German Delegation

for External Debts.

243-18 Del. 39-2177/52.

To the

Chairman of the

Tripartite Commission on German Debts,

29 Chesham Place,

London, S.W. 1.

London, S.W. 1,

21st November, 1952.

Mr. Chairman,

The negotiations provided for in Article V, paragraph 3, of Appendix 4 and in Article 6 of Appendix 6 to the Final Report of the London Debt Conference and referred to in the joint letter from Sir Otto Niemeyer and Herr Hermann J. Abs to the Tripartite Commission on German Debts, the purpose of which was to define the criteria constituting the specific foreign character of Goldmark liabilities and of Reichsmark liabilities with a gold clause or a gold option, took place in London from 21st October to 21st November, 1952, between the German Delegation for External Debts and a delegation of British, American, Swiss and Netherlands creditor representatives.

We are glad to be able to inform you that these negotiations resulted on 21st November, 1952, in an understanding which was recorded in an Agreement signed to-day. The Chairman of the two Delegations, in signing this Agreement, exchanged four letters dated 21st November, 1952, designed to clarify various questions in connexion with the Agreement, as follows:

1. Exchange of letters concerning the transfer of amounts due for payment on Goldmark claims with a specific foreign character.

2. Exchange of letters concerning the interpretation of the provision on a “trusteeship contract”.

3. Exchange of letters concerning a question of interpretation in connexion with the 40th Executory Ordinance to the Currency Conversion Law.

4. Exchange of letters concerning a reservation by the creditors with respect to the conversion of claims against secondary debtors and the possibility of the withdrawal of this reservation.

We have the honour to submit to you one copy of the text of the Agreement in the German and English languages and of the four exchanges of letters, also in the German and English languages, with the request that you should approve them as soon as possible. We should be grateful if the Agreement and also the four exchanges of letters could be appended as sub-Annexes to Annexes I, II and IV of the Debt Agreement.

Please accept, Mr. Chairman, the expression of our highest esteem.

(sd) HERMANN J. ABS.

Head of the German Delegation

for External Debts.

(sd) N. LEGGETT.

Chairman of Negotiating

Committee B at the

Conference on German

External Debts.

Note:

1. It was agreed by the signatories to the above letter that these documents should become Annex VII to the Agreement on German External Debts and not sub-Annexes to Annexes I, II and IV of that Agreement, as requested in the final paragraph above.

2. The exchange of letters referred to in the final paragraph above have now been summarised and are attached as the Sub-Annex to Annex VII.

Agreement on Goldmark Liabilities and Reichsmark Liabilities with a Gold Clause, having a specific foreign character

London, 21st November, 1952.

By virtue of the reservations made in Article V, paragraph 3, of Appendix 4, and in Article 6 of Appendix 6 of the Final Report of the London Debt Conference, and of the joint letter adressed by the Head of the German Delegation, Herr Hermann J. Abs, and Sir Otto Niemeyer to the Tripartite Commission on German Debts, dated 19th November, 1952, on the subject of Goldmark loans of German municipalities, it is agreed as follows:

I. In respect of the claims and rights specified below it is recognised that they have a specific foreign character within the meaning of the above-mentioned provisions.

1. Claims expressed in Goldmarks or in Reichsmarks with a gold clause or a gold option arising out of bonds made out by German debtors and issued or placed abroad, if

(a) they constitue a loan, the conditions of which show that is was intended for investment, sale or negotiation in foreign countries only. Where the interest on any bond has been exempt from taxation of capital yield, the bond shall be considered as forming part of a loan which was intended for investment sale or negotiation in foreign countries only;

(b) they are payable in foreign countries only under the terms of the bonds.

Any part of a loan which differs from the other parts of the loan in respect of special designation or special treatment in Germany as regards taxation or quotation shall likewise be considered as a loan within the meaning of (a) or (b) above, except where the bonds belonging to such part of a loan were officially quoted on a German Stock Exchange before 1st September, 1939.

2. Claims expressed in Goldmarks or in Reichmarks with a gold clause or a gold option, arising from other loans or advances resulting from financial transactions and raised abroad by German debtors, including claims of this kind secured by mortgage charges; if

(a) is was expressly agreed under the original written debt arrangements that the place of payment or the competent court is situated abroad or foreign law is applicable; and if

(b) whenever the debt was incurred after 31st July, 1931, the equivalent was made available in foreign currency, free Reichsmarks or gold, or originates in a blocked Reichsmark account to which repayments on a Goldmark or foreign currency loan from a foreign country granted before 31st July, 1931, had been credited provided that the foreign creditor has again loaned out the amounts withdrawn from the blocked Reichsmark account, with the consent of the competent German Foreign Exchange Control Authorities, to some other German debtor, stipulating a gold clause or gold option Clause for such renewed loan.

A loan or advance shall likewise be deemed to have been raised in a foreign country if the debtor was aware, when the indebtedness was incurred, that the German creditor, by virtue of a trusteeship contract, was merely the trustee of a foreign lender. A loan or advance raised from the foreign trustee of a German lender shall not be deemed to have been raised in a foreign country.

II. The claims and rights mentioned under I do not include claims of foreign credit institutions and insurance enterprises which under German Law are required to prepare a conversion sheet, provided the claims have to figure as assets on the conversion sheet.

(1) The text of this paragraph was agreed between the parties concerned on 12th February, 1953.

III In the case of real estate liens (mortgages, land charges and terminable annuities), which on 20th June, 1948, had been entered for the purpose of securing the personal claims of a foreign creditor specified in such agreement, the original conversion shall, subject to the provisions set out hereinafter, continue to apply as carried out in accordance with the Conversion Law, including the 40th Executory Ordinance issued thereto. In those cases where any such real estate lien has, in accordance, with these prescriptions, been converted at a rate other than 1:1, the security in favour of the creditor in the form of real estate lien of the same nominal amount as the real estate lien in his favour on the 20th June, 1948, less any subsequent reductions thereof, will be re-established in equal rank in so far as this is possible without interference with any real property rights which a third party may have acquired during the period between the 21st June, 1948, and 15th July, 1952. To the extent that third parties may have acquired such rights during the said period, the following rules shall apply, it being agreed that they will in detail be established by German legislation:

(a) Where the real property has changed ownership, the security in favour of the creditor, in the form of a real estate lien, which is lacking will be re-established only to the extent that a public charge in respect of the levy on mortgage profits (Hypothekengewinnabgabe) is or will be reduced.