Expropriation
CASES
CASE CONCERNING
THE FACTORY AT CHORZOW
• On March 5th, 1915, a contract was concluded
between the Chancellor of the German
Empire, on behalf of the Reich, and the
Bayerische, according to which that Company
undertook "to establish for the Reich and
forthwith to begin the construction of",
amongst other things, a nitrate factory at
Chorzow in Upper Silesia.
• the Company undertook to manage the
factory until March 1st, 1941, making use of
all patents, licences, experience gained,
innovations and improvements, as also of all
supply and delivery contracts of which it had
the benefit.
• a special section of the Company was to be
formed which was, to a certain extent, to be
subject to the supervision of the Reich, which
had the right to a share of the profits resulting
from the working of the factory during each
financial year.
• On December 24th, 1919, a series of legal
instruments were signed and legalized at Berlin
with a view to the formation of a new Company,
the Oberschlesische Stickstoffwerke A.-G., with a
share capital of 250,000 marks, increased
subsequently to IIO millions of marks, and the
sale by the Reich to this Company of the factory
at Chorzow, that is to say, the whole of the land,
buildings and installations belonging thereto,
with alI accessories, reserves, raw material,
equipment and stocks.
• management and working of the factory were to
remain in the hands of the Bayerische, which, for
this purpose, was to utilize its patents, licences,
experience gained and contracts.
• The Oberschlesische was duly , entered, on
January zgth, 1920, at the Amtsgericht of
Konigshütte, in the Chorzow land register, as
owner of the landed property constituting the
nitrate factory at Chorzow.
• In the contract of December, 1919, between the
Reich and the newly created Oberschlesische, a
second limited liability Company, founded the
same day and known as the Stickstol'f Treuhand
Gesellschaft m. b. H.
• Under the contract, the whole of the factory for
the production of nitrated lime, with the
accessory installations, situated at Chorzow, was
ceded by the Reich to the Oberschlesische
• the Treuhand taking over, in the place of the
Oberschlesische, as sole and independent debtor,
al1 the obligations imposed by the contract upon
the latter in regard to the Reich, and obtaining in
consideration thereof, without payment, shares
of the Oberschlesische
• Later, the Treuhand also acquired the rest of the
shares of the Oberschlesische, thus becoming the
sole shareholder of that Company
• On May 15th, 1922, was signed at Geneva
between Germany and Poland the Convention
conceming Upper Silesia.
• In July 1922, the Polish Court the right of
ownership in the landed property in question
was to be registered in the name of the Polish
Treasury.
• Oberschlesische had brought an action before the German-
Polish Mixed Arbitral Tribunal at Paris, claiming, amongst
other things, that the Polish Government should be
ordered to restore the factory.
• The fact of the dispossession of the Oberschlesische is in no
way disputed. But notwithstanding this, in the contention
of the Polish Governrnent, that Company has suffered no
damage : it argues, first, that the right of ownership
claimed by the Oberschlesische was null and void or subject
to annulment, and, secondly, that the contract of
December zqth, 1919, attributed to the Reich rights and
benefits so considerable that any possible damage would
not materially affect the Company.
• The action of Poland which the Court has judged
to be contrary to the Geneva Convention is not
an expropriation to render which lawful only the
payment of fair compensation would have been
wanting.
• it is a seizure of property, rights and interests
which could not be expropriated even against
compensation, Save under the exceptional
conditions fixed by Article 7 of the said
Convention.
• It follows that the compensation due to the
German Government is not necessarily limited to
the value of the undertaking at the moment of
dispossession, plus interest to the day of
payment.
• This limitation would only be admissible if the
Polish Government had had the right to
expropriate, and if its wrongful act consisted
merely in not having paid to the two Companies
the just price of what was expropriated
• such a limitation might result in placing
Germany and the interests protected by the
Geneva Convention, on behalf of which
'interests the German Government is acting,
in a situation more unfavourable than that in
which Germany and these interests would
have been if Poland had respected the said
Convention
• Such a consequence would not only be unjust,
but also and above al1 incompatible with the aim
of Article 6 and following articles of the
Convention- that is to Say, the prohibition, in
principle, of the liquidation of the property, rights
and interests of German nationals and of
companies controlled by German nationals in
Upper Silesia-since it would be tantamount to
rendering lawful liquidation and unlawful
dispossession indistinguishable in so far as their
financial results are concerned.
• The essential principle contained in the actual
notion of an illegal act-a principle which
seems to be established by international
practice and in particular by the decisions of
arbitral tribunals-is that reparation must, as
far as possible, wipe out al1 the consequences
of the illegal act and reestablish the situation
which would, in al1 probability, have existed if
that act had not been committed.
• Restitution in kind, or, if this is not possible,
payment of a sum corresponding to the value
which a restitution in kind would bear ; the
award, if need be, of damages for loss
sustained which would not be covered by
restitution in kind or payment in place of it-
such are the principles which should serve to
determine the amount of compensation due
for an act contrary to international law.
• Geneva Convention-then involves the obligation
to restore the undertaking and, if this be not
possible, to pay its value at the time of the
indemnification, which value is designed to take
the place of restitution which has become
impossible.
• To this obligation, in virtue of the general
principles of international law, must be added
that of compensating loss sustained as the result
of the seizure.
Wena Hotels Limited v. Arab Republic of
Egypt
• On June 11, 1975, the United Kingdom and the Arab
Republic of Egypt entered into an Agreement for the
Promotion and Protection ofInvestments ("IPPA,,).
• Wena is a British company for purposes of the IPP A
• On August 8,1989, Wena and the Egyptian Hotels
Company ("EHC"), "a company of the Egyptian Public
Sector affiliated to the General Public Sector
Authority for Tourism"2D entered into a 21 year, 6
month "Lease and Development Agreement" for the
Luxor Hotel in Luxor, Egypt.
• Pursuant to the agreement, Wena was to
"operate and manage the 'Hotel' exclusively
for [its] account through the original or
extended period of the 'Lease,' to develop and
raise the operating efficiency and standard of
the 'Hotel' to an upgraded four star hotel
according to the specification of the Egyptian
Ministry of Tourism or upgrade it to a five star
hotel if [Wena] so elects
• The agreement provided that EHC would not
interfere "in the management and
or/operation ofthe 'Hotel' or interfere with
the enjoyment of the lease" by Wena.
• The agreement provided that EHC would not
interfere "in the management and
or/operation ofthe 'Hotel' or interfere with
the enjoyment of the lease" by Wena
• Wena claims that it "found the condition of
the Hotels to be far below that stipulated in
the lease [and] withheld part of the rent, as
the lease permitted.
• Egypt claims that Wen a "failed to pay rent
due to EHC and EHC in tum liquidated the
performance security posted by Claimant.
• In an award dated November 14, 1990, the ad
hoc arbitral tribunal ordered EHC to make
repairs to the Luxor Hotel and ordered Wena
to pay its outstanding rental obligations
• Wena subsequently brought an action in the
South Cairo Court to have the arbitration set
aside.
• Minister Sultan convened a meeting in his
offices to "discuss the differences between
the Egyptian Hotels Company and Wena
• On April 1, 1991, at approximately 6:15 p.m.,
Mr. Simon Webster and Ms. Angela JeIcic,
Wena's foreign managers, left the Nile Hotel
to have dinner at the nearby Nile Hilton
Hotel.64 Short thereafter, several buses
owned by EHC arrived at the Nile Hotel
• According to a statement made that evening
to the Kasr EI-Nile Police by Mr. Muhammad
Abdul Hameed Wakid, an attorney for Wena
Hotels, "about one hundred and fifty persons,
some of whom were carrying sticks and
cudgels, assaulted the hotel against us
immediately after Ramadan breakfast.
• According to Ms. JeIcic and Mr. Webster, Wen
a staff went to both the nearby Kasr EI-Nile
police station and the Tourist police station
seeking assistance with the exception of one,
lone policeman who arrived two to three
hours later- both police forces refused to
assist Wena there is evidence that officers
from Kasr EI-Nile police did begin an
investigation at around 11 :00 p.m.
• Minister Sultan testified that he first learned
of.the seizures by reading the newspaper the
next morning.
• However, Minister Sultan also admitted that
he did not take any action to return Wena to
the hotels, to punish EHC or its officials, or to
withdraw the hotels licenses so that EHC could
not operate the hotels
• From April 1, 1991 through February 25,1992,
the Nile Hotel remained in the control ofEHC.
The Luxor Hotel remained in EHC's control
until April 21, 1992.
