PUBLICATIONS DE LA COUR PERMANENTE DE JUSTICE
INTERNATIONALE

SERIE A — No 17
Le 13 septembre 1928

RECUEIL DES ARRETS

N° 13
AFFAIRE RELATIVE A
L'USINE DE CHORZOW

(DEMANDE EN INDEMNITÉ)
(FOND)

PUBLICATIONS OF THE PERMANENT COURT
OF INTERNATIONAL JUSTICE

SERIES A.—No. 17
September 13th, 1928

COLLECTION OF JUDGMENTS

No. 13
_ CASE CONCERNING

THE FACTORY AT CHORZOW

(CLAIM FOR INDEMNITY)
(MERITS)

LEYDE
SOCIÉTÉ D’EDITIONS
A.W. SIJTHOFF
1928

LEYDEN
A.W. SIJTHOFF’S
PUBLISHING COMPANY
1928

PERMANENT COURT OF INTERNATIONAL JUSTICE.

1928.

S ber rgth.
FOURTEENTH (ORDINARY) SESSION. September LEE

Docket XIV: 1.

Before:

MM. ANZILOTTI, President,
HUBER, Former President,
Lord FINLAY,
MM. LoDER,
NYHOLM,
DE BUSTAMANTE, > Judges,
ALTAMIRA,
ODA,
PEssôa,

M. BEICHMANN, Deputy-Judge,

MM. RABEL,

EHRLICH, National Judges.

JUDGMENT No. 13.

CASE CONCERNING THE FACTORY
AT CHORZOW

(CLAIM FOR INDEMNITY)
(THE MERITS).

The Government of Germany, represented by Dr. Erich
- Kaufmann, Professor at Berlin,

| Applicant,
Versus

The Government of the Polish Republic, represented by
Dr. Thadeus Sobolewski, Agent for the Polish Government before
the Polish-German Mixed Arbitral Tribunal,

Respondent.
JUDGMENT. No. I3.—CHORZOW FACTORY (MERITS) 5

THE CourT,
composed as above,
having heard the observations and conclusions of the Parties,

delivers the following judgment :

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 Sta-
tute 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. (herein-
after designated as the Oberschlesische) and the Bayerische Stick-
stoffwerke 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 Chorzéw, 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 15th, 1922, between Germany
and Poland (hereinafter described as the Geneva Convention).

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 juris-
diction to hear the suit brought before it and submitting that
the Court should, ‘‘without entering into the merits, declare
that it had no jurisdiction’.

The Court dealt with this plea in its Judgment 1 No. 8 given
on July 26th, 1927, by which it overruled the preliminary objec-
tion raised by the Polish Government and reserved for judg-
ment on the merits the suit brought on February 8th, 1927;
by the German Government.

Furthermore, under the terms of this judgment, the Pre-
sident 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
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 6

September 30th, November 15th and December 30th, 1927, were
subsequently extended by successive decisions until November
30th, 1927, February zoth and May 7th, 1928, respectively.

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. |

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.

ae
* *

The submissions made in the German Government’s Applica-
tion of February 8th, 1927, were as follows:
It is submitted :

{ Translation]

(x) that by reason of its attitude in respect of the Oberschle-
sische Stickstoffwerke and Bayerische Stickstoffwerke Com-
panies, 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 Conven-
tion, the Polish Government is under an obligation to
make good the consequent damage sustained by the aforesaid
Companies from July 3rd, rg22, 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 Bayeri-
sche Stickstoffwerke Company for the period of exploita-
tion 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 ;
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 7

(c) that, from the date of judgment, 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 3oth, 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.

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 55 of the Rules),
subject only to the condition that the other Party must
always have an opportunity of commenting on the amended
submissions.

Submission No. 1 of the Application has not been subse-
quently amended.

On the other hand, with regard to submission No. 2, import-
ant amendments have been made. In the Case this submis-
sion 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 Oberschlesi-
sche Stickstoffwerke Company, and 20,179,000 Reichsmarks
for the damage caused to the Bayerische Stickstoffwerke
Company.

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 :
JUDGMENT No. 13.—CHORZOW FACTORY (MERITS) 8

(a) that the total of 59,400,000 mentioned in the Application
as the figure representing the damage suffered by the Ober-
schlesische is calculated as on July 3rd, 1922;

(b) that this sum includes the sum of 1 million for raw mater-
ials, 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 Oberschle-
sische 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, 1922, to July 2nd, 1927;

(2) 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 repre-
senting 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.

Lastly, submission (2) of the Application has been amended
in the German Agent’s oral reply as concerns the compensa-
tion 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 :
[Tvanslation.] - |

that the total of the compensation to be paid to the German
Government is 58,400,000 Reichsmarks, plus 1,656,000 Reichs-
marks, plus interest at 6°4 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 Ger-
man Government.is 20,179,000 Reichsmarks for the damage done
to the Bayerische Stickstoffwerke A.-G.

It follows that, as regards the Oberschlesische, the German
Government (a) reverts to the sum of 58,400,000 as on
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 9

July 3rd, 1922; (0): 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. .

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.

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 sub-
mission 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. .

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 Ober-
schlesische Stickstoffwerke Company for the taking possession
of the working capital and the compensation due to the Baye-
rische Stickstoffwerke Company for the period of exploitation
from July 3rd, 1922, to the date of judgment.

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.

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 r5th, 1928, at latest ;

in the alternative, that, in so far as payment may be effect-
ed 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 Oberschle-
sische Stickstoffwerke Company and to the Bayerische Stick-
stoffwerke Company.

1
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 10

Thus to the main original submission has been added an
alternative contemplating the possibility of payment by instal-
ments. OS

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 altern-
ative that, in so far as payment may be effected by instal-
ments, the Polish Government should, within one nionth from
the date of judgment, give bills of exchange for the amounts
of the instalments, including interest, payable on maturity
to the Oberschlesische Stickstofiwerke A.-G. and to the Bayeri-
sche Stickstoffwerke A.-G.

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.

Paragraph 3 (c) of the submissions of the Application (4 (c}
of the Case) has undergone no subsequent modification.

On the other hand, paragraph 3 (4) 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 Ger-
man 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 with-
out any deduction to the account of the : two Companies with
the Deutsche Bank at Berlin.

The original submission is contained | in the last part of this
paragraph, the principal clause of which now seeks a declara-
tion excluding any possibility of extra-judicial set-off.

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:
JUDGMENT No. 13.—CHORZOW FACTORY (MERITS) : II

(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.

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 tepeated,
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.

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.

*
* *

In connection with certain submissions made by the Polish
Government in regard to the compensation of the Oberschle-
sische, the German Government has not merely asked the Court
to reject these submissions but has also formulated two other
submissions, namely :

(Translation. |

(x) 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 Chorzéw.

2
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) I2

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.

Apart from the two additional claims just referred to, the
final submissions of the German Government are therefore as
follows : |

(Translation, |

(I) that by reason of its attitude in respect of the Oberschle-
sische Stickstoffwerke and Bayerische Stickstoffwerke Com-
panies, 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
Governmient is under an obligation to make good the conse-
quent 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 Governnient 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 Germiany, 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 ammionia, 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 pos-
session of the working capital and the compensation due to
the Bayerische Stickstoffwerke A.-G. for the period of exploi-
tation from July 3rd, 1922, to the date of judgment ;

(6) 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 ;
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 13

- (d) that the Polish Government is not entitled to sett off
against the above-mentioned claim for indemnity of the Ger-
man 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 indeninity; and that the payments
mentioned under (a) to (c) should be made without any deduc-
tion 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 Govern-
ments.

The Polish Government has made no formal objection to
the amendments successively made in the original submissions
of the German Government.

. *
* *

The submissions formulated by the Polish Government in
teply to those set out in the Application and Case of the Ger-
man Government are worded as follows in the Counter-Case :

It is submitted: - ‘

[Translaivon.]
_ A. In regard to the Oberschlesische :

(1) that the applicant Government’s claim should be dis-
missed;

(2) in the alternative, that the claim for indemnity should be
provisionally suspended ;

(3) as a further alternative, in the event of the Court award-
ing 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 Chorzéw factory and after the formal abandonment
by it of any claim against the Polish Government in res-
pect of the latter’s taking possession and exploitation of
the Chorzéw factory; (6) 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 owner-

‘ ship in the land register has been finally decided in favour
of the Oberschlesische.

(4) In any case, it is submitted that the German Govern-
ment should, in the first place, hand over to the Polish
Governmient the whole of the shares of the Oberschlesische
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 14

Stickstoffwerke Company, of the nominal value of 110,000,000
Marks, which are in its hands under the contract of
Deceniber 24th, 1919.

B. In regard to the Bayerische:

(1) (a) that the applicant Government’s claim for compensa-
tion in respect of the past, in excess of 1,000,000
Reichsmarks, should be dismissed ;

(0) that, pro futuro, an annual rent of 250,000 Reichsmarks,
payable as from January Ist, 1028, until March 3rst,
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 Chorzéw factory and after
the formal abandonnient by it of any claim against the
Polish Government in respect of the latter’s taking
possession and exploitation of the Chorzéw. factory ;

(2) that the applicant Government’s third submission to
the effect that until June 3oth, 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 permis-
sible for the Polish Government 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 indeminity, and that the payments
mentioned under 4 (a)—(c) should be made without any deduc-
tion to the account of the two Companies with the Deutsche
Bank at Berlin—should be rejected.

These submissions have not subsequently been amended
_ except that submission A, 3 (0), was withdrawn by means of a
declaration contained in the written Rejoinder.

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.

For the reasons given above, the Court holds that there is
nothing to prevent the Polish Government for its part from
JUDGMENT No. I3.—CHORZÔW FACTORY (MERITS) 15

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 ‘‘addi-
tional claims’ of the German Government mentioned above,
was doubtless designed to meet the Polish submission which
has been thus abandoned. |

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 :

(I) 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 award-
ing 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 Chorzéw factory, and after the formal abandonment
by it of any claim against the Polish Government in res-
pect of the latter’s taking possession and exploitation of
the Chorzéw factory.

(4) In any case, it is submitted that the German Govern-
ment 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, 1910.

B. As regards the Bayerische:

(x) (a) that the applicant Government’s claim for compensa-
tion in respect of the past, in excess of 1,000,000
Reichsmarks, should be dismissed ;

(6) that, pro futuro, an annual rent of 250,000 Reichsmarks,
payable as from January rst, 1928, until March 3rst,
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
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 16

Tribunal in respect of the Chorzéw 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 Chorzéw factory ;

(2) that the applicant Government’s third submission to the
effect that until June 30th, 1931, 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 permis-
sible for the Polish Government 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 men-
tioned 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.

*
% *

A comparison between the German and Polish final submis-
sions 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 @ 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.
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 17

the past, of a sum not exceeding 1,000,000 Reichs-
marks for the future, of an annual rent of 250,000 Reichs-
marks payable as from January Ist, 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.

TI.— As regards the Polish submissions: that submission A 4,
which goes beyond the scope of the German submis-
sions, has given rise to a claim for its rejection on the
part of the German Government, formulated during the
oral proceedings.

(ok
* *

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 devel-
opments 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 ‘“sub-
sidiary arguments’ or as mere suggestions as to the procedure
to be adopted; this is certainly the case as regards the num-
erous requests with a view to the consultation of experts or
the hearing of witnesses. There is no occasion for the Court
JUDGMENT No. 13.—CHORZOW FACTORY (MERITS) 18

to pass upon all these requests; it may therefore confinc 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.

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.

The facts underlying the present suit have already been suc-
cinctly stated or referred to in Judgments: Nos. 6, 7, 8 and
II, given by the Court on August 25th, 1925, May 25th, 1926,
July 26th, 1927, and December 16th, 1927.

The present judgment, however, must deal with the so-called
case of the factory at Chorzéw 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 15th, 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.

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 construc-
tion of”, amongst other things, a nitrate factory at Chorzéw
in Upper Silesia. The necessary lands were to be acquired on
JUDGMENT No. I13.—CHORZOW FACTORY (MERITS) 19

behalf of the Reich and entered in its name in the land
register. The machinery and equipment were to be in accord-
ance with the patents and licences of the Company and the
experience gained by it, and the Company undertook to manage
the factory until March 3rst, I94x, 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 sub-
ject 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 manage-
ment 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 condi-
tion of fifteen months’ notice being given, if the Reich’s share
of the surplus did not reach a fixed level.

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 Novem-
ber 22nd, 1018, respectively, relate to the Chorzôw 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 ful-
filment of the contract of March 5th, 1915, 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 Chorzôw
factory.

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 Com-
pany of the factory at Chorzéw, that is to say, the whole of
the land, buildings and installations belonging thereto, with all
accessories, reserves, raw material, equipment and stocks. The

3
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 20

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, 1010,
exchanged between them. The Oberschlesische was duly
entered, on January 29th, 1920, at the Amisgerichi of Kônigs-
hütte, in the Chorzôw land register, as owner of the landed
property constituting the nitrate factory at Chorzéw. The
registered office of the Oberschlesische which, under the
memorandum of association, was established at Chorzéw, was
subsequently, by an amendment executed on January 14th, 1920,
transferred to Berlin.

In the contract of December 24th, 1919, between the Reich
and the newly created Oberschlesische, a second limited lia-
bility 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 Chorzéw, was ceded by the Reich to the Oberschle-
sische 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 obliga-
tions imposed by the contract upon the latter in regard to
the Reich, and obtaining in consideration thereof, without pay-
ment, 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 Ober-
schlesische. 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 author-
ized 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
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 21

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 share-
holders, 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%—it 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.

On May 15th, 1922, was signed at Geneva between
Germany and Poland the Convention concerning Upper Silesia.

After the signature of this Convention, but before the
actual cession of Polish Upper Silesia to Poland, the Treu-
hand, 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. :

On July ist, 1922, the Polish Court of Huta Krolewska,
which had replaced the Am*sgericht of Kônigshütte, 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
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 22

Polish Treasury. This decision, which cited Article 256 of the
Treaty of Versailles and the Polish laws of July rath,
1920, and June 16th, 1922, was. carried into effect on the
same day. |

On July 3rd, 1922, M. Ignacy Moscicki, who was delegated
with full powers to take charge of the factory at Chorzôw 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.

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 'Govern-
ment 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.

In the meantime, the Oberschlesische, on November 15th,
‘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 with-
drawn by the Oberschlesische in June 1928, before the Tri-
bunal had been able to give a decision.

The Oberschlesische, on November 24th, 1922, instituted a paral-
lel action in regard to the movable property existing at Chorzéw
at the time of the taking over of the factory, against the Polish
Treasury before the Civil Court of Katowice, with a view to obtain-
ing 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.

As regards the Bayerische, that Company also, on March 25th,
1925, brought an action before the German-Polish Mixed
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 23

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 Ober-
schlesische and in the same circumstances.

The Court’s Judgment No. 7 was given on May asth, 1926.
This judgment was the source of developments tending in two
different directions.

On the one hand, at the initiative of the German Govern-
ment, 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 conse-
quently the reparation due must, in principle, take the form
of the payment of compensation, a statement which is more-
over 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.

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 Ober-
schlesische in order to obtain a declaration that that Company
had not become owner of the landed property at Chorzdéw ;
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.
UDGMENT No. 13.—CHORZOW FACTORY (MERITS 2
4

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 inter-
pretation 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.

The Court, on December 16th, 1927, delivered its Judgment
in this suit (No. rr). 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 Chorzéw factory under
municipal law. |

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. .

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.
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 25

#
* *

THE LAW.
I.

The Court, before proceeding to consider the Parties’ sub-
missions, must determine the import of the application which
has given rise to the present proceedings, in order to ascet-
tain 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.

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 obliga-
tion 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.

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 Govern-
ment 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 repara-
tion on its own. behalf, according to the measure provided
by the losses suffered by the companies whose case it has
JUDGMENT .No. I3.—CHORZOW FACTORY (MERITS) 26

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 govern-
ments 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.”

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.

Even should it be possible to construe the terms of the
application and of the subsequent submissions of the Applic-
ant 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 fromthe 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 Con-
vention.

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 Ober-
schlesische 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
JUDGMENT No. 13.—CHORZOW FACTORY (MERITS) 27

Court recognized that—as had been maintained by the Applic-
ant—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 inter-
pretation 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 engage-
ment 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, notwith-
standing 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 dispos-
session which led to the filing with the Court of the German
Government’s Application now before it.

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 compen-
sation now put forward by Germany. Accordingly the declara-
tions 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.

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

4
JUDGMENT No. 13.—CHORZOW FACTORY (MERITS) 28

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 repara-
tion due to the State.

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.

This view is moreover readily reconcilable with the submis-
sions of the Applicant. The first of its submissions, through-
out 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 44, 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
JUDGMENT No. I13.—CHORZOW FACTORY (MERITS) : 29

two Companies with the Deutsche Bank at Berlin, is inter-
preted by the Agent for the German Government as solely
relating to the locus solutioms.

The Court therefore is of opinion that the Applicant has not
altered the subject of the dispute in the course of the pro-
ceedings.

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 Oberschle-
sische 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.

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 obliga-
tion 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 conven-
tion itself. The existence of the principle establishing the
obligation to make reparation, as an element of positive inter-
national law, has moreover never been disputed in the course
of the proceedings in the various cases concerning the Chorzéw
factory.

The obligation to make reparation being in principle recog-
nized, it remains to be ascertained whether a breach of an inter-
national engagement has in fact taken place in the case under
consideration. Now this point is ves judicata. The non-
conformity of Poland’s attitude in respect of the two Companies
with Article 6. and the following articles of the Geneva Con-
vention is established by No. 2 of the operative provisions of
Judgment No. 7. The application of the principle to the pre-
sent case is therefore evident.
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) - 30

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 Chorzéw 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.

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 repara-
tion; 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 Decem-
ber 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. .

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.

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.
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 31

IE.

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 Oberschlesi-
sche in respect of the Chorzéw undertaking is therefore equi-
valent to the total value—but to that total only—of the
property, rights and interests of this Company in that under-
taking, without deducting liabilities.

The Polish Government argues in the first place that the
Oberschlesische has suffered no loss as a result of its dispos-
session, because it was not the lawful owner, its right of owner-
ship 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.

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 owner-
ship of the Chorzéw 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 Chorzéw 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
JUDGMENT No. 13.—CHORZOW FACTORY (MERITS) 32

Chorzéw 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 Oberschle-
sische was not in conformity with Article 6 and the follow-
ing 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.

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 Chorzôw 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 Ober-
schlesische’s right to the Chorzdw 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 neces-
sarily 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. | | |

The Polish Government now points out that, after Judg-
ment No. 7 had been rendered, the Civil Court of Katowice
JUDGMENT No. 13.—CHORZOW FACTORY (MERITS) 33

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 Oberschle-
sische 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 r4th, 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.

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 pro-
tected 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 proceed-
ings,—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 Treasury are essentially
the same as those already discussed before the Court on the
basis of the Polish Government’s submissions in the proceed-
ings leading up to Judgment No. 7, which reasons, in the
opinion of the Court, did not suffice to show that the Ober-
schlesische 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
JUDGMENT No. 13.—CHORZOW FACTORY (MERITS) 34

effect of the judgment of the Tribunal of Katowice of Novem-
ber 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.

It is to the objection dealt with above and to a submission
connected therewith which the Polish Government miade 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 Chorzéw.

This submission has been maintained notwithstanding the
withdrawal of the Polish submission referred to.
’ 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 Govern-
ment based on the judgment of the Tribunal of Katowice.

e +

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 Chorzéw, 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.

The Polish Government, admitting, for the sake of argu-
ment, 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 Ger-
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 35

man 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, fails
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”.

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.

Even if this should not be the case and if the instrument
of December 24th, r91r9, 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 calcul-
ated, 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 Chorzé6w 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.

The Polish Government also alleges that, under Article 256
of the Treaty of Versailles, the rights and interests of the
‘German Government in the Chorz6w undertaking are trans-
ferred 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

5
JUDGMENT No. 13.—CHORZOW FACTORY (MERITS) 36

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 Decem-
ber 24th, 1919, is to be regarded as genuine and effective, the
Polish Government holds that, in order to determine the in-
demnity 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 hand-
ing over by Germany to Poland of the shares of the Oberschle-
sische to the nominal value of x1o 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, 1019.”

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 interpreta-
tion 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 in 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 spe-
cial 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 Chorzéw 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
JUDGMENT No. 13.—CHORZOW FACTORY (MERITS) 37

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 dis-
pute 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 juris-
diction of the Court in regard.to the question raised in the
Counter-Case. In the course of the negotiations in regard to
the Chorzé6w case, the German plenipotentiary had already
proposed to the’ Polish plenipotentiary that this question should
be referred to the Court.”

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 some 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 Conven-
tion, seems above ail anxious that the Court should give judg-
ment on this submission in the course of the present proceed-
ings. .

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 estab-
lishes the principle that the Court’s jurisdiction depends on
the will of the Parties; the Court therefore is always compet-
ent 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.
JUDGMENT’ No, 13.—CHORZOW FACTORY (MERITS) 38

But this is not the case as regards the submission in question.

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, conse-
quently, it is juridically connected with the principal claim.

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:

“4° conclusions based on the facts stated; these con-

clusions may include counter-claims, in so. far as the
latter come within the jurisdiction of the Court.”

The claim having been formulated in the Counter-Case,
the formal conditions required by the Rules as regards coun-.
ter-claims are fulfilled in this case, as well as the material
conditions. . : _

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 counter-claim,
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 submis-
sion 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 corre-
sponding to the value of the rights and interests which the
Reich possessed in the enterprise under the contract of Decem-
ber 24th, 1910, which value, according to the Polish Govern-
ment, 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
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 39

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 Applic-
ant. 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. |

*

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 Chorzôw
undertaking 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,
and 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 owner-
ship; and even from an economic point of view it is impos-
sible to disregard the rights of the Treuhand.

Such being the situation at law, to endeavour now to ident-
ify 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 deci-.
sion 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.

The same applies in regard to the contention that the
Oberschlesische is a company controlled not by German nation-
als but by the Reich. It is true, as the Polish Government
has recalled, that the Court in Judgment No. 7 has declared
JUDGMENT No. 13.—CHORZOW FACTORY (MERITS) 40

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.

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.

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 Baye-
rische. For seeing that, under the contract of December. 24th,
1919, the Reich had declared that it agreed to leave the
. management of the Chorzéw undertaking in the hands of the
Bayerische, under the conditions previously settled with the Reich,
and that, under the subsequent contract concluded on Novem-
ber 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.

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.
JUDGMENT No. 13.—CHORZOW FACTORY. (MERITS) 4I

Alternatively, the Polish Government has contended that, even
if the rights possessed by the Reich under the contract of
December 24th, 1910, in the Chorzéw 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.

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.

It must therefore be ascertained, amongst other things,
whether the rights of the Reich under the contract of Decem-
ber 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 con-
trolled 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 tights,
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 Oberschle-
sische from Chorzéw to Berlin after the coming into force of
the Treaty of Versailles çannot be regarded as illegal and null:
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 42

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.

It is also in vain that the Polish Government cites para-
graph io 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 obliga-
tions 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.

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 Gov-
ernment’s contention—based on the applicability of that art-
icle—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.
JUDGMENT No. 13.—CHORZOW FACTORY (MERITS) 43

*
* *

Alternatively, and also in regard to the claim for an indemn-
ity 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.

The reasons for which it seeks this suspension appear to
be as follows:

The Polish Government has notified the Reparation Com-
mission of the taking over of the Chorzéw factory, under
Article 256 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 Chorzéw 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 Chorzéw fact-
ory off the list, it—the Polish Government—cannot be com-
pelled to make a payment in favour of the Oberschlesische.

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 repara-
tion 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

6
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 44

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 Conven-
tion may have to oppose the sale of the factory and in view
of the right of the Reparation Commission to ensure the dis-
charge of reparation debts in general and especially in view
of the right reserved to it under Article 248, Poland’s obliga-
tion to pay to Germany an indemnity in favour of the Ober-
schlesische is dependent on the previous approval of the said
States and of the Reparation Commission.

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
“as 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”.

The Court considers that there is no doubt as to its juris-
diction to pass judgment upon the Polish submission in ques-
tion, but that this submission must be rejected as not well-
founded.

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
Judgmient 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
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 45

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 Chorzéw
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 Chorzéw 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 dis-
posal 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 Repara-
tion Commission, if, in accordance with Germany’s claim, she
pays this value to that State.

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 pro-
visions 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.

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
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 46

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 under-
stand 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 objec-
tion based on this article must therefore also be overruled.

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 objec-
tions 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 sub-
mission in question in so far as it relates to third parties
who are not specified.

ITI.

The existence of a damage to be made good being recog-
nized 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 Ober-
schlesische being set aside, the Court must now lay down the
guiding principles according to which the amount of compensa-
tion due may be determined.

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 compensa-
tion 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. .
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 47

It follows that the compensation due to the German Govern-
-ment 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 Conven-
tion, 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 Conven-
tion—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.

The essential principle contained in the actual notion of an
illegal act—a principle which seems to be established by inter-
national 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 valve
which a restitution in kind would bear; the award, if need be, of
damages for loss sustained which would not be covered by restitu-
tion 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.

This conclusion particularly applies as regards the Geneva
Convention, the object of which is to provide for the mainte-
nance of economic life in Upper Silesia on the basis of respect
for the status quo. The dispossession of an industrial under-
_taking—the expropriation of which is prohibited by the
JUDGMENT No. I13.—CHORZOW FACTORY (MERITS) 48

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 inter-
national 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 Chorzéw factory could
therefore have no other effect but that of substituting. payment
_ of the value 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.

*
* *

Such being the principles to be followed in fixing the com-
pensation 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.

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.

In the present case, the situation is different. The economic
unity of the Chorzéw 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 partici-
pation in the undertaking (sums due and shares in the profits)
would have been payable by the Oberschlesische. The value
JUDGMENT No. 13.—CHORZOW FACTORY (MERITS) 49

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, comi-
pensation under this head must remain within these limits.

On the other hand, it is clear that the legal relationship
between the two Companies in no way concerns the inter-
national proceedings and cannot hinder the Court from adopt-
ing the system of a lump sum corresponding to the value
of the undertaking, if, as is the Court’s opinion, such a cal-
culation is simpler and gives greater guarantees that it will
arrive at a just appreciation of the amount, and avoid
awarding double damages.

One reservation must, however, be made. The calculation
of a lump sum referred to above concerns only the Chorzéw
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 under- :
taking. On the other hand, it is possible that damage of
such a nature may be shown to exist as regards the Bayeri-
sche, which possesses or works other factories of the same
nature as Chorzôw ; the Court will consider later whether such
damage must be taken into account in fixing the amount of

compensation.
*

* *

Faced with the task of determining what 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. |
JUDGMENT No. I3.—~CHORZOW FACTORY (MERITS) 50

The cost of construction of the Chorzéw 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.

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 Treu-
hand, or with the offer of sale of the shares of the
Oberschlesische to the Geneva Compagnie d'azote et de fertili-
sants 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 Chorzé6w undertaking,
and which the Court has judged not to be in conformity with
the Geneva Convention.
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 51

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.

This being the case, and in order to obtain further enlighten-
ment 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 Chorzôw 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 Oberschle-
sische 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 pre-
sent judgment, if it had been in the hands of the said Com-
panies ?

Il.—What would be the value at the date of the present
judgment, expressed in Reichsmarks current at the present
time, of the same undertaking (Chorzéw) 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 Oberschle-
sische Stickstoffwerke, and had either remained substantially
as it was in 1922 or had been developed proportionately on

7
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 52

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 ?

The purpose of question I 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 shave accrued
to the undertaking between the date of taking possession and
that of the expert opinion.

On the other hand, question IT is directed to the ascertain-
ment 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.

This question contemplates the present value of the under-
taking 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 develop-
ment 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 Chorzéw, as well
as certain differences between the two, have been many times
pointed out during the present proceedings. |

In regard to this, it should be observed that the Agent for
the German Government, at the public sitting of June z21st,
1928, handed in two certificates by notaries containing a
summary of contracts concluded on April 16th, 1925, and
August 27th, 1927, between the Mutteldeutsche Stickstoffwerke
A.-G. and the Bayerische, and adhered to by the Vereinigte
Indusirie-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 Govern-
JUDGMENT No, 13.—CHORZOW FACTORY (MERITS) 53

ment, 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.’

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.

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.

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
formule; basing itself on the results of the said valuations
and of facts and documents submitted to it, it will then
JUDGMENT No. 13.—CHORZOW FACTORY (MERITS) 54

proceed to determine the sum to be awarded to the German
Government, in conformity with the legal principles set out

above.
*

It must be stated that the Chorzéw factory to be valued by
the experts includes also the chemical factory.

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.

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 186r.

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 construc-
tion 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.
JUDGMENT No. 13.—CHORZOW FACTORY (MERITS) 55

“Ok
* *

In the Court’s opinion, the value to which the above ques-
tions 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 Chorzéw
undertaking.

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 Bayeri-
sche 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 Bayeri-
sche a licence supposed to be granted by the said Company
to a third party under fair and normal conditions.

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 participa-
tion 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
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 56

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.

For this reason, any difference which might exist between
the conditions fixed in the contracts of 1915, 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.

*
*

It therefore only remains to be considered whether, in con-
formity 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. |

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 possi-
bility 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. ©

The Court must however observe that it has not before
it the data necessary to enable it to decide as to the exist-
ence and extent of damage resulting from alleged competition
of the Chorzéw 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 Chorz6w, 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 insuffi-
ciently proved. .
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 57

Moreover, it would come under the heading of possible
but contingent and indeterminate damage which, in accord-
ance with the jurisprudence of arbitral tribunals, cannot . be
taken into account.

This is more especially the case as regards damage which
might arise from the fact that the field in which the Bayeri-
sche 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 could have done if it had continued to work
the Chorzéw factory.

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.

In addition to pecuniary damages for the benefit of the
Bayerische, the German Goverment 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.”

In regard to these submissions, it should be observed in the
first place that they cannot contemplate damage already sus-
tained, but solely damage which the Bayerische might suffer
in the future. ;

If the prohibition of export is designed to prevent damage
arising’ from the competition which the Chorzdw 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
JUDGMENT No. 13.—CHORZOW FACTORY (MERITS) 58

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.

It must further be observed that if the object of the pro-
hibition 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 Govern-
ment, 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 prohi-
bition of export upon the existence of these patents and licences.

On the contrary, the German Government’s claim seems to
present the prohibition of export as a clause which should have
been included in a fair and equitable licensing contract con-
cluded between the Bayerische and any third party; in this
connection the following remarks should be made:

The mere fact that the produce of any particular undertak-
ing 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
Chorzéw undertaking, constitutes an entirely separate under-
taking from that of Chorzôw and one that may even to a
certain extent have interests conflicting with those of Chorzéw
—were to limit 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 Chorzéw 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 under-
taking, 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
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 59

prohibition of export asked for by the German Government
cannot therefore be granted, or the same compensation wouid
be’ awarded twice over.

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.

As regards the German Governmient’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 comipensation, 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 inoper-
ative 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 more-
over very doubtful whether, apart from any other considera-
tion, prohibition of exploitation is admissible under the Geneva
Convention, the object of which is to provide for the mainte-
nance of industrial undertakings, and which, for this purpose,
even permits them, in exceptional cases, to be expropriated

{Article 7).
IV.

The Court thinks it preferable not to proceed at this stage
to consider the Parties’ submissions concerning certain condi-
tions 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
8
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 60

German submission No. 4 (a)—(b)—(c), and the Polish submissions
A 3 and B I (¢), which the Court therefore reserves for
the judgment fixing the indemnity.

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 (@) of the Applicant and submission C of the Respond-
ent respectively relate.

The claim of the German Government in regard to this
matter has, in the last instance, been couched in the follow-
ing 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 insur-
ances 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.”

The Polish Government, for its part,. has stmply asked for
the rejection of this submission.

If the German submission is read literally, it is possible to
regard it as mainly designed to prevent a specific case of set-
off, that is to say, the setting-off in this case of the claim
which the Polish Government contends that it possesses in res-
pect 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 Govern-
ment asks the Court for a decision of principle the effect of
which would be either to prevent the set-off, of any counter-
claim 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.

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
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 61

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.

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.

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 pay-
ment 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.

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.

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 comipen-
sation.

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.
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 62

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 recon-
cilable with the fundamental principles of the Court’s, juris-
diction, which is limited to cases specially provided for, in
treaties and conventions in force.

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 repara-
tion shall be effective. Now, it seems clear that this argu-
ment 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.

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. —

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
JUDGMENT No. I3.—CHORZ6W FACTORY (MERITS) 63

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. r to the effect that it neither can nor should
contemplate the contingency of the judgment not being com-
plied with at the expiration of the time fixed for compliance.

In these circumstances the Court must abstain from passing
upon the submissions in question.

+
* *

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 ï2th, 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 Govern-
ment the whole of the shares of the Oberschlesische Stick-
stoffwerke Company, of the nominal value of 110,000,000
JUDGMENT No. I3.—CHORZOW FACTORY (MERITS) 64

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 judg-
ment 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.
JUDGMENT No. 1I3.—-CHORZOW FACTORY (MERITS) 65

Done in French and English, the French text. being author-
itative, 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. Nu

(Signed) PAUL RUEGGER,

Deputy-Registrar.

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 IT in the judgment should not be put to the experts.

M. Altamira, Judge, declares that he is unable to concur in
the judgment of the Court as regards No. 6 of the operative
portion. .

M. Rabel, National Judge, desires to add to the judgment
the remarks which follow hereafter.

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.

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.