims in question, except the claim arising
out of social insurance in Upper Silesia. Now the Arbitral Tribunal of
Interpretation, established between [p68] the Reparation Commission and
Germany to hear disputes concerning the so-called Dawes Plan, gave, on March
24th, 1926, a decision having the force of res judicata as between Germany
and Poland, to the effect that the payment of the 25 millions referred to is
included in the annuities which, under the Dawes Plan, Germany has to pay to
the Agent-General for Reparation Payments. As these annuities consist of
fixed sums, the Polish Government's contention was therefore designed to
make the German Government - contrarily to the award of the Arbitral
Tribunal of Interpretation - bear the burden of this claim, by causing it to
lose the indemnity due for the dispossession of the Oberschlesische, which
had been established by another international judgment, namely the Court's
Judgment No. 7.
[198] 2. In the course of the proceedings leading up to Judgment No. 8, as
well as those leading up to the present judgment, in spite of the
invitations of the Applicant on the subject and notwithstanding the
exhaustive statements made by both Parties on the question of set-off, the
Polish Government has neither put forward specific claims to which it is
entitled, nor said that it would not maintain its submission that judicial
or extra-¬judicial set-off against the future judgment should be allowed.
[199] The German Government in the course of the proceedings has several
times pressed that the Court should decide this question which, being the
real cause of the breakdown of the diplomatic negotiations, is, in its
opinion, a question of vital importance in this suit, and that, unless it
were decided, the dispute concerning the Chorzów factory would not really be
completely adjusted.
[200] 3. The Court considers that it has not jurisdiction to pass upon this
difference of opinion under Article 23 of the Geneva Convention.
[201] It should be observed that the terms of the judgment which dismisses
the German claim in regard to the question of set-off in so far as they are
based on the said opinion, do not seem to me to have any bearing on claims
directly seeking judgment for an actual payment in money. For the Court,
having decided in its judgment that the said Article 23 of the Geneva
Convention gives it jurisdiction to determine the form and [p69] method of
the reparation due, seems undoubtedly to cover, in this definition of its
jurisdiction the question whether, in this case, a money indemnity should be
actually paid in money or in other values.
[202] 4. The judgment deals rather with the abstract question raised by the
Applicant as to whether and under what conditions a respondent condemned by
a judgment of the Court to pay a certain slim, may put forward a
counter-claim to be set off against this obligation. This question also
seems to me to enter into the present proceedings and not to relate to a
point necessarily distinct from them, such as should only be taken at a
subsequent stage.
[203] A judgment imposing a penalty creates an obligation and lays down in
what that obligation consists. In a system of municipal law, the judge may
and should confine himself to certain observations and technical points,
which observations may be read in the light of relevant municipal
legislation. Thus municipal law will define what is meant by a payment which
the defendant is ordered to make and in particular whether and under what
conditions the setting-off of a counterclaim is equivalent to payment in
money of the judgment debt. If, on the other hand, in an international case,
the Parties are at issue as to the action to be taken by the defendant in
complying with the judgment, it appears to me that the nature of this action
must be defined in the judgment in order to avoid any possible uncertainty.
[204] As regards the other conditions necessary for the granting of the
claim in question, I will merely point out that in my opinion they also are
fulfilled in the present case.
(Signed) E. Rabel.
[p70] Dissenting Opinion by Lord Finlay
[205] I regret that I am unable to concur in the judgment that has just been
delivered. I think that question II ought not to have been put to the
experts and am further unable to agree with what is said in the judgment as
to the principles governing the assessment of the indemnity.
I.
[206] In its Memoire, Chapter II, § 2 at page 13, the German Government
renounced its claim to restitution of the undertaking in the following
terms:
"Le Gouvernement allemand, qui, au commencement, avait demande la
restitution en nature de l'entreprise expropriée, s'est convaincu, au cours
des négociations, que la restitution n'entre pas en cause, étant donne que
l'usine, qui a été exploitée par I'Etat polonais pendant presque cinq années
et qui a été soustraite aux soins et au développement de l'entrepreneur
primitif pour ętre adaptée aux besoins de son exploiteur actuel, n'est plus,
dans son 6tat actuel, au point de vue juridique et économique, le męme objet
qu'elle était ŕ la date de la reprise, et que, par conséquent, elle n'est
pas propre ŕ ętre restituée."
[207] The Party who has been dispossessed has a choice of remedies. He may
claim restitution of the property taken. This is what is meant by restitutio
in integrum. He may on the other hand abandon any claim to restitution of
the actual property and claim damages instead. The German Government
abandoned its claim to restitution, possibly under the impression - which
may have been correct - that the alterations were not of a nature which
would harmonize with the use to which the German Government intended that
the property should be put. If the German Government had obtained restitutio
in integrum, it would have got the property itself and any enhanced value
which it, had reached would necessarily go to the German Government with the
property. But since the claim to restitution is abandoned, the only claim is
for damages for the wrongful act. A Party who has given up [p71] his right
to restitutio in integrum is not entitled to claim damages on the footing
that it is right that he should have the enhanced value, if any: that he
would have got if he had pressed his claim for restitution. The German
Government having renounced restitution cannot make good a claim to recover
an amount representing the value of the property which would have to be
restored. It has given up restitution and elected to take damages and these
damages must be assessed according to the general rule as at the time of the
wrong.
[208] There is no trace of anything from which it could be implied that on
giving up the right to restitutio in integrum, Germany should be entitled in
lieu thereof to get damages on a higher scale than that on which the damages
for a wrongful taking would by law be assessed. If the Parties had intended
this they would have said so. Germany and Poland merely agreed that the
claim for restitution had been abandoned, and that left matters exactly as
if that claim had never been put forward. To construe this transaction as
involving an agreement that the damages should be assessed in any but the
usual way is to make a new agreement for the Parties. What the Parties did
was merely to abandon restitution with the consequence that Germany took the
right to damages to be assessed in the usual way.
[209] In my opinion, according to the general principle of international
law, these damages should be assessed upon the basis of the value of the
undertaking at the time of the seizure, that is the 3rd July, 1922, together
with a fair rate of interest on that value from that date until the date of
payment; and in addition any other damage directly consequent upon the
seizure.
[210] It may be that damages so assessed will amount to no more than the
amount which the Polish Government would have had to pay if it had been able
to expropriate the undertaking in conformity with the terms of the Geneva
Convention; but this is immaterial. Germany has selected as the form of
reparation for the wrong done to her at international [p72] law a pecuniary
indemnity corresponding to the loss sustained by her nationals. It is
immaterial whether the result of this selection is to put Germany and the
German Companies in a better or worse position than that in which they would
otherwise have been.
[211] It is said that the general rule as to assessment of damages cannot
here be applied and that some distinction must be made between the
consequences of a wrongful expropriation and those of a lawful expropriation
in accordance with the provisions of the Geneva Convention. The fact that
Poland, had she expropriated in accordance with the Geneva Convention, would
have been bound to pay an indemnity equal to the amount of the damages, if
the damages are assessed according to the general rule of international law,
does not affect the matter. The question is what was the loss inflicted on
the two Companies by the seizure.
[212] It is argued that it would not be equitable that the liability of a
mere wrongdoer should be no greater than that of one who had expropriated
the property in accordance with the terms of the Geneva Convention.
[213] Expropriation in accordance with those terms was at the time
impossible, in the absence of recognition by the Mixed Commission that this
measure was indispensable for the maintenance of the working of the
undertaking (Article 7). No special provision is made in the Convention as
to what is to happen if the Government takes property in contravention of
these provisions: that is left to the general law. It is now however argued
that it is not equitable that the general law should apply in such a case,
and an effort is made to modify it so as to prevent the Government which has
so acted being financially in no worse position than one which has acted
under the provisions of the Geneva Convention.
[214] It seems to me that it is entirely beyond the province of the Court in
effect to introduce provisions of this nature, in the absence of agreement
in treaty or convention to that effect. [p73]
II.
[215] If the relevant time for determining the value of the undertaking is
the time of the seizure, it follows that the value of the undertaking at the
present time, had it remained in the hands of the Oberschlesische and the
Bayerische, is irrelevant except in so far as it may give some assistance in
determining the value at the time of the seizure. It is not necessary to
refer to the experts any question directed to the value at the present time.
I think therefore that question II is unnecessary.
[216] That question is in the following terms:
«Quelle serait la valeur exprimée en Reichsmarks actuels, ŕ la date du
présent arręt, de ladite entreprise de Chorzów, si cette entreprise (y
compris les terrains, bâti¬ments, outillage, stocks, procčdes disponibles,
contrats de fourniture et de livraison, clientčle et chances d'avenir),
étant restée entre les mains des Bayerische et Oberschle¬sische St. W., soit
était demeurée essentiellement en l'état de 1922, soit avait reçus, toutes
proportions gardées, un développement analogue ŕ celui d'autres entreprises
du męme genre, dirigées par la Bayerische, par exemple, l'entreprise dont
l'usine est sise ŕ Piesteritz?»
[Translation.]
"What would be the value at the date of the present judgment, expressed in
Reichsmarks current at the present time, of the same undertaking (Chorzów)
if that undertaking (including lands, buildings, equipment, stocks,
available processes, supply and delivery contracts, goodwill and future
prospects) had remained in the hands of the Bayerische and Oberschlesische
Stickstoffwerke, and had either remained substantially as it was in 1922, or
been developed proportionately on lines similar to those applied in the case
of other undertakings of the same kind, controlled by the Bayerische, for
instance, the undertaking of which the factory is situated at Piesteritz?”
[217] Further, I consider this question unsatisfactory in itself. It is
directed to two values under hypothetical conditions. The first of those
values is dependent upon the hypothesis that the undertaking remained
substantially in the condition in which it was in 1922. It would be
difficult to say what the present day value of the undertaking in such an
obsolete [p74] condition would be. The second of those values is dependent
upon a hypothetical development of the undertaking. The development which
the question assumes is one "proportionately on lines similar to" the
development which has taken place in what are alleged to be parallel
undertakings. It would be difficult to determine the proportions of
development applicable. The question of what undertakings may be taken into
consideration for this purpose seems to be one for the experts themselves,
and I think that question II would present great difficulty in the working.
[218] It is on these two points only that I am unable to concur in the
judgment of the Court in this case; but they are of vital importance.
(Signed) Finlay.
[p75] Dissenting Opinion by M. Ehrlich.
[219] I regret that I disagree on some of the questions decided by the
judgment which has just been given.
I.
[220] In my opinion, the Court should have taken into consideration the
judgment given by the Civil Court of Katowice.
*
[221] The Parties are agreed, and moreover it follows from the principles
generally applied by arbitral tribunals, that in cases like the present the
basis of the award must be found, not in the enrichment of the Respondent,
but in the loss suffered by the individuals concerned. In this case these
are the Bayerische and Oberschlesische, and the Respondent has contended,
among other things, that the Oberschlesische was not the owner of the lands
and buildings which were entered in its name in the land register, from
January, 1920, until this ,entry was vacated, in 1922, in accordance with
the Polish law of 1920.
[222] In my opinion this contention of the Respondent cannot be rejected on
the basis of what the Court has said either in Judgment No. 7 or in Judgment
No. 8.
*
[223] The judgment which has just been given does not, it is true, rely on
res judicata; this is correct, for it is quite certain, to mention only the
case of the Pious Fund of the Californias, that in international law, one of
the conditions on which the existence of res judicata is dependent is that
there must be "identity of subject matter" and that the point which was
decided must relate to the "merits of the case". It is evident that in the
proceedings concluded by Judgment [p76] No. 7, the question of the ownership
of the Oberschlesische was not a part of the main dispute, but that it was a
question to be decided as a preliminary and incidental point. This is
precisely what the Court said in Judgment No. 7:
"In the next place, it must be observed that the Court, in the exercise of
the jurisdiction granted by Article 23 of the Geneva Convention, will not
examine, save as an incidental or preliminary point, the possible existence
of rights under German municipal law."
[224] German legislation was referred to because, in Polish Upper Silesia,
it is German civil law which determines such questions of real property.
[225] The Court maintained the same standpoint in Judgment No.11, when it
recalled that, in Judgment No. 7, it had recognized the necessity of
examining, though "as an incidental or preliminary point", the contention of
the Polish Government that the contract of 1919 and the transfer of the
factory to the Oberschlesische were of a fictitious and fraudulent
character.
[226] It is generally admitted that the principles of litispendency and res
judicata do not apply to questions decided as incidental and preliminary
points.
[227] Without however laying down that there is res judicata, the judgment
which has just been delivered declares that it would be impossible for the
Oberschlesische's right to the Chorzów factory to be defined differently for
the purposes of Judgment No. 7 and in relation to the claim for reparation
which is the subject matter of the present judgment.
[228] On this point I disagree. It is true that facts adduced by one Party
and accepted by the Court as the direct or indirect basis of its decision
cannot be disputed by the same Party in a subsequent suit; similarly, a rule
of law applied as decisive by the Court in one case, should, according to
the principle stare decisis, be applied by the Court as far as possible in
its subsequent decisions. But it may be necessary to view differently the
same situation of fact in a different suit, of which the subject matter is
different, and in which, consequently, different principles should be
applied. [p77]
*
[229] In the proceedings concluded by Judgment No. 7, the Applicant said
that the Chorzów undertaking was not and had never been from the outset
(contract of 1915) an enterprise of the Reich, that the Bayerische was the
business concern which worked it (Publications of the Court, Series C., No.
11 - I, pages 351, 159), and the Applicant maintained, as to what had been
the property of the Reich until 1919-1920, that even admitting the nullity
of the contract of 1919,
"the Oberschlesische Stickstoffwerke were entered in the land registers as
owners and, in accordance with paragraph 891 of the German Civil Code, if a
right is entered in those registers in favour of a certain person, the
presumption is that that person is the possessor of the right. And should
the contents of the registers not be in accordance with the real situation
at law, the interested Party may, under paragraph 894, call upon the person
entered to have the entry rectified.....
If therefore the Polish Government considered that the contract of 1919 was
fictitious, why did it not resort to the legal remedy afforded by the Civil
law in force?"
[230] Then, dealing with the question whether the contract of 1919 was,
fictitious, or concluded in fraudemn creditorum, the Applicant insisted that
:
"The most favourable result for the Polish Government would therefore be
that it could bring an action against the Oberschlesische for the transfer
to it of the ownership in the immovable property obtained by the
Oberschlesische under a fraudulent contract."
[231] It is in accordance with these contentions of the Applicant that the
Court, in Judgment No. 7, has said :
"In the present case, in fact, the Court holds that the Oberschlesische's
right of ownership of the Chorzów factory must be regarded as established,
its name having been duly entered as owner in the land register. If Poland
wishes to dispute the validity of this entry, it can, in any case, only be
annulled in pursuance of a decision given by the competent tribunal ; this
follows from the principle of respect for vested rights …..” [p78]
[232] Judgment No. 7, in so far as it relates to the Chorzów case, says, as
had already been said in Judgment No. 7, that the Chorzów undertaking was an
entity of which the factory, which belonged at first to the Reich and
afterwards to the Oberschlesische, was only one constituent part;
consequently, the undertaking as such did not fall within the scope of
Article 256 of the Treaty of Versailles. Judgment No. 7 also says in regard
to the Oberschlesische, first, that the sale to the latter by the Reich was
permissible from the point of view of international law, and, secondly, as
has been said above, that the name of the Oberschlesische had been entered
in the land register and that as a result of this, in the absence of a
decision to the contrary by the competent municipal court, the presumption
was that the right of the Oberschlesische was established. The reason
expressed in the words "its name having been duly entered as owner in the
land register" suffices to establish that, while the Geneva, Convention may
have been violated by the failure to observe the rules of municipal law
regarding this entry, it is in this failure alone that the violation of the
Geneva Convention consists in this respect.
*
[233] The violation of the Geneva Convention cannot be effaced, ex post
facto by a decision which should have preceded the vacation of the rights of
the Oberschlesische on the land register. That is all that is to be deduced
from Judgment No. 7 as regards subsequent decisions of competent municipal
courts. As is also said in Judgment No. 8, an examination of the right of
ownership:
"in order to justify such dispossession after it has taken place, cannot
undo the fact that a breach of the Geneva. Convention has already taken
place, or affect the Court's jurisdiction."
[234] But, in the present proceedings, there is no question of deciding
whether the breach was justified, or whether it has been effaced. These two
points are res judicata: both Parties agree that Judgment No. 7, in so far
as it decides that there [p79] has been a breach of the Geneva Convention,
cannot be called in question, and the Respondent has not referred to any
possibility of making good this breach.
[235] The question to be decided now is entirely different. It is this: what
was the loss actually sustained by the Oberschlesische? There is nothing in
Judgment No. 7 to prevent a subsequent decision by the competent tribunals,
as to the existence and extent of property rights at municipal law, nor is
there anything to prevent such a decision being taken into account by the
Court. There is neither in the operative part nor anywhere else in Judgment
No. 7 anything which might come either to appear erroneous or to be
invalidated, if the Court, in the present case, were to take into account
the decision of the Tribunal of Katowice of November 12th, 1927.
Incidentally, that decision was given in accordance with the terms of the
German Code of Civil Procedure which is in force in Polish Upper Silesia,
and therefore, having been rendered by default, does not contain a statement
of the grounds on which it is based. The fact that the passages in question
in Judgment No. 7 were not made solely with regard to the case then before
the Court, clearly appears also from the interpretative Judgment No. 11
which says in regard to the passage beginning "If Poland wishes. . .":
"Though from the use of the present tense it may be concluded that the Court
had in view the possibility of the institution by Poland, even after the
judgment, of proceedings with a view to obtaining the annulment of the entry
by means of a decision of the competent municipal tribunals, it would be
contrary to the whole of the reasoning to construe it as a reservation
implying that the binding effect of the judgment given - and more especially
of paragraph 2 (a) of the operative part thereof ("that the attitude of the
Polish Government in regard to the Oberschlesische Stickstoffwerke and
Bayerische Stickstoffwerke Companies was not in conformity with Article 6
and the following articles of the Geneva Convention")-were to depend on the
result of such proceedings instituted subsequently."
[236] The same conclusion is indicated by the fact that the operative part
of Judgment No. 11 definitely affirms that a declaration of the ownership of
the Oberschlesische had been made (in Judgment No. 7) with binding effect
"in respect of that particular case". [p80]
II.
[237] In my opinion, the objections of the Respondent based on the view that
the rights of the Reich both in the Chorzów enterprise and in the shares (of
the Oberschlesische) have passed to Poland under Article 256 of the Treaty
of Versailles, should have been upheld.
*
[238] I hold that the Reich is owner of the shares of the Oberschlesische.
[239] I cannot accept the view that the question of the ownership of the
shares is - though not res judicata in virtue of Judgment No. 7 - no longer
an open question since that judgment. All that is said in Judgment No. 7 on
the question of the Treuhand as owner, is to be found in an incidental
observation in the following context :
"Moreover, it was the Bayerische which, in conjunction with another Company,
the Deutsche Petroleum A.-G., had founded the Treuhand which owned all the
shares of the Oberschlesische; and the purchase of the factory by the latter
may therefore be regarded, in a sense, as the exercise, modified in
accordance with circumstances, of the right of purchase possessed under the
contract of March 5th, 1915, by the Bayerische which, by itself, had not the
necessary funds at its disposal."
*
[240] On December 24th, 1919, were concluded simultaneously:
(1) the memorandum of association of a new limited liability company
(hereinafter called the Treuhand) with a share capital of 300,000 marks,
increased the same day to 1,000,000 marks;
(2) the memorandum of association of a new joint stock company (hereafter
called the Oberschlesische) with a share capital of 250,000 marks, increased
the same day to 110,000,000 marks; [p81]
(3) a contract between the Reich, the Oberschlesische and the Treuhand, by
which the Reich left over to the Oberschlesische the Chorzów factory; the
contract laid down the principles on which the purchase price
(Uberlassungspreis) was to be calculated, and added that this price
represented, according to the documentary evidence then existing, about
110,000,000 marks, and that on this sum would be reckoned interest at 5 %
from December 31st, 1919. The contract continued as follows:
Ҥ 3. The purchase price (Kaufpreis) and the interest will be liquidated by
paying to the Reich the whole of the net profit shown by the balance sheet
(of the Oberschlesische).”
[241] After adding that larger payments in liquidation of the debt would be
permissible at any time, the contract proceeded.
Ҥ 4. The Treuhand will assume in place of the Oberschlesische, as sole
debtor, in accordance with the provisions laid down above, all the
obligations imposed by their contract upon the Oberschlesische in respect of
the Reich.
§ 5. The interest and capital of the purchase price shall be liquidated
exclusively by the payment to the Reich of the profits on the shares (of the
Oberschlesische) . . . ."
[242] The contract also stipulated that the Oberschlesische should increase
its capital to a sum equal to the purchase price of the factory and that as
guarantee for the claims of the Reich under this contract, the Treuhand
should
"undertake to obtain for the Reich a lien on all existing shares of the
Oberschlesische after this increase, with the effect that the Reich will be
authorized itself to exercise all rights derived from the possession of the
shares and especially the right to vote at general meetings of
shareholders".
[243] The, Reich agreed, in its capacity as holder (Inhaber) of the shares,
to maintain the rights of the Bayerische resulting from previous contracts
between the Reich and the Bayerische. The Treuhand might at any time pay the
whole or a part of the capital and interest and, if a part of the purchase
price were refunded, shares of a nominal value corresponding to the payment
would be released from the lien, whereas the reduction of the capital sum by
the payment of the profits of the Oberschlesische would liberate no shares
from the lien. But – [p82] the contract proceeded - the Stickstoffwerke (a
designation used in the contract to denote the Oberschlesische)
"can only claim the handing over of the shares if and in so far as they may
sell shares to a third party with the consent of the Reich. Until such time
the shares will remain in possession of the Reich, which will continue to
exercise all rights derived from possession of the shares, including the
right to vote at general meetings of shareholders."
[244] The contract lays down that any alienation (sale, transfer, pledging,
pooling, leasing, or grant of a right to receive dividends, in short, any
kind of disposal) of the shares or of a part thereof will only be permitted,
even after the expiration of the lien, with the consent of the Reich, and
that, as a guarantee of compliance with this obligation, the Reich will
retain possession of the shares even after the expiration of the lien.
[245] Finally, there were provisions concerning the sale of the shares by
the Reich, in which case the Treuhand might declare its readiness to acquire
(erwerben) the shares at the price which the Reich was prepared to accept,
and if the Treuhand made no such declaration, it was to receive 10 % of the
surplus remaining after deduction of the capital sum and of the arrears of
interest of the price of the factory; if, on the other hand, the Treuhand
wished to dispose of the shares or a part thereof, which it could never do
without the consent of the Reich, the Reich was to obtain out of the
purchase price the total sum due to it and the arrears of interest plus 85 %
of the surplus, the remainder of the surplus going to the Treuhand.
[246] The shares of the Oberschlesische were shares to bearer
(Inhaberaktien); the Treuhand was never mentioned in the contract as owner
of the shares; it could only obtain them, even after having paid the whole
of the debt with all interest, by acquiring (erwerben) them if the Reich
were willing to sell them and if it (the Treuhand) availed itself of the
right of preemption; it could decide nothing as to the sale of the shares
without the Reich's consent; if on the other hand the Reich wished to
dispose of them, the Treuhand had only a right of preemption; it could not
exercise the rights of a shareholder, until it had "acquired" the shares
under the conditions indicated or by permission (by sufferance) of the [p83]
Reich. On the other hand, the Reich was always, in all circumstances, to
remain holder of the shares (Inhaber of the Inhaberaktien) until the moment
when it decided to alienate them.
[247] A limited liability company which had just been formed could hardly
guarantee to the Reich a debt amounting to 110 times its capital. At all
events, the Treuhand's only responsibility towards the Reich was to obtain
for it the shares of the Oberschlesische, a thing which it was able in
principle to do there and then at no expense. Over and above the right of
preemption which I have mentioned, the Treuhand had only a hypothetical
right to a commission. Indeed, it is in the Case of the applicant Government
in the proceedings concluded by Judgment No. 7 that the difference of 5 %
has been described as a "commission" (Publications of the Court, Series C.,
No. 11 - I, page 356). It is obvious that an owner does not receive
commission on the sale of his own property.
*
[248] Even if it be sought to deny that the Reich was owner of the shares of
the Oberschlesische, it is impossible to deny that it had a complete and
perpetual right of antichresis in virtue of which it was the owner in so far
as all third parties were concerned. The only restriction upon it, namely
the obligation to maintain the management in certain hands for a limited
time, cannot be looked upon as a real obligation, but as a purely personal
obligation, which cannot affect the position of the Reich as the actual
shareholder.
*
[249] The question of the alleged control of the Reich over the
Oberschlesische has been left open by Judgment No. 7.
[250] All that is to be found on the subject in Judgment No. 7 is confined
to the two following paragraphs:
"In a similar connection, the further question might be examined whether the
Oberschlesische, having regard to the rights conferred by the contract of
December 24th, 1919, on the Reich in respect of that Company, should be
regarded as [p84] controlled by the Reich and, should this be the case, what
consequences would ensue as regards the application of the Geneva
Convention.
It is, however, not necessary for the Court to go into this question. The
Respondent, who adopts the standpoint that no measure of liquidation has
been taken by the Polish Government in respect of the Chorzów factory, has
not raised it, even as a subsidiary point, and it would seem that he does
not dispute-apart from.-the argument regarding the fictitious character of
the agreements of December 24th, 1919 - the fact that the Oberschlesische is
a company controlled by German nationals."
[251] It appears from these paragraphs that the Court had not considered the
question of control in Judgment No. 7. It also appears that it "seemed" that
Poland did not dispute the contention that the Oberschlesische was
controlled by German nationals and not by the Reich. Even if the Court had
dealt with this question, it would only have dealt with it as with an
incidental and preliminary point; consequently, even if the Court had
decided the point, its decision would not have the force of res judicata; a
fortiori, it is impossible to argue that because the Respondent did not
raise this incidental and preliminary point, it was thereby debarred from
ever raising it.
[252] Even admitting for the sake of argument that the Reich was not the
owner of the Oberschlesische's shares, it would still be true that that
Company was exclusively controlled by the Reich. It would be difficult to
conceive a clearer case of control by the Reich than that of a company of
which all the shares, and bearer shares at that, remained in the hands of
the Reich which had all the rights of a shareholder in perpetuity, subject
only to the possibility of sale if it saw fit, in which case it would
receive practically the whole' sale price, these rights of the Reich being
limited only by a contractual obligation to maintain in certain hands, and
for a certain time, the management of the works owned by the Company.
*
[253] The right s of the Reich fall within the scope of Article 256 of the
Treaty of Versailles of which paragraph I is as follows: [p85]
"Powers to which German territory is ceded shall acquire all property and
possessions situated therein belonging to the German Empire or to the German
States, and the value of such acquisition shall be fixed by the Reparation
Commission, and paid by the State acquiring the territory to the Reparation
Commission for the credit of the German Government on account of the sums
due for reparation."
[254] The interpretation of this article as found in Judgment No. 7 has not
the force of res judicata.
[255] In declaring that it had jurisdiction to deal with the case decided by
Judgment No. 7, the Court in Judgment No. 6 said :
“It is true that the application of the Geneva Convention is hardly possible
without giving an interpretation of Article 256 of the Treaty of Versailles
and the other international stipulations cited by Poland. But these matters
then constitute merely questions preliminary or incidental to the
application of the Geneva Convention."
[256] This point of view was in accordance with that of the Applicant, on
whose behalf the following observation was made during the hearing in regard
to the question of jurisdiction :
"And if it [Article 256] is to be taken into consideration solely on this
ground (erroneous citation thereof by the Polish Government), it is only as
a preliminary question to be decided incidentally."
*
[257] If the Reich either was the sole owner of the shares of the
Oberschlesische, or controlled the Oberschlesische, the whole of the
property of that Company in Polish Upper Silesia falls under the provisions
of Article 256. Such is actually the case.
[258] But, even if this were not so, the rights of the Reich should in any
case be regarded as situated in Polish Upper Silesia.
[259] It appears to me impossible to hold that these rights consisted
entirely or for the most part, in the so-called claim against the Treuhand,
a claim which was only guaranteed by a lien on the shares. The Treuhand was
a limited liability [p86] company with a capital amounting to less than 1%
of the sale price of the factory; the balance sheet of the Treuhand drawn in
1924, mentioned a capital of 1,000 RM. so that this Company cannot
reasonably be held to be indebted for value which the applicant Government
has estimated in the present proceedings at a figure in any case exceeding
50,000,000 RM. Furthermore, it does not appear from the contract of 1919
that the Treuhand had any obligation towards the Reich; by handing over to
it all the shares of the Oberschlesische, it freed itself from any possible
obligation. In the proceedings leading up to Judgment No. 7, the Applicant
stated that the Treuhand was "merely a legal device for the exercise of
shareholders' rights ; it was not essential. It was created in order to
provide a special mechanism for the sale of the shares and also so as not to
burden the balance sheets of the other companies with the debt arising from
the contract of purchase and sale" (Publications of the Court, Series C.,
No. 11 - I, page 241). It must be remembered that the Treuhand was a limited
liability company whose obligations would not therefore involve obligations
on the part of the companies which formed it.
[260] The fact that the Treuhand does not regard itself as the Reich's
debtor also appears from the fact that in its gold-balance sheet drawn up
for the first time in 1924, there appear neither the shares of the
Oberschlesische, the value of which was considered fictitious, nor the debt
to the Treasury. This is explained in a letter from the Treuhand to the
Deutsche Bank, submitted to the Court by the Applicant, in the following
terms
"It follows naturally that the balance sheet also cannot include amongst the
liabilities, a debt to the Treasury of the Reich. The value of the shares in
the balance sheet must be set off against the debt. But since it is
impossible to assess the value of the shares in the balance sheet, owing to
the seizure of the factory, our obligation towards the Reich Treasury also
disappears (fallt…fort).
*
[261] Even admitting for the sake of argument that the Reich had a genuine
claim upon the Treuhand, it cannot be denied [p87] that that claim would be
localized in Polish Upper Silesia, since the Chorzów factory constituted the
only property of the Oberschlesische and since all the net profits of the
Oberschlesische and consequently all the net profits of the undertaking,
except perhaps certain very small deductions, were to be paid to the Reich,
which moreover, in virtue of its position as sole shareholder, had the whole
of the property of the Oberschlesische at its disposal. It appears to me
impossible to deny that the terms of Article 256 of the Treaty of Versailles
would apply to a factory situated in ceded territory, a factory of which all
or nearly all the net profits went to the Reich and over which the Reich had
in fact all possible rights of ownership, except that, for a certain time,
it was obliged by a contract not to change the management.
[262] I find it impossible to hold that the rights of the Reich are not
situated in Upper Silesia, on the ground that these rights are rights as
against the Treuhand, the registered office of which is in Germany. For it
would follow that, contrary to what the Court has laid down in Judgment No.
7, Poland has not expropriated the contractual rights of the Bayerische,
since these rights were derived from contracts between the Bayerische and
the Reich and later, between the Bayerische and the Oberschlesische, that is
to say, between Parties which, according to the judgment just given, were
all domiciled in Germany. Yet the Court did decide in Judgment No.7 t at
these contractual rights of the Bayerische related to the factory and were
so to speak concentrated in that factory. From this the Court drew the
conclusion that they should not have been expropriated, having regard to the
last sentence of Article 6 of the Geneva Convention, which lays down that,
with certain exceptions, "property, rights and interests of German nationals
or of companies controlled by German nationals, cannot be liquidated in
Polish Upper Silesia".
*
[263] Article 256 must be construed in good faith and consequently in
accordance with the principle that the real state of things must be
ascertained and that no decisive value must be attached to mere legal forms.
Again, the interpretation of this article [p88] must take into account the
economic conditions of which legal forms are merely an outward expression.
Legal forms such as a joint stock company must serve the objects of economic
life, but they must not obscure economic facts. There is no doubt that a
joint stock company is very closely bound up with its property ; that is
why, for instance, according to the German Commercial Code, which is in
force both in Germany and in Polish Upper Silesia, a total alienation of the
property of a company involves in principle the liquidation of that company.
It must be remembered that the rights of the Oberschlesische in the Chorzów
undertaking constituted its sole property. During and since the world war,
it has been found more and more necessary to define the nationality of joint
stock companies in accordance with economic facts (for instance the question
of control) instead of by means of formal criteria such as the registered
office of the place of registration. Quite recently the House of Lords
refused to admit that a company which was registered in London and had a
secretary there, but of which the whole commercial activity was carried on
in Egypt, was "resident" in England. Lord Sumner, who delivered the leading
judgment, declared the argument to be "too transcendental for acceptance"
(Egyptian Delta Land and Investment Co., Ltd., v. Todd). It seems to me
impossible to deny that for the purposes of Article 256 the commercial
domicile of the Oberschlesische was not at Chorzów, assuming that one
regards that Company as the owner of the factory.
*
[264] I cannot agree that it is the Bayerische which had control over the
[p89] Oberschlesische. Control is the power of final decision belonging to
the shareholder, but not the power to appoint under an obligation accepted
by the shareholder, the board of management or some of its members. Again,
since the Oberschlesische has, at the utmost, succeeded to the rights of the
Reich and since the Bayerische has only retained the powers held by it under
the contract with the Reich, it cannot be argued that the Bayerische had
control over the owner of the factory; for the owner, before the
Oberschlesische, had been the Reich itself.
III.
[265] Assuming that the Oberschlesische was legally owner of the factory at
Chorzów and that it was neither identical with the Reich as treasury nor
controlled by it, it must also be held that the Oberschlesische has suffered
no material damage.
[266] It is not disputed that if it had suffered such damage, this should
have been taken into account in fixing the amount of the indemnity to be
paid to Germany.
[267] But the indemnity can only include the amount corresponding to the
damage actually sustained by the persons whose losses should, according to
the claim of the German Government, serve as a basis for the assessment of
compensation in the present case. For this reason, damage sustained by any
third person, and amongst others by the Reich Treasury, must be left out of
account ; for the German Government has not asked the Court to take into
account damage suffered by itself (its Treasury). The Court has only to
estimate the loss suffered by the Oberschlesische and Bayerische, in
accordance with the principle non ultra petita.
[268] The loss caused to any given person can only be quantum ejus interest.
If two persons have different rights over a piece of land, one being the
owner, and the other being owner of land in favour of which a servitude over
the land has been established, the reparation due to each of these persons
will be represented by the value of his right, excluding the value of the
rights of the other person. It is true that the amount of debts and other
obligations, for which the injured person is responsible, must not be
excluded; but by this is meant only personal debts and other personal
obligations. On the other hand, the reparation of the loss caused, for
instance, by the destruction of a house-whether the person concerned be
owner, tenant, or owner of a property in favour of which a servitude
exists-, would only cover the value of the rights of the particular person,
excluding the rights of every other person. [p90]
[269] Now, if the interests of the Reich be excluded, no material injury
could have been suffered by the Oberschlesische ; for the Reich had, to the
exclusion of anyone else, all rights of ownership in the factory; thus, in
the exercise of its rights as shareholder, it could alienate the factory; it
could also draw from it all the net profits. If the shareholder were not
identical with the Reich, he had never obtained and could never obtain from
the factory any profit except that which the Reich, in the exercise of its
rights at the general meeting of shareholders, chose to grant him.
IV.
[270] Any assessment of the damage resulting from the taking over of the
enterprise must be based on the extent of the damage suffered at the time of
dispossession. If there were delay in payment, the damage may be increased
by the amount of the loss resulting from such delay ; this loss may either
be expressed in terms of interim interest, or may be estimated by taking
into account, according to the circumstances, the balance of the profit and
loss which, in all probability, would have accrued between the date of
dispossession and the date of judgment. It is impossible to take as the date
of assessment a date subsequent to dispossession, unless it were the fault
of the Respondent that the claim could not be brought earlier before the
international tribunal.
[271] Moreover the German Government itself has asked for a sum consisting
of the capital amount and of interest calculated as from 1922.
[272] It should be added that in the present case no subjective
consideration enters into account, such as a wrongful act entailing damages
which should be calculated on some special basis; indeed the Court cannot
presume that there has been anything but an error on the part of Poland in
construing and applying the Geneva Convention.
V.
[273] It is not permissible to infer from the articles of the
Oberschlesische, the existence of a vested right on its part to [p91] work
the so-called chemical factory. The articles of a joint stock company are,
from a legal point of view, only a contract .of private law, which,
according to the commercial code, must be entered in the commercial
register. Such an entry merely establishes that the rules of the commercial
code have not been infringed in the formation of the Company. It does not
involve any right to carry on the activities contemplated in the contract.
(Signed) Ludwik Ehrlich
[p92] Observations by M. Nyholm.
[274] The wish to have recourse to expert opinion for the purpose of
estimating the compensation due in respect of the Chorzów factory is
certainly legitimate, but is it also possible to obtain a result by this
means? If it were a question of an expert report on a purely mathematical
basis, such as the drawing up of a balance sheet prepared from accounts,
experts appointed by the Court and by the Parties - working entirely
independently and with no liaison with the Court, on a footing of equality
amongst themselves and authorized to obtain any information - would
doubtless be of decisive assistance in arriving at a just settlement of the
matter. But in this case the hypothetical nature of the questions involves
an equally hypothetical answer. As it is a question of estimating what
financial results the factory would have produced between 1922 and 1928, if
it had remained in German hands, the experts will find themselves in a
sphere in which they will have difficulty in replying otherwise than by
hypothetical answers.
[275] A considerable number of circumstances enter into account. Amongst
others the capacity of the various persons concerned in the management to
undertake technical control and to take advantage of the situation of the
general market and of the formation of the various groups of factories into
consortiums which is a characteristic of the years 1922-1928; the capital
which might have been at the disposal of the factory, the favourable or
unfavourable effect of Polish legislation, etc.
[276] The answer can hardly take the form of the indication of a precise sum
which would enable the affair to be immediately settled.
[277] Even supposing that, thanks to the declarations of the experts, it
might be possible to arrive more nearly at the true situation, the greater
or less degree of progress thus made would not be of much importance in a
case when the Court's estimate must always be based on a number of detailed
decisions, all arrived at separately, in order to reach [p93] the total sum.
It matters but little whether in regard to some points the figure estimated
is for instance 110 instead of 100, if the net result of all the decisions
is still in the nature of an approximation.
[278] It may be wondered therefore whether it is worth while to delay the
settlement of the case and to incur the difficulties connected with an
expert report, including amongst others the choice of the experts who must,
if they are to perform their task properly, possess qualifications but
seldom found in one and the same person.
[279] In the end the Court may be confronted with precisely the same
situation as before the expert report and may find that the discussion upon
the report between the Parties involves a rediscussion of the case on the
same bases as those already considered.
[280] Again, the numerous data afforded by the documents in the case would
appear to make an immediate decision possible. A study of the information
and statistics furnished by the documents in regard for instance to the
condition of the factory and general development in the industry in question
would appear to afford a sufficient basis for the general assessment which
the Court must in any case undertake. The application, mutatis mutandis, of
this information to the sister factory of Piesteritz would seem particularly
likely to produce useful results. There would seem to be a possibility of
obtaining corroborative evidence, for instance, by examining the offer of
sale made to the Swiss Company, taking into account the situation existing
at that time.
* * *
[281] Certain points in this case, which as a whole is of a specific nature,
may attract attention from the point of view of law.
*
[282] As regards the assessment of the damage, the Respondent again seeks in
the present proceedings to revert to points already dealt with, maintaining
that it should not pay the [p94] indemnity because it is not the two
Companies which are entitled to receive it, but the Reich. These questions
have been decided by Judgment No. 7, which definitely lays down that any
damages are due to the two Companies and not to the Reich, which is not the
owner, since it sold the factory under the contracts of 1919. The judgment
therefore unnecessarily again deals with the Polish objections on this
point.
[283] The Polish contention based on Article 256 of the treaty of
Versailles, again seeks to show that the Reich should be regarded as owner.
But this question is already dealt with by the decisions of Judgment No. 7.
This is also the case as regards the position of the Reich as pledgee.
The Court therefore need not again concern itself with this. If Poland is to
succeed in her claim based on Article 256, it must be before some other
tribunal and not this Court. If she succeeded in establishing her claim
before such other tribunal, the result would simply be that Poland would in
the future regain what she has to pay now. This claim, therefore, cannot be
opposed to the decision contained in Judgment No. 7, which is being applied
by the present judgment. There is therefore no reason for again undertaking
an examination of Article 256, as is done in the judgment; nor need the
Court again consider the question whether the Reich has become owner in
consequence of its position as pledgee. This matter, as also the question
regarding Article 256, relates to a stage reached long before the present
judgment, and it cannot be reopened on the pretext that, when the preceding
judgments were given, the question was to establish the principle of
damages, but that now the problem is to estimate these damages. Both are
points which have already been decided.
* * *
[284] A question of more general legal interest arises as regards the
situation of Germany in the proceedings; that Germany alone, to the
exclusion of the two Companies, can sue, is undeniable, since this is a suit
within the jurisdiction of the Permanent Court, which is open only to
States. But what is [p95] the situation of Germany as regards the claim for
indemnity? It cannot be denied that judgment must in form be given in favour
of the German State; but since the damage has been sustained by others, it
is not in the capacity of owner that Germany can claim an indemnity. The
claim put forward in the Reich's conclusions seems rather to relate to the
award of a sum as reparation for wrong inflicted upon its subjects. In the
judgment the expressions vary: "The amount of compensation to which the
German Government is entitled, on the basis of the damage suffered by the
two Companies" (page 55). Another passage runs as follows: "What sum must be
awarded to the German Government in order to enable it to place the
dispossessed Companies.... in the economic situation... ? " (page 49). A
precise indication of the Applicant's position is not to be found in the
judgment. It seems that the problem may be solved in accordance with the
following considerations.
[285] The asset claimed by the two Companies is in itself an asset in the
hands of the Polish State, which may be claimed by civil action against the
Polish Government and under Polish law; but as the result of the Geneva
Convention, the asset has acquired also an international character. In
seizing the factory the Polish Government has also infringed the obligations
accepted by it as regards the German State. In basing its action on this
infringement, Germany is relying on the wrong done to the Companies; but she
cannot lay claim to the indemnity as her own property. Germany may suffer,
as the result of Poland's action, moral damage represented by the demand for
an imaginary sum, and also, maybe, material damage; but the latter is always
based on a fact affecting the State itself. To measure such damage by the
actual amount of damage caused to its subjects is to make a claim that,
finds no support save as regards the special cases where the wrong done to
subjects directly affects the State as being privately interested in the
enterprise. In the present affair such a case might have arisen, owing to
the situation of Germany as pledgee; no such claim has however been put
forward in the proceedings. The State must therefore, as far [p96] as itself
is concerned, limit its claim to the moral or material damage directly
caused to it. But at the same time international precedent has laid down
that the State may put forward before an international court the claims of
its subjects, may "take up" their case, with the result that such claims
must then be decided according to international law (see judgments of the
Permanent Court of International Justice - Wimbledon and Mavrommatis
affairs).
[286] In this situation the new question arises, since the creation of the
International Court, whether the State has the right to take upon itself or
at any rate to bring before the Court on its own initiative the claims of
individuals.
[287] As regards this point, it appears that there is no reason for assuming
that in international law any change has taken place in the general
principles which grant to individuals the protection of their property
rights. These rights remain always protected, and the putting forward of a
particular claim in international proceedings can only be the result of the
existence of a tacit or expressed mandate, arising either from a demand or
from the consent of the Parties. That such a mandate exists in the present
case cannot be doubted. The documents in the case show that the German State
is working in full collaboration with the Companies, who have evidently
supplied all information in order that the proceedings may have a favourable
issue. From what precedes it results that the claims must indeed be granted
to the German Government in name, but only as mandatory for the Companies.
The Court cannot therefore award the money to Germany without further
comment and without considering the question whether the German State can in
law make free disposition of the amount of the indemnity as owner, and
without the legal obligation to pay it to the parties dispossesses. The
position of the Applicant must be regarded as one of mandatory.
* * *
[288] The argument set out above has an effect upon the question of the
award of a lump sum in compensation in favour of the two Companies, the
system adopted by the judgment. In the [p97] documents there is indeed no
trace of the existence of a mandate conferring on the German State the right
to lump together the two claims. On the contrary, the whole of the pleadings
were conducted on the basis of a complete separation.
[289] The amalgamation of the claims of the Oberschlesische and Bayerische,
officially declared by the judgment, seems therefore to have no support in
law. And further, in fact, it meets with great difficulties. The claim of
the Bayerische is composed of one part representing a percentage on the
profits of the Oberschlesische; but there are other special claims, rights
resulting from the management of the factory in relation to other factories
united in a consortium under the direction of the Bayerische. As regards the
relations between the two Companies, the figures cannot be compared -for
from a financial point of view we have on the one hand a balance sheet for
the Oberschlesische for 1928, or a question of capital, and on the other
hand, for the Bayerische, a remuneration for the exploitation running as far
as 1941. There seems therefore to be no reason for departing from the
express wishes of the Parties set out in the pleadings.
[290] As regards the question of set-off, the judgment has concluded that
there was no ground for deciding it, especially because, in any case, the
matter had not been raised by the Respondent. It appears therefore that the
Court decides that it has jurisdiction.
[291] On the other hand, the judgment states (page 61) that: "It is clear
that the question whether international law allows claims to be set off
against each other and if so under what conditions such set-off is permitted
is in itself outside the jurisdiction derived by the Court from Article 23
of the Geneva Convention."
[292] This paragraph appears to have for consequence a declaration of want
of jurisdiction to deal with the dispute itself.
[293] It appears however that the Court, which has jurisdiction .as regards
the sums in dispute, will also have the right to [p98] hear and determine
the objections. To those which relate to the extinction of the credit
claimed may be added the declaration of a set-off which cancels out the
credit. In international law no principle can be raised which would
establish on this subject a difference between national and international
law.
(Signed) D. G. Nyholm.
[p104] Annex.
I. Documents submitted by the agent to the German government:
Contract between the Chancellor Of the Reich and the Bayerische, May 2nd,
19i6 (in German).
Second additional contract between the same Parties, October 21st, 1916 (in
German).
Fourth additional contract between the same Parties, December 22nd, 1916 (in
German).
Fifth additional contract between the same Parties, March 20th, 1917 (in
German).
Seventh additional contract between the same Parties, November 13th, 1918
(in German).
Application filed by the Bayerische against the German Treasury, May 14th,
1919 (in German).
Letter from Messrs. Lybrand, Ross Bros. & Montgomery to the management of
the Bayerische (with expert opinion).
Notary's certificate by Dr. Hermann Münch, June 19th, 1928.
Notary's certificate by Dr. Robert Henoch, June 19th, 1928.
Glossen zur Stickstoff-Industrie, lecture by Dr. -X. Caro, Januarv 24th,
1927 (in German).
General Plan of the Piesteritz factory.
Plan of the Reichsstickstoffwerke, Piesteritz.
Panoramic view of the Bayerische Stickstoffwerke, Piesteritz.
General Plan of the Oberschlesische Stickstoffwerke at Chorzów.
Plan of the Reichsstickstoffwerke, Chorzów.
Panoramic view of the factories at Chorzów.
Glossen zur Stickstoff-Industrie, extract from the Chemische Industrie, No.
14, April 9th, 1927 (in German).
Letter from the Oberschlesische to Dr. Ernst Wolff, Berlin, June 19th, 1928
(in German).
Letter from the Bayerische to Dr. Ernst Wolff, Berlin, June 19th, 1928 (in
German).
Annual balance sheets of the Stickstoff Treuhand Gesellschaft, March 31st,
1921, to March 31st, 1928 (in German).
II. Documents submitted by the agent to the Polish government:
Application made to the Tribunal at Katowice, in the name of the Polish
Treasury against the Oberschlesische.
Letter from the Bayerische to the State Factories Section of the Management
of the Chorzów factories, Berlin, July 24th, 1917.
Speech by Deputy Mayer in the Reichstag, November 2nd, 19i6.
Letter from the General commanding Sixth Army Corps to the
Reichsstickstoffwerke, Chorzów, October 20th, 1916.
Letter to the Management of the Railways, Katowice, June 22nd, 1917.
Letter from the War Ministry to the Kriegsamtstelle, Breslau. May 25th 1918.
[p105]
Letter from the Oberschlesische to the Bayerische Stickstoffwerke A.-G.,
Trostberg, October 14th, 1920.
Description bf the factory plant at Chorzów.
Extract from the Gewerbeordnung für das Deutsche Reich, Berlin, 1912.
Table showing the actual cost of production of 1 Kg. of nitrate in the
Chorzów factory.
Statement of stores, etc., taken over at the Chorzów factory, July 3rd,
1922.
Application made to the German-Polish Mixed-Arbitral Tribunal by the
Bayerische against the Polish State, March 25th, 1925.
Note verbale from the German Government to the Polish Legation, Berlin, May
11th, 1927.
Judgment of the Tribunal of Katowice in the affair Polish Treasury v.
Oberschlesische, November 12th, 1927.
Letter from Dr. Ernst Wolff, advocate, to the German-Polish Mixed Arbitral
Tribunal, January 6th, 1928.
Letter from the German Minister in Warsaw to M. Jackowski, October 24th,
1927.
Letter from the German Minister in Warsaw to M. Jackowski, October 20th,
1927.
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