Taken Place Between the Treuhaender and Banks. the Interest

Home , Creditor

DES TRIBUNAUX ARBITRAUX MIXTES taken place between the Treuhaender and banks. The interest which the Creditor will be entitled to receive will not be ascertained with regard to what has taken place between the banks and the Treu- hMnder. According to paragraph 22 of the Annex to Section III Part X the rate of interest due to the Creditor isthat fixed by the contract. There is a dispute between the parties as to the rate which during the critical period is to be considered as the contractual rate. Until this has been cleared up the Tribunal will be unable to give their final decision. The Tribunal therefore direct the parties to furnish in seven copies to the Secretariat within two months of the date hereof, a statement setting out: (a) their contentions as to the terms of the contract lbetween them ; (b) the evidence upon which they rely as to the rate of interest applicable.

Signed: EUGkNE BOREL, ROLAND E. LONIAX VAUGHAN WILLIAMS, Dr. A. N. ZACHARIAS. British Government Agent: Mr. B. HONOUR. German Government Agent: Dr. BARANDON. Counsel for the Creditor: Mr. F. P. M. SCIIILLER, K. C. and Mr. G. T. SIMONDS. Solicitors for the Creditor: Messrs. COWARD and HAWKSLEY, SONS and CHANCE.

Tribunal arbitral mixte anglo-allemand (ire Section), 24th October 1923, 26th March and 15th April 1924 . Pr6sidence de M. Borel. General Electric Co Ltd v. Deutsche Gasgluehlicht A. G. (Case 1556.)

GERMAN COMPANY SOLE SHAREHOLDERS IN ENGLISH COMPANY. - EN- GLISH COMPANY CONTROLLED BY GERMAN COMPANY. - PAYMENTS MADE TO GERMAN COMPANY OUT OF SURPLUS PROFITS IN ADVANCE OF DIVIDENDS TO BE SUBSEQUENTLY DECLARED. - \o DECLARATION OF DIVIDEND AGAINST WHICH SUCH PAYMENTS COULD BE SET OFF. - PAYMENTS TREATED AS DEBTS RECOVERABLE UNDER ART. 296 OF THE TREATY OF VERSAILLES. The Debtors were the owners of the entire shareholding in and had abso- lute control over a Company incorporated under the laws of Great Britain. At the dictation of the Debtors, certain surplus profits of the British Com- pany were prior to the war advanced to the Debtors under an"arrangement between the two Companies whereby such advances were to be set oft against dividends which it was contemplated would be declared at some future time. No such set off of dividends against the said advances ever in fact took place. The Creditors claimed as assignees of the British Company in respect of the advances so made as aforesaid. Held that notwithstanding-the rela- tionship between the two companies the Debtors had not and could not have in the British Company any rights other than those of shareholders; they could not legally appropriate profits made by the British Company in any other way than by getting these profits duly declared by this Company and by receiving them as shareholders; the said advances must accordinhgly be T. A. m. 1914-1925 13 194 DtCrSIONS considered as loans and were recoverable by the creditors as debts und-- Art. 296 ol the Treaty ol Versailles.

SOCIETE ALLEMANDE SEULE ACTIONNAIRE D'UNE SOCII Ti ANGLAISE. - SOCIETE ANGLAISE CONTR6LEE PAR LA SOCIETA ALLEMANDE. - PAIE- MENT FAIT A LA SOCII Tg ALLEMANDE SUR DES BENEFICES A TITRE D'A- VANCE SUR LES DIVIDENDES A DECLARER ULTERIEUREMENT. - AB- SENCE DE DECLARATION DE DIVIDENDES SUR LESQUELS CES PAIEMENTS POURRAIENT ETRE IMPUTES. - PAIEMENT TRAITE COMME DETTE RE- COUVRABLE EN VERTU DE L'ART. 296 Du TRAITfI DE VERSAILLES. Les d/endeurs ttaient propritairesde la totalit6 des actions d'une sor cihtg ktablie suivant les lois britanniques et dont ils avaient le contr6le absolu. Sur l'injonction des d~biteurs, certains bn fices de la Socitg britannique /urent avancs aux dits ddbiteurs avant la guerre en vertu d'un accord entre les deux Socits ; aux termes de cet accord, ces avances devaient 6tre rdcu- pr~es sur les dividendes dont on envisageait la dclaration dans l'avenir. Cete rcupbrationdes avances ne put jamais avoir lieu sur les dividendes en question. Les requ~rants intentaient une action au norn de la Compagnie britannique sur Ia base des avances ainsi /aites. Jugc par le Tribunal que, nonobstant les relations existant entre les deux Socits, les dtbiteurs n'avaient pas et ne pouvaient pas avoir dans la Soci(tt, britannique des droits autres que des droits d'actionnaires; ils ne pouvaient pas lgalement s'approprierles bn~fices rgalisds par la Socit britannique autrement qu'en obtenant ces bjndfices dilment djclars par cett Soci tM britannique et qu'en les recevant en quality d'actionnaires; en consiquence, iugs par le Tribunal que lesdites avances doivent tre considtres comme des prts et sont recouvrables par les crganciers comme des dettes en vertu de l'art. 296 du Traitg de Versailles.

SOCILTA TEDESCA UNICA AZIONISTA DI UNA SOCIETA. INGLESE. - So- CIETA INGLESE CONTROLLATA DALLA SOCIETA TEDESCA. - PAGA- MENTO FATTO ALLA SOCIETA TEDESCA SOPRA UTILI A TITOLO DI AN- TICIPO SUI DIVIDENDI DA DICHIARARSI IN SEGUITO. - MANCATA DICHIARAZIONE DEI DIVIDENDI SU CUI CALCOLARE TALI PAGAMENTI. - PAGAMENTO CONSIDERATO COME DEBITO RIMBORSABILE IN FORZA DELL'ART. 296 DEL TRATTATO DI VERSAILLES. I convenuti erano proprietari di tutte le azioni di una societ& costituita secondo le leggi inglesi e di cui essi avevano l'assoluto controllo. Per ingiunzione dei debitori certi utili della societd inglese jurono anti- cipati ai debitori stessi prima della guerra in virtu di una convenzione Ira le due societal. A termini di tale convenzione gli anticipi dovevano poi essere calcolati sui dividendi di cui si prospettava la dichiarazione nell'avvenire. Tali anticipi non poterono mai esser ricuperati sui dividendi in ques- tione. Gli attori intentarono a nome della Compagnia inglese azione per gli anticipi latti. I1 Tribunale giudica che nonostante i rapporti esistenti tra le due societat, i debitori non avevano n potevano avere nella soci'etd inglese altri diritti che quelli di azionisti ; essi non potevano legalmente appro- DES TRIBUNAUX ARBITRAUX MIXTESV I) priarsi gli utili realizzati dalla societd inglese, se non ricevendo in qualitd di azionisti gli utili debitamente dichiarati dalla societ stessa ; di conse- guenza it tribunale giudica che gli anticipi si devono considerare come mutui e i creditori it possono ricuperare come debiti in forza dell'arti- colo 296 del trattato di Versailles.

EINE DEUTSCHE GESELLSCHAFT ALLEINIGE AKTIONARIN EINER ENGLIS- CHEN GESELLSCHAFT. - DIE ENGLISCHE GESELLSCHAFT KONTROL- LIERT DIURCH DIE DEUTSCHE GESELLSCHAFT. - GEWINNANSZAHLUNG AN DIE DEUTSCHE GESELLSCHAFT ALS VORSCHUSS AUF DIE SPAETER NAHER ZU BEZEICIINENDEN DIVIDENDEN. - FEHLEN EINER NACH- WEISUNG VON DIVIDENDEN, AUF WELCHE DIESE ZAHLUNGEN VER- RECHNET WERDEN KONNTEN. - ZAHLUNG BEHANDELT ALS EIN- TREIBBARE SCHULD GEMASS ART. 296 V. V. Die Beklagten waren Eigentiimer der gesamten Aktien einer nach den englischen Gesetzen errichteten Gesellscha/t, Uber welche sie die unein- geschrankte Kontrolle hatten. Auf das ausdrzckliche Ersuchen der Schuldner wurden gewisse Gewinne der englischen Gesellscha/t vor dem Kriege den erwadtenten Schuldnern vorgestreckt au/ Grund einer Abmachung der beiden Gesellscha/ten. Nach den Bestimmungen dieser Abmachung sollten diese Vorscbiusse au/ die Dividenden verrechnet werden, deren Nachiveisung man in Zukun/t zu liefern gedachte. Diese Verrechnung der Vorschusse konnte hinsichtlich der Iraglichen Dividenden niemals stattfinden. Die Kl.Tger strengten namens der englischen Gesellscha/t eine Klage an auf Grund der solchermassen geleisteten Vorschiisse. Das Gericht hat entschieden, dass unbeschadet der Beziehungen zwts- chen den beiden Gesellscha/ten die Schuldner in der englischen Gesellschaft keine anderen Rechte hatten und haben konnten als die Rechte von Aktio- nxeren ; sie konnten sich von. Rechts vegen die durch die englische Gesells- cha/t erzielten Gewinne nicht anders zueignen als indem sie die Gewinne erlangten, welche ordnungsgemess durch die englische Gesellschaft ange- geben waren, und z4var indem sie sie als Aktionare empfingen ; infolge- dessen ist vom Gericht entschieden, dass die besagten Vorschaisse als Dar- lehen zu betrachten seien und dass sie von den Gla Eubigern als Schulden in Gem-essheit des Artikels 296 V. V. zura.ckverlangt werden kacnnen.

INTERIM DECISION ET DIRECTIONS.

The Creditors are a British Company having their chief office in London. The Debtors are a Company registered under German law and having their chief office in Berlin. The sum claimed as a debt by the Creditors arose out of the tran- sactions, which will be described later, between the Osram Lamp Works -Ltd. and the Debtors. The Debtors were the holders of all the shares in the Osram Lamp Works Ltd. In July 1915, the 0srare Lamp Works Ltd. acquired the business and assets of the Roberston Electric Lamps 'Ltd., and by a special resolution of the Osram Lamp Works Ltd., passed on August 13th 1915, confirmed on August 30th 1915, and with the approval of DECISIONS the Board of Trade, the name of the Company was changed to Os- ram Robertson Lamp Works Ltd. The capital of the Osram Lamp Works Ltd. was increased by the creation of 150.000 preference shares of £ 1. each, and later the capital of the Osram Roberston Lamp Works Ltd., was increased by the creation of 5.000 ordinary shares of £ -10 each. By two orders of the Chancery Divsion of the High Court of Justice in England, dated June 8th 1915 and July 4th 1916 res- pectively, the shares in the Osram Roberston Lamp Works Ltd., which were the property of the Debtors were vested in the Public Trustee. By an agreement dated September 4th 1916 between the Public Trustee and Hugo Hirst, the Public Trustee exercising the power of sale conferred upon him by the Trading with the Enemy (Amendment) Act 1914, sold these ordinary shares in the Osram Robertson Lamp Works Ltd., to Hugo Hirst, acting on behalf of the Creditors, for the sum of £ 260.000. On November 1-1th 1919 the undertaking and business carried on before that date by the Osram Robertson Lamp Works Ltd., together with all concessions, credits, debts, choses in action and the full benefit of all contracts and agreements, were assigned by the liquidator of the Osram Robertson Lamp Works Ltd. (in liquida- tion) to the Creditor Company. The debt to which these proceedings relate, as already stated, was one between the Osram Lamp Works Ltd., an the Debtors. By virtue of the assignment, of which notice has been given to the Debtors, the claim of the Osram Lamp Works Ltd. was assigned to the Creditors. The claim of the Creditors is for the sterling valueat the pre war rate of exchange of M. 70.801, 5 pfg. and 6.866.083 M. 30 pfg., together with interest accrued thereon up to the date or dates when the Debtors received payment from Koppel et Co. Bankers of Berlin, and interest in respect of the total sum at the rate of 5 00 per annum from such dates up to the date of crediting. The debt claimed is alleged to have arisen in the following circumstances. The Osram Lamp Works Ltd. were earning large profits. A dividend was declared and paid up to the end of the Company's financial year ending in June 1911. As from that date no dividend was declared until the adjourned general meeting of the Osram Lamp Works Ltd., which was held on February 9th 1915 when a dividend of 50 % free of income tax was declared in respect of the financial year ending June 30th 1914. The sum of £ 50.000 represen- ting this dividend was paid to the Public Trustee as Custodian of Enemy Property for account of the Debtors in pursuance of Sec- tion 11 (1) of the Trading with the Enemy Amendment Act 1914. During the intervening years i. e. from 1912 onwards, the Osran Lamp Works Ltd. handed over to the Debtors whatever sums of money were available out of the profits made by them. This was done in accordance with directions given by the Debtors who DES TRIBUNAUX A1BITnAUX MIXTES 197 appear to have wished that the large profits made by the Osram Company should not be declared, and who may have been inspired by the firm of Koppel & Co.who appear to have had a big interest in the Debtor Company. The objects of the Debtors appear Io have been - they wished to postpone the declaration of the profits made by the Osram Company, and at the same time they desired that in the meanwhile the ressources, represented by these profits, should be made available and put at their disposal. Accordingly arrangements were made for the remitting of the surplus profits made by the Osram Co. to the Debtor Company and in consequence a complicated system of faccounts was set up. On February 12th 1912 the following letter was sent by the Osram Lamp Works Ltd. to the Debtors. " Re MONTHLY REMITTANCES. ((At the end of January wwe remitted to you £ 6.000 in advance of any money we owed you, and we anticipate that each, month (with the exception of the present month), we shall be remitting to yoularge sums. (c It is Mr. Kallmann's desire that these amounts should be credited in a separate account to us in your books, so that Mr. Kall- mann can readily ascertain the amounts remitted you in advance of (( Dividend declaration , and the interest which will "accrue thereon ). The Mr. Kallmann referred to was the Manager of the Debtor Company and appears to have been also a Managing Director of the Osram Lamp Works Company. Accordingly the Osram Company paid the remittances into the London Bank of Mexico, the bankers of-the Debtor Company. On April 16th 1912, Koppel & Co wrote to the Osra n I o informing them that by instruction of the Debtors they had opened a special account called the " Deposit Account Osram Lamps Ltd ,.Into this the Debtor Co had paid the remittances whirh they had received in accordance with the Osram Company's letter of February 12th. Messrs. Koppel & Co's letter concluded in these terms : ( We point out that the Deutsche Gasgluhlicht Aktiengesells- chaft (Auergesellschaft) Berlin, only has a right to dispose of the e monies of this account and interest, so that Company informs us)). On Selptember 10th 1912, the Debtors wrote acknowledging a letter from the Osram Company which had informed them of an amount of £ 7.000 to be paid into the Osram Company's account at Koppel & Co, and the Debtors concluded : ( We reply thereto that we prefer to use the said amount on s account of the dividend for June 30th 1912, and have accordingly placed the amount to the credit of a special account (( Osrain e Lamp Works Ltd Dividend Claim. ), To this the Osram Lamp Works Ltd. replied on September 12th. ((We hare in receipt of your letter of the 10th September re £ 7.000, a sent to you on the 2nd inst. We note that you have placed this to s Dividend Account, but we can only credit this in our books to 198 DCISIONS Deposit Account with you, until such times as the Dividend has { been declared, although immediately the dividend is declared ( you will deduct the whole of the dividend from our Deposit Ac- count. In fact the Debtor Company was further debited by the Osram Company in this deposit account for all payments made in excess of what they really owed to the Debtor Company fot goods furnished. As above mentioned the Debtors had found it convenient to deposit in the Bank of Messrs. Koppel & Co part of the sums they thus received from the Osram Co and by a letter dated March; 5th 1913, they instructed the Osram Co to debit them with the interest which Koppel & Co were allowing to the Debtors thereon. By a further letter to the Osram Co dated May 29th 1913 the Debtors directed the Osram Co to turn the deposit account in their books into two accounts to be opened in the name of Messrs. Koppel & Co. On August 4th 1914 there was standing to the credit of the. Osram Lamp Works Ltd., with Koppel & Co, on current account, the sum of M. 70.801.5 pfg., and on deposit account sums amounting to 6.866.083 Mk. 30 pfg. These sums in the hands of Koppel & Co were, as above mentioned, at the disposal of the Debtors. It is common ground that the sums of money which had been paid into the account at Koppel & Co were not dividends. At the hearing the representative of the German Clearing Office stated that they had been so paid in, in order to secure the profits to the Debtors without the necessity for declaring dividends. On August 6th 1920 the Creditors notified to the British Clearing Office a debt against Koppel & Co, for the amounts of the balances standing to the credit of the accounts. The debt was contested by Koppel & Co on the following grounds: ((The Deutsche Gasgluhlicht Aktiengesellschaft (Auer Co) in (( Berlin (D. G. A.) were the sole shareholders of the-creditors. In ((the financial years 1911-12 and 1912-13, the creditors made large <(profits, which for business reasons were not paid out, but carried ((forward. These profits were deposited with us by the creditors, ( as a bank credit. However, to give expression to the fact that financially speaking it was not the money of the creditors but (( money of the D. G. A. we were informed by, the creditors when depositing the money with us, that the D. G. A. was entitled to dispose of same, and the latter in fact, always disposed of this (Cmoney as if it was their own. -The D. G. A. today still holds the ( view that it is in fact their money, and they would hold us liable for damages if we were to pay out to the creditors the amount in (( dispute. In view of this fact, and particulary in view oJf the cir- ( cumstances again pointed out that the creditors waived the right to dispose of the money, we must dispute the claim). It subsequently appeared however that on December 27th 1918 Messrs. Koppel & Co, had, in accordance with instructions from the Delutors, transferred the balances in the current and deposit DES TRIBUNAUX ARBITRAUX MIXTES accounts referred to, to the credit of the current account of the Debtors at the Bank. On learning that the Debtors had been paid by Koppel & Co the Creditors notified a claim against the present Debtors. The debt was contested by the Debtors on the following grounds : 1. That at the outbreak of the war the Osram Co was a German Company and that therefore the claim was one of a German sub- sidiary Company against a German parent Company. 2. That the disposal of the monies was exclusively the right of the Debtors in accordance with arrangements made between the Companies. At the hearing it was contended by the German GovernmentAgent that the beneficial ownership in the money deposited was through out in the Debtor Company; that nothing which had happened could alter this. The German Government Agent has further contended that, as it appeared from the dealings between the parties, the sums in the hands of Koppel & Ca, were considered by both sides as sums which were not to be ever repaid to the Creditors, and that therefore such sums, even if the Creditors were to be considered as having preserved an interest therein, they were not sums which could represent a clearing debt under Article 296 of the Peace Treaty. Finally that if there were a claim this claim would be against Koppel & Co, and not the Debtors. The Tribunal cannot uphold these contentions. Though they had the control of the Osram Lamp Works Ltd. the Debtors had not and could not have in that company any other rights than that of shareholders. They could not legally appropriate profits made by the Osram Lamp Works Ltd. in any other way than by getting these profits duly declared by the Company and by receiving them as shareholders. The Debtors were fully aware of this position. Since they desired that declaration of profits and dividends should be postponed in London , they could only receive the money available there as an advance for which they remained accountable. They accepted this position and the accounts show that they considered themselves as owing to the Osram Lamp Works Ltd. interest -on the sums put at their disposal. Still more clear was the ground taken by the Osram Lamp Works Ltd. which, in accordance with paragraph 85 of the Article of Arsociation of the said Company, could not and did not consider the sums paid over to the Debtors otherwise than as sums advanced on deposit account. Under these circumstances it appears to the Tribunal that for these sums there was as regards the Osram Lamp Works Ltd. a debt of the Deutsche Gasgluhficht Aktiengesellschaft, who remained throughout the real debtors, though at a certain time they had found'it convenient to put the said monies into the hands of Koppel & Co subject to their ,own exclusive right of disposal in that bank. The Tribunal have carefully considered a question which was not DCciSIONS insisted upon at the hearing, but which deserves mention. In the letter of 12th September 1912, the Osram Lamp Works Ltd. state that they considered the monies paid over as advances on deposit account as long as the company did not declare dividends.) Immedia- tely the dividend is declared))- they write to the Debtors - ((you will deduct the whole of the dividends from our deposit account )5. The question is whether the parties thereby contemplated an auto- matic effect of the declaration of dividends which whould have automatically converted into property of the German company the amount of the dividends spon their shares, as soon as such dividends should have been declared in London. In such a case it might have been contended that up to the amount of dividends declared in London before the compulsory sale of the shares belonging to the Debtors, the Debtors have automatically become owners of an equal sum in the funds which had been advanced to them and which were in Germany at their disposal. But, after ca- reful consideration, the Tribunal find that this cannot be accepted. The above mentioned letter does not seem anything beyond what is declared therein, and it does not appear as possible to extend this meaning by way of implication. The Tribunal are of opinion that what the Osram Lamp Works Ltd. contemplated then, was the fact that when once dividends were duly declared, there could be and would be a natural setting off of the claim of the Debtors for the said dividends, and their debt for the monies advanced to them on deposit account. This would eventuate in a deduction, which as the Osram Lamp Works Ltd. contemplated, the Debtors would make from their own debt to the amount of the dividends to be paid to them. Now it is common ground that at the moment when dividends were declared by the general meeting in February 1915, and later on, up to the sale of the shares belonging to the Debtors, such dividends were immediately subject to the provisions of Trading with the Enemy (Amendment) Act 1914, and that they were legally paid by the British Company into the hands of the Public Trustee in his capacity of Custodian of enemy property, the result being that the company was duly discharged towards the respective shareholders with regard to the dividends which are to be considered as having been at the time duly paid. The consequence is that at the moment when the Debtors instructed Koppel & to to repay to them the amount of the two accounts opened in their bank in the name of Osram Lamp Works Ltd, the Debtors could no longer as against their debt effect a set off of the claim which they would have had for dividends declared before their shares were sold. In the accounts before the Tribunal, they are unable properly to distinguish between principal and interest. The Tribunal therefore propose to make an interim award. They will give ditections to enable the case to be finally disposed of. DES TRIBUNAUX ARBITRAUX MIXTES

In the opinion of the Tribunal the Creditors will be entitled to, receive : (1) As principal,, the amount of the remittances by the Creditors at issue ; (2) As interest; (a) up to August 4th 191-1 the amount of interest credited by Koppel and Co , (including compound interest, if credited by Koppel & Co); (b) between August 4th 1914 and December 31st 1918, simple interest on the total of the remittances at issue, at the rate per annum credited by Koppel & C° ; (c) from December 31st 1918, simple interest on the total of the remittances at issue at the Treaty rate of 5 % per annum. The Tribunal will direct the crediting of the sum of 6.770.810 M. 5 pfg. This is the total of the purported principal sums on August 4th 1914 in the two accounts according to the books of the Deb- tors. It may be, however, that both these balances include interest. The Tribunal therefore decide that there is due as an instalment from the Debtors to the Creditors the sterling equivalent at the pre war rate of exchange of six million, seven hundred and seventy thousand, eight hundred and one Marks five pfg. (6.770.801 M. 5 pfg.) and that this sum is to be credited forthwith by the Germanl Clearing Office to the British Clearing Office, and Ihe Tribunal re- serve to their final decision both the question of interest and of costs, and the Tribunal direct the Creditors to furnish, in 7 copies, not later than two months from the date thereof, an account ad- justed in accordance with the principles set out in this decision. Dated 4th April 1924.

Signed: EUG*NE BOREL, ROLAND E. LOMAX VAUGHAN WIVLLIAMS, Dr. A. N. ZACHARIAS. British Governement Agent: Mr. B. HONOUR. German Government Agent: Dr. BARANDON. Counsel for the Creditors : The Rt. Hon. Sir JOHN SIMON, K. C., Mr. C. J. CONWAY and Mr. AUGUST COHN. Solicitor for the Creditors : Messrs. WILD, COLLINS and CROSSE.

Tribunal arbitral mixte anglo-allemand (I re Section), 2nd April and 2nd May 1924. Prdsidence de M. Borel. E. A. Rehder v. Landgesellschaft ,, Wannsee (Case 1543.)

ART. 296 OF THE TREATY OF VERSAILLES. - TEST FOR RESIDENCE. - TEST FOR NATIONALITY. - PRE WAR DEBTS. - DEBTS PkYABLE DU- RING THE WAR. - CLAIM BY BRITISH EXECUTOR UNDER ART. 296 (2). - DECEASED GERMAN TESTATOR. -DEATH IN AMERICA IN MARCH 1917. - ART. 296 (2) INAPPLICABLE. For the purposes of Art. 296 of the Treaty of Versailles, the 10th Ja-