MUST GERMANY PAY?

Hawke's Bay Tribune, Volume XXI, Issue 301, 4 December 1931, Page 5

MUST GERMANY PAY?

LOANS TO HER COLONIES. AN AFRICAN SUIT. A lawsuit involving between £3,000,000 and £4,000,000 in the first instance, and anything up to £20,000,000 later on, will shortly commence in the High Court of South West Africa (formerly German South West Africa) at Windhoek, writes Eric Rosenthal in the “San Francisco Chronicle,” If, as is almost certain, an appeal is noted, the matter will come before the Appellate Division at Bloemfontein and will set up a record as the largest legal action ever brought in the Union of South Africa. The object of the case is to recover from the Government of the mandated territory the capital and interest due on loans raised by the former German colonies. Thousands of bondholders, not only in the Fatherland but in England, America, and Africa are interested. The action received its first impetus on 3th March, 1908, when a law was passed in the German Reichstag, under which all the colonies jointly, i.e., South-west Africa Tanganyika, the Cameroons, Togoland, New Guinea, Kiautchau, the Caroline Islands, etc., were authorised to borrow money. More than £14,000,000 was subscribed on the security of the “partners” during the six' years between that date and the outbreak of the World War. Of this sum, more than £3,000,000 was devoted to the development of their present mandated territory of South-west Africa, 40,622,000 marks (over £2,000,000) going into the railway system alone. IMPERIAL AID. Owing to the small population in the German colonies it was impracticable to let them carry the burden unassisted by the parent country. By the law of 16th March, 1907, the imperial treasury became guarantor for all interest on the securities. “By an extraordinary oversight,” says a South African lawyer, “no explicit provision for the disposal of these funds was made under the treaty of Versailles. Germany did waive her financial right in foreign parts, but it was not set forth what should be done with the colonial loans. Did her guarantee o fthe interest terminate, or is she still liable? Who is responsible for the repayment of the enormous sums involved? Is the mandated territory bound by the obligations of the South-west African colony? The coming lawsuits will show.” In legal circles the view is held that the bondholders who seek to sue the present administration have a strong case. Pretoria departments take the view that the matter is one for the Windhoek treasury, and intend to fight any action that may be brought against them. Under the leadership of a well-known Justizrat (Judicial Counsellor), Dr. Rhode, who was also identified with the recent Kaokoveld concession dispute before the League of Nations,, a body known as the “Kolonia] Zentral Verband,” or Colonial Central Society, fought for the recognition of the demands of the bondholders. Test cases have been brought in the Provincial Court for the District of Berlin against the German Government. NOT DEFEATED. Judgment was not given against the plaintiffs. The Bench decided that the German treasury was at present only liable as guarantor and that the “principal debtor,” i.e., the mandated territory, must first be proceeded against. Against this finding an appeal his been noted in the highest Court of the country, the Reichsgericht at Leipzig. If the judgment below is confirmed, immediate proceedings will be commenced at Windhoek. An important feature of the case is the fact that interest, which is at the rate of 4 per cent., was regularly paid by the German treasury until after the war, when its Ministry ruled that the sums so disbursed were only “ex gratia,” and any future claims must be against the former colonies. A considerable part of the scrip has passed into the hands of investors who look upon the whole contest as a wild gamble. A judgment in favour of the bondholders will involve the country in a big extra annua] liability. In 1914 the colony had actually started capital repayments with the modest sum of £83,000, thereby acknowledging the debt.