Chorzow Factory Case Germany v. Poland September 13, 1928 (Indemnity)

(27) It is a principle of international law that the reparation of a wrong may consist in an indemnity corresponding to the damage which the nationals of the injured State have suffered as a result of the act which is contrary to international law (28) The damage suffered by an individual is never therefore identical in kind with that which will be suffered by a State; it can only afford a convenient scale for the calculation of the reparation due to the State (28)International law does not prevent one State from granting to another the right to have recourse to international arbitral tribunals in order to obtain the direct award to nationals of the latter State of compensation for damage suffered by them as a result of infractions of international law by the first State (29) Reparation … three fundamental questions arise: (1) the existence of the obligation to make reparation (2) the existence of the damage which must serve as a basis for the calculation of the amount of the indemnity (3) the extent of the damage As regards the first point, the Court observes that it is a principle of international law, and even a general conception of law, that any breach of an engagement involves an obligation to make reparation… reparation is the indispensable complement of a failure to apply a convention, and there is no necessity for this to be stated in the convention itself (31) in estimating the damage caused by an unlawful act, only the value of property, rights and interest which have been affected and the owner of which is the person on whose behalf compensation is claimed, or the damage done to whom is to serve as a means of gauging the reparation claimed, must be taken into account. This principle, which is accepted in the jurisprudence of arbitral tribunals, has the effect, on the one hand, of excluding from the damage to be estimated, injury resulting for third parties form the unlawful act and, on the other hand, or not excluding form the damage the amount of debts and other obligations for which the injured party is responsible. (33) If the Court were to deny the existence of damage on the ground that the factory did not belong to the Obershlesische, it would be contradicting one of the reasons on which it based Judgment No. 7 and it would be attributing to a judgment of a municipal court power indirectly to invalidate a judgment of an international court, which is impossible.

(46) the court must no lay down the guiding principles according to which the amount of compensation due may be determined. 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 interest which could not be expropriated even against compensation. (47) 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 consequence would not only be unjust, but also and above all incompatible with … the prohibition, in principle, of liquidation of the property, rights and interest 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 result are concerned. The essential principle contained in the actual notion of an illegal act – a principle which seem 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 all the consequences of the illegal act and re-establish the situation which would, in all 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 by covered by restitution in kind of 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. (51) following question: I. A. What was the value, on July 3rd 1922, expressed in Reichsmarks … of the undertaking …. (including the lands, buildings, equipment, stocks and processes at its disposal, supply and delivery contracts, goodwill and future prospects)? II. What would be the value at the date of the present judgment? I. B. What would have been the finantial results … (profits and losses) which would probably have been given by the undertaking thus constituted from july 3rd 1922 to the date of the present judgment?