strength in France and Italy. Their influence increased with the
deprivation and economic misery which prevailed in those countries in the
years after the war.
The United States Marshall Plan, proposed in 1947, was designed to jump
start European recovery. The Soviet Union and its satellites rejected
this aid but it became a vehicle of Western European economic recovery,
increasing economic and political integration and unity in the face of
the threat from the east. It was soon recognized that economic recovery
of the three western zones of Germany was critical to the recovery of the
rest of western Europe and that a military defense of western Europe was
impossible without the participation of West Germany.
Under these circumstances there occurred a fundamental change on the
part of the western allies towards their defeated foe. Instead of reducing
Germany to a pastoral condition, the German economy, including its
industries, was to be revived through the Marshall Plan and by other
means. Assurance that Germany was never again to become an aggressor
nation was to be obtained by integration of Germany into a strong
European community of nations. West Germany was authorized to develop
military strength, integrated with the armed forces of NATO.
While these fundamental changes took place the Soviet Union developed
its own atom bomb in 1947; in January 1948 Czechoslovakia's western
oriented foreign minister was either defenestrated or fell to his death,
anticipating February's Red Army supported coup imposing a pro-communist
government upon Czechoslovakia; on June 24, 1948, the Soviet Union
blockaded access to western Berlin, leading to the Berlin airlift; in
June 1950 the Soviet Union's ally North Korea invaded South Korea,
precipitating the Korean War; meanwhile the Soviet Union's armed
strength, nuclear and missile capability and submarine fleet expanded.
It was against this backdrop that the negotiation of the various
reparations agreements took place.
IV. Agreements Concerning Reparations
A. Potsdam Agreement: At the Potsdam Conference in the summer of 1945,
following the unconditional surrender of the Third Reich in April, the
heads of state of the United States, the United Kingdom and the Soviet
Union agreed to a reparations formula which implemented the Morgenthau
Plan, i.e., the creation of a nonindustrial, pastoral Germany. The
formula was designed to extract reparations from Germany, reduce its
ability to remilitarize, but at the same time leave sufficient "resources
to enable the German people to subsist without external assistance."
Protocol of the Proceedings, Berlin (Potsdam) Conference, August 2,
1945, 3 Bevans 1207, Art. (B)(111). Reparation claims were to be
satisfied by the allocation to the parties to the Potsdam Agreement of
specified percentages of industrial capital equipment and shares of German
B. Paris Agreement: The United States and seventeen other allied
nations (including Czechoslovakia) met at the 1946 Paris Reparations
Conference to develop a more detailed formula by which they would divide
among themselves reparations to be extracted from Germany. Negotiations
produced the Agreement on Reparation from Germany, Establishment of
Inter-Allied Reparation Agency and Restitution of Monetary Gold, Jan.
14, 1946, 61 Stat. 3157, T.I.A.S. 1655 (the "Paris Agreement").
The Paris Agreement continued the Morgenthau Plan's punitive approach.
Its preamble stated the intention of the signatory states "to obtain an
equitable distribution among themselves of the total assets which . . .
are or may be declared available as reparation from Germany." Paris
Agreement at 1, preamble. The Agreement recognized that the dislocations
of war had produced a large body of
stateless persons who had been victims of the Nazi regime and "now stand
in dire need of aid to promote their rehabilitation but will be unable to
claim the assistance of any Government receiving reparation from
Germany." Id. Art. 8. There was agreement to set aside a percentage of
the reparations received by each signatory power to aid the stateless
As to the effect upon claims of citizens of the eighteen signatory
states the Paris Agreement provided:
The Signatory Governments agree among themselves
that their respective shares of reparation as
determined by the present Agreement, shall be regarded
by each of them as covering all its claims and those
of its nationals against the former German Government
and its Agencies, of a governmental or private
nature, arising out of the war (which are not
otherwise provided for).
Id., Art. 2(A).
Under the Potsdam Agreement the amount due to the western allies had
been set at approximately 75% of assets in the western zones. The Paris
Agreement classified these assets as Category B assets (consisting of
dismantled material and merchant and inland ships) and Category A assets
(consisting of all other reparation assets including assets abroad). From
each category each signatory state was allotted a specified share. The
total reparation to be paid by Germany, therefore, was computed on the
basis of a proportion of German assets, not on the basis of the total
loss of Germany's victims. Among other circumstances demonstrating that
the consequences of forced labor were covered by the Agreement was the
fact that each signatory state was asked to specify the value which it
attached to forced labor of its nationals.
An Interallied Reparation Agency ("IARA") was given the task of
ascertaining the value of seized German assets and of dividing these
assets among the contracting states.
The parties to the Paris Agreement did not intend that it finally
resolve all reparation issues and reserved their rights "with respect to
the final settlement of German reparations." Id. Art. 2(B)(ii). The final
settlement was to be effected through a final multilateral peace treaty
or through bilateral agreements signed prior to a final peace treaty.
The IARA proceeded to assess the value of reparation assets. In August
1947 western zone occupying powers agreed to a revised level of
industrial development for Germany and prepared a new list of industrial
plants affected. According to the revised level, Germany was to achieve
roughly the same industrial capacity as it possessed in 1936 instead of
the originally designated 75% of the 1936 level. The United States
particularly was concerned that the dismantling program not conflict with
its efforts to promote European redevelopment. It discovered that keeping
Germany in a state of economic collapse required the United States to
incur enormous costs for food and other subsistencelevel aid.
C. Bilateral Peace Treaties: In February 1947, the Allied powers
concluded bilateral peace treaties with Romania, Hungary and Bulgaria,
former allies of Nazi Germany. They have been referred to above in the
summary of Dr. Wolf s declaration. These treaties were entered into at a
time when a punitive approach to reparations was being pursued pursuant
to the Potsdam Agreement and the Paris Agreement, and when the totality
of reparation payments was measured by a percentage of German assets. The
pertinent language was: "Romania/Hungary/Bulgaria waives on its own behalf
and on behalf of Romanian/Hungarian/Bulgarian nationals all claims
against Germany and German nationals outstanding on May 8, 1945 except
those arising out of contracts and other obligations entered into, and
rights acquired before September 1, 1939. This waiver is deemed to
include debts, all intergovernmental claims in respect of
arrangements entered into in the course of the war and all claims for
loss and damage during the war."
D. The Transition Agreement: Early in the occupation the three western
occupying powers imposed upon Germany the obligation to provide for the
return of property or payment of value to either the owner or heir or, if
there were no surviving heirs to the Jewish Restitution Successor
Organization. For example, Law No. 59 on Restitution of Identifiable
Property enacted by the United States Military Government in November
1947 was designed "to effect to the largest extent possible the speedy
restitution of identifiable property . . . to persons who were wrongfully
deprived of such property from January 30, 1933 to May 8, 1945 for
reasons of race, religion, nationality, ideology or political opposition
to National Socialism." Law No. 59 provided that claims for restitution
of identifiable property could be filed by surviving owners of such
property or their heirs. Third parties in possession of identifiable
property subject to restitution were required to return such property even
if they had purchased such property in good faith.
West Germany, or the Federal Republic of Germany, was not a legal
entity at the end of the war. Upon the framing of its constitution in
1949 it acquired the capacity to enter upon agreements with other
nations. At that time the approach of the western Allies towards Germany
was in the process of change; for the reasons set forth in the previous
section of this opinion they had determined to integrate the Federal
Republic of Germany into the community of free nations and conclude the
state of occupation.
This transition was effected during a period of negotiations in Bonn
and Paris during 1952 through 1954 and was implemented in a series of
agreements including the Convention on the Settlement of Matters Arising
out of the War and the Occupation, signed at Bonn on May 26, 1952, as
amended by Schedule 4 to the Protocol on the Termination of the
Occupation Regime, signed at Paris on October 23, 1954, 332 U.H.T.S. 219
(the "Transition Agreement").
The agreements negotiated in Bonn and Paris consisted mainly of a
General Treaty, a Forces Convention, a Financial and Taxation Agreement
and the Transition Agreement. They resolved many questions and issues
which would normally be dealt with in a final peace treaty. The General
Treaty dealt primarily with the ending of the state of occupation, the
legal status of Germany and Berlin and the stationing and security of the
Allied armed forces. The Transition Agreement dealt with subjects that
included claims by and against Germany and its nationals.
Reflecting the decision not to reduce Germany to a pastoral status the
United States, the United Kingdom and France agreed "that they will at no
time assert any claim for reparation against the current production
[i.e., goods and capital generated by private industry] of the Federal
Republic." Transition Agreement, ch. 6, Art. 1. Previously responsibility
for seeking compensation for the victims of Nazi oppression rested with
the occupying powers, which implemented this responsibility by such
measures as adoption of Law No. 59 and setting aside in the Paris
Agreement a portion of each nation's seized assets for compensation of
stateless persons. Under the Transition Agreement responsibility to
compensate victims of Nazi oppression was shifted to Germany itself.
the obligation to implement fully and expeditiously
and by every means in its power, the legislation
referred to in Article I of [the chapter entitled
Internal Restitution] and the programmes for
restitution and reallocation thereunder provided. The
Federal Republic shall entrust a Federal Agency with
ensuring the fulfillment of the obligation undertaken
in this Article, paying due regard to the provisions
of the Basic Law [the German Constitution].
Transition Agreement, ch. 2, art. 2. Further, the Transition Agreement
The Federal Republic acknowledges the obligation to
assure in accordance with the provisions of paragraphs
2 and 3 of this Chapter adequate compensation to
persons persecuted for their political convictions,
race, faith or ideology, who thereby have suffered
damage to life, limb, health, liberty, property, their
possessions or economic prospects (excluding
identifiable property subject to restitution).
Furthermore, persons persecuted by reason of human
nationality, in disregard of human rights, who are now
political refugees and no longer enjoy the protection
of their former home country shall receive adequate
compensation where permanent injury has been inflicted
on their health.
Id. ch. 4. The Transition Agreement established in Germany a Supreme
Restitution Court to adjudicate issues under the legislation to be
enacted. Id. ch. 2, art. 6.
This new dispensation abandoned payment of reparations through seizure
and distribution of German assets. Instead it contemplated compensation
of Nazi victims through legislation enacted in Germany and adjudicated by
a German court as well as through state-to-state agreements. As in the
past, it was recognized that the victims of Nazi oppression could never be
fully compensated for their losses. Germany assumed the obligation to
provide adequate" compensation. "The Federal Republic acknowledges the
obligation to insure . . . adequate compensation to persons persecuted
for their political conclusions, race, faith or ideology, who thereby
suffer damage to life, limb, health, liberty, prosperity, their
possessions or economic prospects." Id. ch. 4, art. 1. Recognizing that
reparations had to be limited to Germany's ability to pay, the Transition
Agreement provided: "The capacity to pay of the Federal Republic may be
taken into consideration in determining the time and method of
compensation payments . . . and in providing adequate funds." Id. ch.
The Transition Agreement was not a final resolution of reparation
claims of the Western Allies. Rather, "the problem of reparation shall be
settled by the peace treaty between Germany and its former enemies or by
earlier agreements concerning the matter." Id. ch. 6, art. 1.
E. London Debt Agreement: Disagreement about plans for a European
Defense Community delayed the effective date of the Transition Agreement
until May 6, 1955. In the meantime in pursuit of the policies which
produced the Transition Agreement, the United States, France, Great
Britain, eighteen other Allied nations and the Federal Republic of
Germany concluded the Agreement on German External Debts, February 27,
1953, 4 U.S.T. 444 (the "London Debt Agreement").
The London Debt Agreement addressed and regulated certain categories of
German debts — some from the First World War, some from the
inter-war period, some from World War II and some from the post-war
period. Article 4 covered debts to be settled and Article 5 set forth
"claims excluded from the agreement." Paralleling provisions of the
Transition Agreement, Article 5(2) of the London Debt Agreement
(2) Consideration of claims arising out of the second
World War by countries which were at war with or were
occupied by Germany during that war, and by nationals
of such countries, against the Reich and agencies of
the Reich . . . shall be deferred until the final
settlement of the problem of reparation.
The London Debt Agreement, like the Transition Agreement, was designed
to stabilize the German economy and integrate it into the community of
free nations, thus furthering overall European prosperity and
strengthening the military forces standing in the way of Soviet
expansion. Thus provision was made for payment of certain debts and the
postponement of consideration of other debts, the effect of