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Tuesday, Aug. 29, 2000

In part one of his article, Professor Sebok situated the Forced Labor Agreement signed earlier this year in its legal and historical context. In part two, he scrutinizes the Agreement to explain how it is intended to extinguish the legal claims of victims of the Holocaust.

The Legal Effect Of The Forced Labor Agreement

According to United States law, the Forced Labor Agreement signed on July 17, 2000 does not, like the settlement of the Swiss bank suits, legally protect German companies from future lawsuits. It cannot, for the simple reason that it is not a settlement of a lawsuit. It was neither supervised nor approved by a federal judge, and it does not purport to fairly represent all the members of a class in the sense required by federal class action law.

Nevertheless, the agreement promises "legal peace," which is fairly astonishing, given that nothing in the agreement prevents a victim of Germany's forced labor program from filing a lawsuit in federal court tomorrow. Yet the United States State Department insisted to the Germans that the agreement was as almost as good as a settlement. The Germans spent $5 billion for "legal peace." Did they get it?

The agreement offers certain concrete protections. For example, it will not take effect until all pending forced labor litigation against German companies are dismissed with prejudice. Most of these cases have been brought by lawyers who helped draft the agreement, and they have promised (on behalf of the plaintiff class) to stipulate that their cases be dismissed.

The remaining cases and all future cases will be dismissed, the agreement seems to assume, as a result of the U.S. Government's intervention. In any case where a forced labor claim is raised against a German company, the State Department is obliged to send a "Statement of Interest" to the court. This statement will "recommend dismissal on any valid legal ground" and will note the United States' "interest" in a resolution of the forced labor claim.

The Uncertain Effect Of Statements Of Interest Relating To The Agreement

Recently, Statements of Interest have been used to explain to a court how the private rights of the plaintiff to a lawsuit were extinguished by the United States in the course of conducting foreign policy. The most memorable instance of this practice was the promise made by the United States that all private law claims against Iran would be subject to an international tribunal in exchange for the resolution of the embassy hostage crisis of 1980-81.

But this situation is different. Statements of Interest do not give a court new reasons to dismiss a claim. Instead, they refer the court to a prior executive act (usually authorized by statute). However, the only act to which the Statements of Interest here refer the court is the act of making the agreement between the lawyers representing former forced laborers and Germany's corporations. Unlike, for example, the diplomatic resolution of the hostage crisis, this agreement is not based on the exercise of an executive or Congressional power. No legal rights were extinguished by the United States through this agreement.

to invoke here. If the plaintiffs in the 1998 lawsuits have no right to damages (perhaps due to the Allies' postwar treaties with Germany), then the court doesn't need a Statement of Interest to figure that out.

On the other hand, if the plaintiffs are entitled to damages, then the Statement of Interests here - which merely point out the fact that the United States helped to broker a private, extrajudicial agreement between a group of lawyers and a group of German companies - hardly provides any legal reason for a judge to dismiss the suit. In fact, it is not clear why the United States would even have standing - the legal right to bring a claim or intervene - to come before the court to present the Statement of Interest. For these reasons, the Statement of Interest is unlikely to provide the Germans any additional legal protection against future lawsuits.

The Settlement Fund: A Second Chance for Whom?

The Statement of Interest may be a legal fiction, but it is one in which everyone wants to believe. By acting as if they are providing German companies new legal protections, the United States and the plaintiffs give the impression that without the agreement, the companies might have faced even worse legal liability. This is false, despite what the plaintiffs may have argued in their lawsuits. In truth, the United States and its allies gave away the rights of their citizens to sue private companies for torts arising from the war in the treaties that were signed between 1946 and 1990.

Beginning with the treaty signed at Potsdam, the victorious Allies laid claim to all of Germany's assets. No distinction was drawn between governmental and private assets. The original plan was to force Germany to pay reparations by stripping it of its industrial capacity. However, although Russia pursued this approach in East Germany, the Western nations modified their approach to reparations in later treaties, and allowed Germany to build its industrial base in exchange for its establishment of various reparations programs. What did not change is that the Allied governments never abandoned their control over the reparations process, which remained both tight and exclusive - in the sense that it did not allow for direct participation through private lawsuits by victims. Indeed, the governments made clear that no debt arising from the war, whether incurred by the German government or German corporations, would have legal status unless recognized by one of the many peace treaties set up between 1946 and 1990. This basic legal fact has been affirmed by various American and German federal courts.

No one pretends that the deals struck in the wake of the Second World War were wholly driven by a desire to do justice. After the onset of the Cold War, the Western nations' approach to German reparations was driven by the memory of two "botched" conferences: Versailles and Yalta. Many diplomatic historians felt that Hitler's rise to power was facilitated by the crushing demands for reparations imposed on Germany after World War One. History, they believed, counseled a lighter load this time.

Furthermore, at the time the treaties were crafted, many were beginning to fear that the Soviet Union intended to establish a permanent empire in Eastern Europe. What was done in Yalta, they suspected, could only be undone if West Germany was strong. It was in this context that the Western Allies approached the question of reparations. Germany, in the end, was obliged to pay $60 billion to individuals and governments, but it could have paid more. The problem of forced labor was discussed as early as 1946, but along with many other forms of loss, individual claims based on forced labor were deferred in 1953 and ultimately extinguished in 1990.

The forced labor agreement signed this year is an important and perhaps final chapter in the long struggle for justice since the end of the war. It is fraught with ironies, however. Although it is supposed to illustrate the power of the individual suing in private law against private corporations, in reality it reaffirms the primacy of the state. The agreement occurred because the German government offered the money and the American government offered the protection. On their own, without the help of the two governments, the forced labor plaintiffs almost surely would have lost, for their claims had been legally extinguished long before the agreement was made.

One wonders whether the payment for "lost wages" to Jews, Poles and others in 2000 is a final admission by both governments that their postwar treaties traded away the right to compensation too cheaply in 1953. The forced labor agreement is a peculiar thing: ostensibly a private agreement with questionable legal force, it is no less than a reformation of an international peace treaty that evolved over forty years.

The real question, perhaps, is not whether Germany's final reparations bill should be $60 billion or $65 billion (or $75 billion or more) but who should decide that number, and how. The dual nature of the forced labor agreement - apparently private, in reality public - suggests that the German and American governments have found it in their interest to keep the answer vague.

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

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