Opinion Number. 1405

Subject

NEW GUINEA validity of expropriation ordinances: claim of german companies FOR profits AND DAMAGES

Key Legislation

TREATY OF PEACE BETWEEN THE ALLIED AND ASSOCIATED POWERS AND GERMANY done at VERSAILLES on 28 June 1919 [1920] ATS 1 (Treaty of Versailles arts) 119, 121, 297B: MANDATE FOR THE ADMINISTRATION OF THE GERMAN POSSESSIONS IN THE PACIFIC OCEAN SITUATED SOUTH OF THE EQUATOR OTHER THAN GERMAN SAMOA AND NAURU, CONFERRED UPON HIS BRITANNIC MAJESTY FOR AND ON BEHALF OF THE COMMONWEALTH OF AUSTRALIA, CONFIRMED AND DEFINED BY THE COUNCIL OF THE LEAGUE OF NATIONS done at Geneva on 17 December 1920 [1920] ATS 2: NEW GUINEA ACT 1920: LAWS REPEAL AND ADOPTING ORDINANCE 1921 (NG): EXPROPRIATION ORDINANCE 1920 (NG) ss 4, 14: EXPROPRIATION ORDINANCE 1921 (NG) s 2

Date
Client
The Secretary, Prime Minister

The Secretary, Prime Minister’s Department, has forwarded for advice the following memorandum which has been signed on behalf of a number of German companies which formerly owned interests in New Guinea:

The Protectorate of German New Guinea was surrendered to the British Forces under Brigadier Colonel Holmes on September 21st 1914 after an agreement of Capitulation having been properly concluded.

After the Occupation of the Colony the Brigadier issued on September 12th 1914 a Proclamation on behalf of His Majesty King George V, in which inter alia the protection of the lives and private property of peaceful inhabitants was promised.

This Proclamation was published in number 1 page 5 of the Government Gazette British Administration German New Guinea.

Under the protection of the agreement of surrender and under the Proclamation German Nationals in the colony remained in possession of their property and were allowed to carry on their ordinary pursuits as far as possible.

The Treaty of Versailles came into force for German New Guinea on January 10th 1920.

In Article 297b the allied and associated powers and consequently the Government of the Commonwealth of Australia as mandatory of the League of Nations, reserve the right to retain and liquidate all property, rights and interests belonging to German Nationals on the date of coming into force of the Treaty.

The clear wording of Article 297b signifies that an act of declaration on the part of the entitled power was required to show that it would make use of the reservation.

This declaration has been given by all allied and associated powers in question, although differently in its content. For example the Government of the South African Union has explicitly declared not to make use of the right.

Other States have allowed certain restrictions and exemptions for German property.

Thence results that the property of German Nationals was not forfeited already by virtue of the Treaty on the 10th of January, 1920, to the allied or associated power concerned but belonged to him by virtue of right.

This statement seems important for the following arguments.

The Government of the Commonwealth of Australia did not take advantage at first of the right reserved to it by Article 297b. Consequently the German Nationals in the colony, who were on the day of coming into force of the Treaty of Peace in possession of their property and in undisturbed exercise of their occupation, remained in full enjoyment of their property, right and interests and rescued them over into the time of peace and therefore have a claim to the result of their work as a new part of property, acquired after the state of peace had commenced.

On September 1st 1920 the British Administration of German New Guinea issued an Expropriation Ordinance, published in Vol. 7 No. 11 of the Government Gazette. This Ordinance lacks legality. It was issued as said above by the Military Administration with the purpose to put into practice in German New Guinea a stipulation of the Versailles Treaty of Peace. By the regulations of the Treaty of Peace however only the mandatory of the League of Nations was entitled to do so for the mandated territory.

For the same reason all the Ordinances, which were issued subsequently to carry into effect or to amend the first Expropriation Ordinance were void.

On September 30th 1920 the Commonwealth Parliament passed the New Guinea Act 1920, which contains the agreement by the principal allied and associated powers that a mandate for the Government of German New Guinea should be conferred upon the Australian Commonwealth under the covenant of the League of Nations and recites that it was expedient to make provisions for the Civil Government of the territory.

This Act must be considered as the fundamental regulation of law for the former Protectorate of German New Guinea. It was to commence only on a date to be fixed by proclamation.

This proclamation was issued on April 7th 1921 and it stipulated the 9th day of May 1921 as the date upon which the New Guinea Act of 1920 was to come into force.(1)

Herewith only and beginning from this day the Governor-General was empowered to accept the mandate.

On May 6th 1921 an Ordinance, called the Laws Repeal and Adopting Ordinance 1921 was made under the New Guinea Act 1920 by the Governor-General to take effect on May 9th 1921, by which a regulation of law was created for the territory and then on June 3rd 1921 a law, called the Expropriation Ordinance was made by which for the first time with valid efficacy the expropriation of German goods, rights and interests was fixed.

In this Act chiefly the Military Administration’s Expropriation Ordinance of September 1st 1920 is confirmed and amended by giving it retrospective force from January 10th 1920.

It has been said already, that the German Nationals were on January 10th 1920, when the state of peace commenced, in the undisturbed possession of their property, rights and interests by virtue of the proclamation and the agreement of capitulation.

Further on it has been explained, that the Military Administration was not entitled to make encroachments by virtue of the Treaty of Peace.

The Government of the Commonwealth, which alone was competent to do so as mandatory, made use of its right out of Article 297b of the Versailles Treaty not earlier than by the Expropriation Ordinance of June 1921.

Consequently the seizure of German property, rights and interests, which was effected through the Expropriation Board by virtue of the Ordinance of September 1920 and of subsequent stipulations, took place without legal basis and authorisation.

As the declaratory act of the Government of the Commonwealth of Australia, to make use of the right, reserved by Article 297b was effected only on June 3rd 1921, the German Nationals had the right, to remain in the undisturbed possession of their property and to transact their business with a claim, to keep for themselves all benefit accruing from such property as a new acquisition in the time of peace.

The Expropriation Ordinance of June 3rd 1921 tries to remove the previous violations of the clear situation of law by confirming the Ordinance formerly issued and by giving them retrospective force from January 10th 1920.

But this measure is invalid as far as German Nationals are concerned.

Their rights are secured by two agreements of international nature,

firstly by the agreement of capitulation entered into in the name of the King of Great Britain and preceding proclamation; and

secondly by the Versailles Treaty.

In connection with the interpretation of article 297b as given above it must be maintained that according to the clear wording of it the property as on January 10th 1920 only but not the accruement after this date was open to expropriation.

By the law of the mandatory these rights of foreign (in this case German) Nationals, vouchsafed by treaties, cannot be curtailed.

The encroachments of the Expropriation Board being invalid as shown, there can be no doubt that the Government of the Commonwealth is responsible for the damage incurred.

The claim of the German Nationals in New Guinea is of a double character, it comprises

firstly the increase of property and the profits earned from the day of the coming in force of peace to the actual date of expropriation which is different for the various undertakings,

secondly all damages for the untimely and incompetent expropriation through the encroachments of the Board at Rabaul.

These statements which so far moved exclusively on legal ground, experience a reinforcement by the maxims of equity.

By intimations of the local authorities the Germans in New Guinea were led to believe that an expropriation would not take place, in consequence of which they pursued with cheerful eagerness the administration of their possessions and the management of their affairs.

By Article 14 of the Expropriation Ordinance of September 1st 1920 the Germans were forced under menace of fines and imprisonment, to remain on their possessions and to continue to administrate them for the Expropriation Board until the day of final seizure through members of the authority.(2)

This signifies the enforcement of services without compensation.

The ordinance, it is true, provides that employees shall continue to receive their former wages but no indemnification is provided for the owners.

Moreover the owners and employees have been deprived of the balance in their favour arising out of savings during the period of their management and they were, when expelled, solely provided with passage to Germany and money for living during the voyage.

This procedure of a cultured nation stands unprecedented in history and the behaviour of the Expropriation Board at Rabaul infers that a consideration of the German claims seems justified after the principles of faith and truth.

Since the coming into force of the Versailles Treaty of Peace numerous powers have resolved to mitigate the hardnesses of the expropriation and to refund to a great extent the liquidated property to the expropriated owners.

Lately Japan has chosen this way and allowed to a considerable extent an indemnification by refunding up to two thirds of the value of the expropriated goods, rights and interests.

It should be deemed possible that on impartial consideration of the legal situation, the measures of the Expropriation Board and the ruinous effect of the sequestration on the expropriated persons, also the Government of the Commonwealth would agree to a compensation after direct negotiations with the prejudiced German Nationals.

The terms of Capitulation, as summarised in the New Guinea Gazette, do not provide for the retention by the inhabitants of their private property, but the Proclamation issued by Colonel Holmes states, inter alia, that ‘the lives and private property of peaceful inhabitants will be protected and the laws and customs of the Colony will remain in force so far as is consistent with the Military situation’.

The terms of Capitulation and the Proclamation by Colonel Holmes were observed until the conclusion of peace, but, upon the signing of the Treaty of Versailles, the provisions of these documents were superseded, and, after that date, therefore, the rights of the companies concerned ceased to be governed by the terms of Capitulation and the Proclamation, and became subject to the provisions of the Treaty of Peace. Under the Treaty (Article 119) Germany renounced in favour of the Principal Allied and Associated Powers all her rights and titles over her oversea possessions, and Article 121 provided that sections I and IV of Part X of the Treaty should apply in the case of these Territories ‘whatever be the form of Government adopted for them’. Article 297, which occurs in section IV of Part X provides, inter alia, as follows:

(b) Subject to any contrary stipulations which may be provided for in the present Treaty, the Allied and Associated Powers reserve the right to retain and liquidate all property, rights and interests belonging at the date of the coming into force of the present Treaty to German nationals, or companies controlled by them, within their territories, colonies possessions and protectorates, including territories ceded to them by the present Treaty.

The liquidation shall be carried out in accordance with the laws of the Allied or Associated State concerned, and the German owner shall not be able to dispose of such property, rights or interests nor to subject them to any charge without the consent of that State.

German nationals who acquire ipso facto the nationality of an Allied or Associated Power in accordance with the provisions of the present Treaty will not be considered as German nationals within the meaning of this paragraph.

In pursuance of this Article the Expropriation Ordinance 1920 was passed by the Military Administration of New Guinea, and it was amended from time to time by the Military Administration, and later by the Governor-General in Council.

Section 4 of this Ordinance, as amended, reads as follows:

  1. Upon—
    1. the publication of any such declaration in the Rabaul Gazette; or
    2. the service of the declaration upon the prescribed company or national or the personal representative or upon any person at the office, place of business or plantation of the prescribed company or national or at any office, place of business or plantation, maintained in connexion with the prescribed estate, as the case may be, all property belonging to or held or managed for or on behalf of the prescribed company, national, or estate on the tenth day of January, 1920, and the right to transfer, manage and otherwise deal with that property, shall thereupon be deemed to have vested, as on the tenth day of January, 1920, in the Custodian, and shall be treated at all times as having so vested and the estate and interest of the prescribed company or national therein or, as regards a prescribed estate, of any person, shall be by force of this Ordinance determined.

The words ‘on the tenth day of January 1920’ were inserted by Ordinance No. 6 of 1921.(3)

It is contended by the German companies that the Expropriation Ordinances passed by the Military Administration were invalid, and that by Ordinance No. 6 of 1921 ‘for the first time with valid efficacy the expropriation of German goods, rights and interests was fixed.’ On this ground the companies claim—

  1. the increase of property and the profits earned from the day of the coming into force of peace to the actual date of expropriation,
  2. all damages for ‘the untimely and incompetent expropriation through the encroachments of the Board at Rabaul’.

I cannot accept the statement that the Expropriation Ordinances passed by the Military Administration are invalid.

Article 297(b) provides that ‘the liquidation shall be carried out in accordance with the laws of the Allied or Associated State concerned’. When the Expropriation Ordinance 1920 was passed the Military Administration was authorised to administer the government of New Guinea on behalf of the Commonwealth, which was ‘the Allied or Associated State concerned’, and, in my opinion, therefore, the Expropriation Ordinance 1920 was validly enacted, and should be regarded as ‘the law of the Allied or Associated State concerned’.

It may be pointed out, however, that the question whether the expropriation was first validly effected by the Expropriation Ordinance 1920 or by the Ordinance dated the 3rd June, 1921, does not materially affect the matter of the rights of the companies because, by section 4 of the Ordinance, the expropriation was made retrospective to the 10th January, 1920.

The property vested in the Custodian under the Expropriation Ordinance was the property belonging to the companies on the 10th January, 1920, but the Ordinance also provided that the property should be deemed to have been vested in the Custodian on that date. Consequently the produce of the property and the profits arising therefrom after the 10th January, 1920, must also be deemed to have been vested in the Custodian.

This procedure is not, in my opinion, in conflict with Article 297(b) of the Treaty, because that Article does not confer any rights on German nationals. It merely reserves rights to the Allied and Associated powers.

In my opinion, therefore, the claims made by the German companies cannot be admitted.

[Vol. 22, p. 898]

(1) Commonwealth of Australia, Gazette, No. 32, 7 April 1921, p. 639

(2) This appears to be a reference to the Expropriation Ordinance 1920 (NG), s 14.

(3) Expropriation Ordinance 1921 (NG), s 2.