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Monday, Aug. 28, 2000

On July 17, 2000, a consortium of German corporations agreed to support a $5 billion fund to pay compensation to people who were forced to work involuntarily and without pay in their factories during the Second World War. The agreement--which is not a settlement to a lawsuit--is remarkable for a number of reasons.

First, the agreement insures that the world remembers that in addition to genocide, Nazi ideology also promoted the widespread use of forced labor. Second, in order to achieve the agreement, the U.S. Government promised to intervene on behalf of German corporations in all future Holocaust-related litigation and to insure that federal judges bar the courthouse door to future claims. Third, the legal protection the German companies are trying to achieve is probably unnecessary, since it turns out that private liability for Holocaust-related torts was given up in treaties signed by the U.S. and others at the end of the war.

This leaves two questions. First, should the U.S. Government be making deals on the side (no matter how well-intentioned) which may interfere with the public's access to the courts? Second, why are German corporations -- with the help of the German government -- spending $5 billion to achieve what they call "legal peace" when they probably already have the law on their side? The answers to both questions are related, and take us to the very heart of the dilemma of reparations for torts committed during wartime.

The History Of Holocaust-Related Lawsuits In the U.S.

Beginning in 1998, a wave of lawsuits were filed in the United States against various German corporations for assault and battery, false imprisonment, conversion of assets, and unjust enrichment. The plaintiffs included Jews (and others) who had been brought over from concentration camps to work at these companies, as well as non-Jewish civilians from countries occupied by the German army who were forced to augment Germany's diminished workforce.

The suits were brought by some of the same lawyers who had sued Swiss banks on behalf of Jews (and their heirs) whose deposits were never returned after the war. And the legal theory behind the suits was the same: that the companies, like the banks, had used the Holocaust to take something of value from innocent people, and that they ought to return what they had taken.

There had been a handful of similar tort suits in both the United States and Germany in the 1950's and `60's, all of which failed. A number of factors led to the new effort in the `90's. First, the end of the cold war had allowed historians access to records from East Germany that raised new questions about the conduct of German corporations during the war.

Second, the reunification of Germany meant that Germany officially concluded its peace treaty negotiations with the former Allied powers. And, although Germany had agreed to make individual payments to victims of the Holocaust for the injuries connected with genocide, and reparations to the nations it invaded, no treaty obliged it to compensate individuals for the value of their stolen labor. Moreover, the final peace treaty of 1990 meant that the German government would have no further wartime obligations beyond the $60 billion it had already paid.

Finally, the end of the Twentieth Century meant that even the youngest of Hitler's victims were growing old. If the victims of German forced labor were to receive any kind of justice, it would have to be done quickly.

Throughout 1998, the defendants argued that although they accepted "moral" responsibility for the forced labor on which the lawsuits were based, legal responsibility lay with the government. But the German government, in turn, refused to reopen and supplement its reparations program, and the plaintiffs, so far, received no compensation.

Once Gerhard Schroeder's Social Democrats beat Helmut Kohl's Christian Democrats in October 1998, the tone began to shift. As a governor, Schroeder had been instrumental in encouraging Volkswagen to settle a forced labor case brought in Germany. As soon as he took national office, he began to prod the nation's largest corporations to consider a global solution to the American lawsuits.

The Clinton administration was a very eager partner in Schroeder's effort. And, in a four-sided negotiation between the German government, the American government, the lawyers for the plaintiffs (which included representatives from the World Jewish Congress and the former Communist nations) and the German corporations, the deal signed last month was hammered out.

The framework of the agreement reflects the particular interests of the four parties. Concentration camp survivors who were forced to work are treated separately, as "slave laborers." There may be 240,000 former slave laborers still alive. The agreement provides separate recognition for the claims of "forced laborers," who will receive one third as much as slave laborers.

Forced laborers are defined to include those non-Jews who were taken from the general population of occupied countries and compelled to work for German companies without pay, often at some distance from their homes. There were over 10 million forced laborers during the war, of which perhaps 1.2 million are still alive. Many are from Eastern Europe or the former Soviet Union, and have never seen any benefit from the reparations that were allegedly collected in their names by their governments.

The German government agreed to contribute one half of the $5 billion fund, but the fund is still technically a non-governmental entity. In exchange, the government preserved its official position that it was not entering into a new reparations program outside of the obligations concluded by treaty in 1990.

For their part, the German corporations agreed to raise the other $2.5 billion from 3500 large and medium companies (many which had not existed in 1945) on a voluntary basis -- thus preserving their position that they have no legal obligation to compensate individuals for lost wages, but are doing so based wholly on moral grounds instead. (The companies claim they have no legal obligation on the ground that, according to the peace treaties that ended the war, it is the German government to whom all claims by foreigners are to be directed). In exchange, the companies insisted that they receive a guarantee that they would never have to defend themselves in an American court on the issue of forced labor ever again.

Read Part II of Professor Sebok's article.

Anthony J. Sebok is a Professor of Law at Brooklyn Law School.

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