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Max Planck Encyclopedia of Public International Law [MPEPIL]

German Interests in Polish Upper Silesia Cases

Matthias Hartwig, Ignaz Seidl-Hohenveldern

From: Oxford Public International Law (http://opil.ouplaw.com). (c) Oxford University Press, 2015. All Rights Reserved.date: 25 August 2019

Human rights — Expropriation — Remedies

Published under the auspices of the Max Planck Foundation for International Peace and the Rule of Law under the direction of Rüdiger Wolfrum.

A.  Introduction

In a series of judgments the Permanent Court of International Justice (PCIJ) interpreted the Convention between Germany and Poland relating to Upper Silesia (signed 15 May 1922, entered into force 3 June 1922; 9 LNTS 465; ‘Upper Silesia Convention’) concluded under the auspices of the League of Nations. The judgments concerned two different series of events.

B.  Facts and Judgments

On 5 March 1915 a contract was concluded between the German Reich and the Bayerische Stickstoffwerke AG, pursuant to which the company undertook to establish and to manage a nitrate factory at Chorzów, Upper Silesia. The necessary lands were acquired by the German Reich and entered in its name in the land register. The contract was to run until 31 March 1941. On 24 December 1919, by a series of legal instruments signed at Berlin, the Oberschlesische Stickstoffwerke AG was formed, to which the Reich conveyed the nitrate factory at Chorzów. On 29 January 1920 the Oberschlesische Stickstoffwerke was entered in the land register as owner of the factory, which retained its links to the Bayerische Stickstoffwerke AG.

On 14 July 1920 Poland enacted a liquidation law, which transferred to the Polish Treasury all assets of the German Reich located in the territory ceded to Poland. This law declared null and void any transactions affecting such property which were made after 11 November 1918, the date of the armistice.

On 1 July 1922 the court at Huta Krolewska (‘Königshütte’ in German), which had passed to the Polish State in the meantime, entered the Polish State as owner in the land register. On 15 November 1922, the Oberschlesische Stickstoffwerke brought an action before the German-Polish Mixed Arbitral Tribunal. The German government claimed that the liquidation of the factory at Chorzów was contrary to the Upper Silesia Convention.

A second series of events concerned the owners, amongst them the municipality of Ratibor, of a number of large estates. These owners had received notice pursuant to Art. 15 Upper Silesia Convention of the Polish Government’s intention to expropriate these estates. The notice included a prohibition on selling the estates. The German government contended that Poland was not authorized to liquidate the estates.

According to Art. 23 Upper Silesia Convention, the PCIJ had been granted jurisdiction concerning differences of opinion arising out of the Upper Silesia Convention without prejudice to the jurisdiction of the German-Polish Mixed Arbitral Tribunal. Invoking this Article, the German government brought an action before the PCIJ, without waiting for the decision of the German-Polish Mixed Arbitral Tribunal. Poland contended, inter alia, that the action should be declared inadmissible until the German-Polish Arbitral Tribunal had rendered its decision.

The Court decided on this preliminary objection in a judgment of 25 August 1925 (Judgment No 6) and found that it had jurisdiction. One year later, in its judgment of 25 May 1926 (Judgment No 7), the PCIJ held that the German Reich had retained its right to dispose of its property in Upper Silesia until the sovereignty concerning this territory had been transferred to Poland. Only a ‘misuse’ of this right or a ‘manquement au principe de la bonne foi’ could endow an act of alienation of the nitrate factory with the character of a breach of the treaty, but ‘such misuse cannot be presumed and it rests with the party who states that there has been such a misuse to prove his statement’ (Judgment No 7 at 30). Thus, the rules of the liquidation law were held to be in conflict with the Upper Silesia Convention and the expropriation of the factory at Chorzów was held not to be an authorized liquidation, as the transfer of the ownership of the factory in 1919 was valid. The problem of the validity of the transfer of ownership should be determined pursuant to German civil law by the ‘competent authority’. As regards the legality of the expropriation of the estates, the PCIJ held that, for factual reasons, the liquidation of some of these estates had been illegal. In this context the PCIJ held that the town of Ratibor was a ‘German national’ within the meaning of the Convention.

Germany thereupon requested the PCIJ to assess the amount of indemnity due for the factory at Chorzów. Poland contended that while the PCIJ had jurisdiction concerning differences of opinion respecting the construction and application of the articles of the Convention, it lacked jurisdiction concerning differences of opinion in respect of obligations arising out of a violation of the articles of the Convention.

By its judgment of 26 July 1927 (Judgment No 9) the PCIJ affirmed its jurisdiction on this point and held Germany entitled to claim an indemnity. On 14 October 1927 the German government requested the PCIJ to indicate to the Polish government that it should pay to the German government, as a provisional measure, the sum of 30 million Reichsmark. This request was rejected in an order dated 21 November 1927 since it was aimed at obtaining provisional satisfaction of part of the claim rather than provisional protection.

10  On 16 September 1927 the Polish government tried to obtain from the Polish court at Katowice a declaration that according to the applicable civil law (ie to German civil law) the Oberschlesische Stickstoffwerke had never become the owner of the factory at Chorzów. This action was based, inter alia, on the assumption that the PCIJ in Judgment No 7 reserved to Poland the right to bring a suit before the competent tribunal for such declaration. Thereupon, the German government, in conformity with Art. 60 PCIJ Statute, submitted a request for an interpretation of judgments Nos 7 and 8.

11  On 16 December 1927, in Judgment No 13, the PCIJ held that its judgments should in no way be made subject to a decision by a Polish court and that it had recognized, with binding effect between the parties, that the right of ownership had passed to the Oberschlesische Stickstoffwerke under German law.

12  In a fifth judgment dated 13 September 1928 (Judgment No 17), the Court considered the nature of the indemnity payable by the Polish government but reserved the fixing of the actual amount for a later judgment. The dispute was settled by a compromise between the parties a few months later, and in an order of 25 May 1929 (Judgment No 19) the Court finally declared the proceedings to be terminated.

C.  Points of Law

1.  Procedural

13  From a procedural point of view the judgments are remarkable for the following reasons.

14  In deciding on its jurisdiction, the PCIJ declared, in Judgment No 6, that it could touch upon subjects belonging to the merits of the case: ‘it is, however, to be clearly understood that nothing which the Court says in the present judgment can be regarded as restricting its entire freedom to estimate the value of any arguments advanced by either side on the same subjects during the proceedings on the merits’ (Certain German Interests in Polish Upper Silesia [Germany v Poland] [Preliminary Objections] 15–16).

15  As for the Polish contention of lis pendens because of the hearings before the German-Polish Arbitral Tribunal, the PCIJ in its Judgment No 6 rightly held this contention not to be well founded. The two actions were not identical: in the action before the Arbitral Tribunal a private company sought the restitution of property which it claimed to have been wrongfully deprived of; whereas the PCIJ was asked to give an interpretation of certain clauses of the Upper Silesia Convention in the dispute between two States. A plea of lis pendens could have been successful before the PCIJ only if there had been an identical action between the same parties before another ‘court of the same character’ (Judgment No 6 at 20).

16  In addition, the Court held (Certain German Interests in Polish Upper Silesia [Germany v Poland] [Merits] 18) that it had jurisdiction to render judgments giving an abstract interpretation of a treaty. Such a judgment differed from an advisory opinion, which under the Covenant of the League of Nations could only be requested by the Council and the Assembly of the League. However, a right to render such declaratory judgments existed only if the State requesting such a judgment had a legal interest in doing so. The rules of municipal law holding inadmissible a request for a declaratory judgment in those cases where the claimant could sue for specific performance were not applicable by analogy to the proceedings before the PCIJ. A State could be assumed to have a legal interest in obtaining a declaratory judgment, establishing that an act of the defendant State was illegal under international law, since such a finding of the PCIJ would enable the claimant State to obtain satisfaction.

17  It should also be mentioned that in cases where the PCIJ had jurisdiction to interpret a treaty or to ascertain a violation of a treaty, the PCIJ asserted that it also had jurisdiction concerning claims for an indemnity which were based on such a treaty violation.

18  In Judgment No 7 the PCIJ established that the transfer, in 1919, of the property of the factory at Chorzów to the Oberschlesische Stickstoffwerke was valid under international law and not contrary to bonos mores, whereas the ‘competent tribunal’ (Certain German Interests in Polish Upper Silesia [Germany v Poland] [Merits] 42) was to rule on the validity of the transfer under civil law. Poland invoked this passage as showing that the PCIJ had not decided in a final manner whether the transfer was valid under municipal law since only the operative part of the judgment became binding on the parties. Invoking Art. 60 PCIJ Statute, Germany thereupon requested an interpretation of this judgment. In its Judgment No 11 the PCIJ held that the operative parts of a judgment become binding only in connection with the rationes decidendi because they would otherwise be incomprehensible. Therefore, in its Judgment No 7, the PCIJ had decided—with force of res iudicata—that the transfer of the property of the factory at Chorzów was valid also under municipal law. The validity of this transfer under municipal law was a precondition for the decision that the proceedings before Polish Courts entered by Poland against the Oberschlesische Stickstoffwerke were not in conformity with the Convention concerning Upper Silesia.

2.  Merits

19  Significant findings on the merits are a liquidation—which the judgment somewhat misleadingly calls an ‘expropriation’—of enemy property pursuant to the Versailles Peace Treaty (Treaty of Peace between the Allied and Associated Powers and Germany [signed 28 June 1919, entered into force 10 January 1920] [1919] 225 CTS 188 [Versailles Peace Treaty]) and to the Upper Silesia Convention was

a derogation from the rules generally applied in regard to the treatment of foreigners and the principle of respect for vested rights. As this derogation itself is strictly in the nature of an exception, it is permissible to conclude that no further derogation is allowed. Any measure affecting the property, rights and interests of German subjects covered by Head III of the Convention, which is not justified on special grounds taking precedence over the Convention, and which oversteps the limits set by the generally accepted principles of international law, is therefore incompatible with the regime established under the Convention. The legal designation applied by one or other of the interested Parties to the act in dispute is irrelevant if the measure in fact affects German nationals in a manner contrary to the principles enunciated above. It follows from these same principles that the only measures prohibited are those which generally accepted international law does not sanction in respect of foreigners; expropriation for reasons of public utility, judicial liquidation and similar measures are not affected by the Convention. (Certain German Interests in Polish Upper Silesia [Germany v Poland] [Merits] 22)

20  A liquidation pursuant to the peace treaties was therefore held to constitute an exception to a general rule of international law. But provisions containing such exceptions were to be interpreted in a restrictive manner (Différend concernant l’interprétation de l’ article 79, par. 6, letter C, du Traité de Paix [Biens italiens en Tunisie—Èchange de letters du 2 février 1951] [25 June 1952] 13 RIAA 389, 390–403; Conciliation Commissions Established pursuant to Art. 83 of Peace Treaty with Italy of 1947).

21  Poland had contended that the liquidation law applied in the same way to foreigners and to nationals. The PCIJ rejected this argument:

Even if it were proved—a point which the Court does not think it necessary to consider—that, in actual fact, the law applies equally to Polish and German nationals, it would by no means follow that the abrogation of private rights effected by it in respect of German nationals would not be contrary to Head III of the Geneva Convention. Expropriation without indemnity is certainly contrary to Head III of the Convention; and a measure prohibited by the Convention cannot become lawful under this instrument by reason of the fact that the State applies it to its own nationals. (Certain German Interests in Polish Upper Silesia [Germany v Poland] [Merits] 32–33)

22  In this passage the PCIJ did not explicitly deal with the problem of whether seizures of property not governed by this Upper Silesia Convention entitled foreigners to an indemnity even if a similar right is denied to nationals, or only to equality of treatment with nationals. The minimum standard solution appears to be in conformity with the basic passage of the judgment quoted above, which holds the respect of vested rights to be a generally accepted rule of international law. In an award rendered on 19 January 1977 (Texaco Overseas Petroleum Company/California Asiatic Oil Company v Government of the Libyan Arab Republic [Award of 19 January 1977] [1978] 17 ILM 1), reliance was placed on the judgments of the PCIJ in this case.

23  In the case of the expropriation of the estates of Vereinigte Königs- und Laurahütte, the PCIJ established the German character of these estates on the basis of the control theory. The PCIJ also stated that, in establishing whether ‘control’ exists, one should not adhere to one criterion only, but should consider all the circumstances of each individual case (Certain German Interests in Polish Upper Silesia [Germany v Poland] [Merits] 69).

D.  Assessment

24  The ongoing interest in the Chorzów case is especially due to the PCIJ’s statements on compensation under international law.

25  The PCIJ concretized in its decision on the merits the legal consequences of international wrongful acts (Factory at Chorzów [Germany v Poland] [Claim for Indemnity] [Merits]). It held in the decision:

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 reestablish 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 kin would bear; the award, if need be, of damages for loss sustained which would not be covered by restitution in kind or payments 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. (at 47)

26  These parts of the judgment later became a point of orientation in cases concerning compensation in international law, as they were often quoted in later decisions of international courts and tribunals. The International Court of Justice (ICJ) regularly referred to the quoted decision of the PCIJ (Gabčíkovo-Nagymaros Case [Hungary/Slovakia] [1997] ICJ Rep 7 para. 152; LaGrand Case [Germany v United States of America] [Judgment] [2001] ICJ Rep 466 para. 125; Arrest Warrant Case [Democratic Republic of the Congo v Belgium] [2002] ICJ Rep 3 para. 76;; Avena and Other Mexican Nationals Case [Mexico v United States of America] [2004] ICJ Rep 12 paras 119–21; Israeli Wall Advisory Opinion [Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory] [2004] ICJ 136 para. 152). Other courts and tribunals likewise derived their understanding of compensation from the passages in the PCIJ Judgment No 17 (eg the International Tribunal for the Law of the Sea [ITLOS] in the Saiga Cases para. 170; the European Court of Human Rights [ECtHR] in the case Papamichalopoulos v Greece [ECtHR] Series A No 330-B para. 36). The International Law Commission (ILC) when elaborating the part on legal consequences of internationally wrongful acts in its Draft Articles on State Responsibility referred strongly to this judgment of the PCIJ.

27  A specific aspect of the compensation can be found in the statement of the PCIJ on the time in which the suffered damage has to be assessed. The PCIJ held that in case of an illegal expropriation, as it took place in the Chorzów case, a compensation should be paid on the basis of the value of the property not at the moment of the expropriation but at the moment of the payment of the damages. Otherwise the injured State would be placed in a situation more unfavourable than that in which it would have been without the breach of the international law. This position has been adopted by ICSID tribunals and other arbitral tribunals in their assessment of the damages (ADC Affiliate Ltd v Hungary [Award of 2 October 2006] ICSID Case No ARB/03/16; Metalclad Corporation v United Mexican States [Award of 30 August 2000] ICSID Case No. ARB(AF)/97/1 [2000] 5 ICSID Rep 209 para. 122; MTD v Chile [Award of 25 May 2004] ICSID Case No ARB/01/7 [2007] 12 ICSID Rep 6 para. 238; SD Myers v Canada [First Partial Award on Liability of 13 November 2000] [2005] 8 ICSID Rep 18 para. 311; Petrobart v Kyrgis Republic [Arbitral Award] Arbitration Institute of the Stockholm Chamber of Commerce [29 March 2005] 77; Amoco International Finance Corporation v Government of the Islamic Republic of Iran 15 Iran-US CTR 189 paras 191–94).

28  The statements of the PCIJ on compensation have been qualified as an identification of a principle of international law which has to be respected when a court or tribunal deals with questions of compensation under international law; or as the ICJ recalled with reference to the Chorzów case: ‘the essential forms of reparation in customary law were laid down by the Permanent Court of International Justice’ (Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory [Advisory Opinion] [2004] ICJ Rep 136 para. 152). It does not mean that the PCIJ’s judgment is a landmark decision. It would be hard to interpret the stated principles as a further development of international law even at the time when the decision was handed down; the PCIJ itself stated that the quoted principle has been ‘established by international practice and in particular by the decisions of arbitral tribunals’ (Factory at Chorzów [Germany v Poland] [Claim for Indemnity] [Merits] 47). But the statements of the PCIJ very concisely phrased the notion of compensation under international law. And even if later developments led to more sophisticated concepts, the very essence of these statements is still held true.