German Foundation
"Remeberence, Responsibility
and  Future"



























Ukrainian  delegation
with their counsel in Berlin


























Myroslaw Smorodsky signing
the settlement  documents
on July 17, 2000 at the German
Foreign Minestry in Berlin.







































Myroslaw Smorodsky
signing the Austrian
Settlement  Documents
on October 24, 2000
in Vienna, Austria






























The Ukrainian Delegation
at the Vienna signing on
Oct. 24th , 2000
EXECUTIVE SUMMARY

NAZI ERA SLAVE & FORCED LABOR SETTLEMENT AGREEMENTS

The objective of this memorandum is to briefly present an overview of the background and the salient events that culminated in the signing of to the historic settlement agreements which  provided some modicum of compensation to over 1.5 million living former slave and forced laborers for their suffering during the horrors of WWII.

Background

The German settlement negotiations were initiated in February of 1999 by German industry as a result of the numerous class action lawsuits that were being filed in the United States seeking compensation for forced/slave laborers as well as for other Holocaust related claims for looted assets, stolen bank accounts and insurance policies, and other atrocities. These suits named specific corporations such as Daimler-Chrysler, Bayer, and BMW among others, charging that these companies conspired and willingly participated with the Nazi regime to violate the laws of nations by enslaving and forcibly deporting millions of persons from Eastern Europe to work for the Reich and that these companies profited from their criminal actions. In the majority of these suits, the German government was not a named party in these litigations since all governments are usually immune from prosecution in this country.

The German companies vigorously denied any legal responsibility for the war atrocities that occurred over 55 years ago.  Among the numerous arguments made to support their claim of non-culpability, the German companies specifically pointed to the fact that American courts should not have jurisdiction over these issues since nearly all of the claimants are located in Europe and the events complained of occurred on that continent. The companies further argued that the war crimes were committed by the Nazi regime and not by the companies themselves.German industry further stated that the German government has adequately compensated and made reparations in the past.(In the early fall of 2000, two US Courts agreed with these legal arguments and dismissed two forced labor cases on these grounds.)

On the other hand, lawyers for the claimants argued that the courts of the United States were an appropriate forum since the German companies or their subsidiaries have a presence here and foreign citizens are permitted access to the court system under our law.(Class actions are not permitted in any of the jurisdictions of Europe; only individual lawsuits can be filed.)The claimants further argued that even though more than 55 years have passed since these events occurred, their claims are not time barred for various legal and historical reasons and because of the magnitude of the atrocities.According to the filed class action complaints, these corporations have grown to the importance and economic stature that they have today in part because they benefited and profiteered from forced/slave labor for which they, as individual business entities, never compensated the victims.They further argued that the funds paid by the government of Germany in the past were not compensation but merely a humanitarian gesture that does not amount to the fair value of the services rendered by them while forcibly detained in Germany under inhumane circumstances.

Despite their legal position, the German corporations stated that they recognized their moral obligations to compensate in part for the wrongs committed by the Nazi regime.On February 16, 1999, German industry announced that they would undertake a voluntary initiative to settle all potential present and future claims that any party could have against the German industry as a result of any alleged actions committed by the German companies in World War II.In essence, German industry demanded legal peace so that no further legal actions would be instituted in the future against them anywhere in the world.However, German industry clearly indicated that their moral obligations did not encompass the forced laborers who were employed by publicly owned entities such as the railroads or who were forcibly employed in the agricultural sector.In order to obtain an all-inclusive resolution, the German industry initiative envisioned the participation of the German government, which would contribute funds to compensate these non-industrial workers.Such action required German parliamentary funding and approval.

As a result of this German Industry Initiative, a progression of settlement conferences occurred in Germany and in Washington DC between May of 1999 and July 2000.All of these conferences were hosted and moderated by high-level representatives of the German and United States governments.The German representative was Otto Graf Lamsdorff; the United States representative during all of the talks was Deputy Secretary of The Treasury, Stuart Eizenstat.Other participants in these conferences were representatives of German industry, the attorneys for the claimants in the various class actions, high-level representatives of Belarus, the Czech Republic, Israel, Poland, Russia, Ukraine, and the Jewish Claims Conference.

Negotiation Difficulties

The scope of the issues in these negotiations was extremely broad and complex.They ranged from the legal questions of how to obtain legal peace or “legal closure” for German industry to issues of determining the compensation amounts which would be within the economic capabilities of German industry and within the borders of German political will.The compensation levels, however, needed to be of sufficient magnitude to be meaningful to the surviving victims of German forced/slave labor.Within this spectrum of issues were questions relating to the definition and categories of forced/slave labor, what constituted “deportation”, the determination of the number of present-day survivors, agreeing on the mechanisms for distribution of the funds, etc.Since most of the victims of forced/slave labor are dead and since their heirs are so numerous, meaningful compensation to each heir was not feasible.The German industry initiative included plans to develop a “Future Fund” which would give some meaningful assistance to the forced laborers’ heirs through various programs and also establish permanently funded programs that would have as their goal the prevention of a repetition of the atrocities of World War II.However, a balance had to be found between the amount of money to be dedicated to the “Future Fund” and to actual compensation of victims.

The negotiations were further complicated by the fact that these talks involved various industry and public sector parties, government representatives and lawyers for the various claimant groups.This multi party aspect of the talks required multifaceted discussions and compromise.Early on in the negotiations, it became evident that the German approach was to establish one general sum for all claimants, and then to have the various groups of claimants argue among themselves over the settlement amount.Since many of the Plaintiff’s counsel represented different victim groups that would lay claim to the same sums of money, internal conflicts of interest would be inevitable.This “divide and conquer” approach was the major theme of the German negotiators throughout the negotiations.

It became evident that, if the slave/forced labor claims were to be successfully negotiated, at a minimum the CEE representatives and their attorneys, who represented over 90% of the previously uncompensated victims, should present a united front.Needless to say, this was a daunting assignment since the CEE countries had among themselves various differences based on historic and geopolitical realities as well as different constituency interests that of necessity could generate strong disagreements negating any attempts at unity of position at the negotiation table.Fortunately, the CEE countries were able to maintain a unified position throughout these negotiations as a result of which a substantial portion of the settlement was earmarked for the benefit of victims in their countries.The attorneys for the forced and slave labor victims who were deported from the CEE were Michael Hausfeld, Esq., Cohen, Milstein, Hausfeld & Toll, Washington, DC; Martin Mendelsohn, Esq., Verner, Liipfert, Bernhard, McPherson & Hand, Washington, DC; Myroslaw Smorodsky, Esq., Smorodsky & Stawnychy, Rutherford, NJ.

The Settlement Agreements

Since the settlement discussions were protracted for such a long time, unanimity had to be achieved in stages.The first accord was reached on December 17, 1999 in the waning hours of the 20th century when the overall cap of 10 billion DM was agreed upon.The second stage was reached on March 23, 2000 when agreement on the allocation of the 10 billion DM among all the categories of victims was achieved.

The allocation that was agreed to is as follows:
  • Forced & Slave Labor, 8.1 BILLION Deutsche marks augmented by earned interest for a total of 8.250 BILLION Deutsche marks.
  • Other Wrongs, 50,000,000 Deutsche marks.
  • Banking claims and other property claims, 200,000,000 Deutsche marks.
  • Banking humanitarian fund, 300,000,000 Deutsche marks for humanitarian projects.
  • Direct Insurance claims, 150,000,000 Deutsche marks of which 50 million is from earned interest.
  • Insurance humanitarian, 350,000,000 Deutsche marks for humanitarian projects.
  • Reserve for insurance claims, 100,000,000 Deutsche marks.
  • Future Fund, 700,000,000 Deutsche marks
  • Administration costs, 200,000,000 Deutsche marks.

Based upon information received from the victim representative groups and the Central & East European delegations, it is estimated that there are approximately 242,000 living slave laborers.In addition, there are approximately 82,000 slaves who were incarcerated in camps other than concentration camps.Known statistics indicate that approximately 575,000 individuals who worked as forced laborers for German industry are still alive.In addition, 666,000 farm laborers who were compelled to work on German farms are also survivors.Slave laborers will receive up to 15,000 Deutsche marks each.Forced laborers in industrial establishments and the other camps will receive up to 5,000 Deutsche marks each and farm workers will receive up to 1,000 Deutsche marks each.Victims who reside in the Central and East European countries will receive the proceeds of the settlement from existing Reconciliation Foundations that presently exist in each country.Jewish victims that reside in the west will be paid through the Jewish Material Claims Conference.

The distribution between the various representative groups is as follows:
Belarus
0.694 BL DM
The Czech Republic
0.423 BL DM
Poland
1.812 BL DM
Russia
0.835 BL DM
Ukraine
1.724 BL DM
The Jewish Claims Conference
1.812 BL DM

After the war, many forced laborers, especially from Poland and Ukraine, remained in the West and emigrated to the United States, Canada and other parts of the free world settling in major metropolitan areas such as New York and New Jersey.Presently, the number of such survivors is not known.As such, a reserve of 800,000,000 Deutsche marks has been set-aside for these forced and slave labor victims.

From March 23, 2000 to July, 2000 the negotiating parties addressed the third stage issues; the required legal structure needed as a basis of implementing the settlement.This accord was finally reached on July 17th after intensive last minute negotiations via international teleconferences and sometimes heated face-to-face discussions in Washington and Berlin. The July 17th Agreement consists of three categories of documents. The first is the German legislation that was a prerequisite and had to be adopted by the German Parliament to fund the settlement and authorize the creation of the foundation that would oversee the implementation of the compensation program to victims.The German Parliament adopted the law on July 7, 2000.Second is the Executive Agreement between Germany and the United States of America outlining the limited steps and terms under which the US government would intervene in law suits to have them dismissed so as to achieve legal closure for German Industry.The third document was the Joint Statement outlining the terms of the settlement was signed by each government involved in the negotiations, by German Industry and by the class action lawyers and victim representative groups who participated in the settlement discussions.

Austrian Negotiations & Settlement Agreement

On October 24, 2000, in an official signing ceremony at the Federal Chancellery of Austria, the governments of the United States, Austria, the CEE (Belarus, the Czech Republic, Poland, Hungary, and Ukraine) as well as the lawyer representatives of the slave/forced labor victims signed a series of agreements whereby the slave/forced laborers who were forcibly deported to the territory of Austria by the Nazis during World War II would receive compensation for there suffering.Unlike the German negotiations, which had been protracted for over 1-½ years, the Austrian discussions were initiated in April of 2000 by Austria on a bilateral basis with each country individually. Preliminary agreement was reached in May of 2000.The payment amounts are as follows:
 

In Austrian Shillings
In German Marks
Slave laborers
105,000 
15,000
Forced Industrial Laborers
35,000
5,000
Forced Agricultural Laborers
20,000
2,857
Women who gave birth to children in labor camps
5,000
715

Children under age 12 can claim the same amount that their parents were eligible for.

It is estimated that approximately 220,000 forced laborers who were deported into Austria of are still alive and approximately 43,000 of the victims reside in Ukraine.Unlike the German settlement, the Austrian negotiations did not require that all claims be immediately settled as part of one settlement package, rather, the agreements signed in October 2000 contemplated the completion of the slave/forced labor component which would immediately be followed by negotiations on the complex property claims with the aim of completing these property negotiations by year’s end.In addition, the government of Austria determined that the Reconciliation Foundations that presently exist in each country would make the distribution of compensation to residents within the five CEE countries.Victims who reside outside of these countries would be paid through an Austrian Foundation to be established by the Austrian government.

The property portion of the Austrian negotiations were concluded on January 17, 2001 in Washington DC.

Status Of The Settlement Agreements

All procedural steps that were required of the Plaintiff lawyers and the US Government have been taken by the end of 2000. From the legal perspective, all 55 lawsuits have been consolidated and the Court for the Federal District of New Jersey has dismissed all of the cases as per the German agreement. However, a few cases were still pending judicial dismissal. These cases related to certain banking claims against German and Austrian banks for their activities during the Holocaust.The judge in those cases refused to dismiss even though all plaintiff counsel and the US government has urged that the court do so.This delay made the prerequisite of ‘legal closure” impossible. For a time, there was a possibility that the entire settlement could potentially unravel putting into jeopardy any compensation ever reaching over 1 million victims. Finally, at the urging of the CEE, dismissal of these last cases was achieved on May 10, 2001. German industry and government provided the 10 billion DM funding of the compensation program in late May of 2001. The German parliament had approved the creation of the German Foundation, which would oversee the entire compensation program.

A worldwide notification and registration reporting system was implemented and information on victims was  gathered. Payments to residents of Central and Eastern Europe are being processed through existing Reconciliation Foundations in those countries. Jewish claimants are being processed through the Jewish Claims Conference. Non-Jewish victims who live outside the CEE are processed by the International Office on Migration. The Austrian government compensated Austrian slave and forced laborers who reside outside of the CEE directly.

Presently, the claims period has long since ended for both the Austrian and  German Settlements.  The Austrian Reconciliation Fund has completed its  payments to victims  but it is anticipated that the German  Reconciliation Fund  payments will not be fully completed until mid 2006.