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Restitution, Reparation, and Indemnification

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The Nazi’s economic war against the Jews began as soon as Adolf Hitler came to power in January 1933, years before the outbreak of World War II and the adoption of the policy of genocide. The German government seized the property of its own Jewish citizens and later the Jews in each of the 16 countries occupied by Germany during the war. Asset-stripping of Europe’s Jewish communities went hand-in-hand with the eventual murder of 6 million. The Allies recognized this fact, and the restitution of looted property to its rightful owners was a feature of Allied postwar policy. Assets would be returned to surviving owners or, if they had perished during the Holocaust, to their rightful heirs. Where entire families had been destroyed and no heirs survived, assets would be returned to the Jewish world in order to finance the rehabilitation of Holocaust survivors. Similarly, the communal assets (schools, synagogues, hospitals, retirement homes, orphanages, etc.) of communities that had been destroyed or greatly reduced would also be returned to the Jewish world.

The first expressions of these policies were part of the international agreement on reparations that Germany would be compelled to pay to the Allies. Although Jews were not legally considered an Allied nation, it was clear that they had been the first and most cruelly affected of Germany’s victims and had a claim for reparations. Accordingly, Article 8 of the Final Act on Reparations (Paris, December 1945–January 1946) set aside three sums of money for the Jewish world: $25 million from German assets in neutral countries (mainly in Switzerland and Sweden); all heirless victim accounts in Swiss banks; and all “nonmonetary gold” (i.e., gold not robbed from a central bank) in Germany. In June 1946 it was resolved that the funds derived from these sources would be allocated to the American Jewish Joint Distribution Committee (JDC; Joint) and the Jewish Agency for Palestine, the two nongovernmental organizations (NGOs) most active in rehabilitating Holocaust survivors.

Although the funds actually paid out under Article 8 were disappointingly small, the principle had been established that the Jewish world had a special claim for the restitution of funds looted from it as a result of German action. It also established the primacy of the Joint and the Jewish Agency as recipients of reparations funds on behalf of the Jewish world. One year later, the American occupation authorities in the U.S. Zone in Germany published a ruling (Military Law No. 59, November 1947) compelling all occupants of formerly Jewish housing and other real estate to return property to former owners unless they could prove (in a German court) that the property had been legally and fairly obtained from its Jewish owners (i.e., not as a result of forced Aryanization). This law was later amended to allow for restitution of property to the Jewish Restitution Successor Organization (JRSO) in cases where no owners or heirs had survived the war. JRSO also became the recipient of public Jewish property owned by communities that had been destroyed or dispersed.

In December 1948, JRSO submitted claims for 164,000 heirless properties. Once a court adjudicated these claims, JRSO then sold the properties and used the funds to finance welfare work, mainly of the JDC and the Jewish Agency. By 1970, JRSO had restituted more than 200 million deutschmarks (DM) to Jewish public funds. Some but not all of the property restituted was returned to the small Jewish communities that resumed activity in Germany after the war.

By 1950, it appeared that funds derived from Article 8 and those expected as a result of Military Law 59 would restore to the Jewish world no more than a fraction of what had been looted and would not even come close to covering the cost of rehabilitating Holocaust survivors. It became clear to the Jewish world that economic justice could only be achieved by the direct payment of reparations by Germany. Less than six years after the closure of the crematoria at Auschwitz, it was almost impossible to conceive of direct negotiations with Germany. Israel and the leading Diaspora organizations preferred to deal with the Allied Powers that still, in 1950, controlled West and East Germany. However, the Allies were returning full sovereignty to Germany and although they were sympathetic to the Jewish claim for reparations, they refused to impose them on Germany.

In September 1951, Chancellor Konrad Adenauer addressed the West German Bundestag with a speech that invited the State of Israel and an umbrella organization representing the leading Diaspora communities to negotiate a material settlement with Germany. The emphasis on a settlement of the material claims against Germany—as opposed to any settlement of Jewry’s moral claims against the perpetrators of the Holocaust—made possible direct negotiations, despite extensive opposition from survivor groups.

In 1952, Israel and a new umbrella organization (the Conference on Jewish Material Claims Against Germany) successfully negotiated a broader reparations and indemnification (individual compensation) agreement with the Federal Republic of (West) Germany. The Luxembourg Agreement (September 1952) was the largest of all postwar attempts to correct the economic damage inflicted on the Jewish world during the Holocaust. Under the agreement, Germany paid 3.5 billion DM ($833 million, at 1952 rates of exchange) over 12 years as compensation for the costs of settling in Israel 500,000 refugees from the Nazis and the costs of rebuilding Jewish life in Europe. In addition, the Federal Republic undertook a massive indemnification program that, as it was implemented and improved over the years, was very much larger than all other Holocaust-related material settlements (including those negotiated in the period 1995–2005). As a result of the agreements negotiated in 1952, the Federal Republic has paid the equivalent of more than $70 billion (in today’s values) to individual victims of the Holocaust, to Jewish communities, and to Jewish organizations. From 1978 to 1980, the indemnification program was expanded to include survivor populations from Eastern Europe that once lived under Communist control but had since emigrated to the West.

During the immediate postwar years (1945–1952), Diaspora organizations and the government of Israel evolved policies that made the material compensation project possible and effective, allowing the rehabilitation and resettlement of the largest number of Holocaust survivors and the reconstruction of Jewish community life in Europe. The Jewish world was regarded as a whole, and reparations and restitution (but not indemnification) funds deriving from the heirless individual or communal assets of one community were used for the benefit of all communities. Precedence was given to global, collective settlements rather than to the time-consuming pursuit of individual property rights, and compromises were made in Jewish claims. Given the pressing needs of the survivor community in the early postwar years and the limited ability of Jewish philanthropy to continue meeting those needs, the realistic policies adopted were responsible for the successful rehabilitation of many survivor communities. Nevertheless, the collectivist approach to property restitution and reparations payments left many individual Holocaust survivors feeling that they personally had not received equitable shares, or that the Jewish organizations had disregarded the rights of individual survivors.

Widespread public interest in the Holocaust, together with the feeling of some survivor groups that they had not been adequately compensated, led to the revival of residual claims in the mid-1990s. The World Jewish Congress, led by Edgar Bronfman and Israel Singer, succeeded in integrating the issue of Holocaust survivor rights with the domestic political agenda of the United States. The involvement of the U.S. State Department, and the appointment of Stuart Eizenstat, a senior State Department official with special responsibilities for Holocaust-era issues, together with the wide support of the American media, created the circumstances for the settlement of a number of outstanding Jewish claims—against Swiss banks, insurance companies, German industry (for the exploitation of Jewish and non-Jewish slave labor), and residual restitution claims for Jewish-owned real estate in the territory of the former (East) German Democratic Republic.

The collapse of Communist regimes throughout Eastern Europe during the late 1980s and early 1990s made it possible to readdress the fate of Jewish private and communal property in Poland, Hungary, Romania, the Czech Republic, Slovakia, and elsewhere. Despite frequent declarations of good intentions, restitution of Jewish property proved unpopular in the domestic politics of the postcommunist countries. Although restitution legislation is different for each country, the overall pattern is the same: partial restitution of prewar Jewish communal property for the benefit of residual surviving communities; partial return of private property to Jews who were citizens of the countries concerned at the time legislation was enacted (usually in the late 1990s); and no restitution of private Jewish property where survivors or heirs had acquired different citizenships, except in rare cases. As the vast bulk of Jewish survivors or their heirs no longer live in Eastern Europe and no longer hold citizenship of an East European country, most Jewish private property has not been restituted. This situation is still the subject of diplomatic activity, while legal action in local courts and the court of the European Union is pending.

Although the total amount that will be paid to survivors as a result of settlements in the late 1990s and the first decade of the twenty-first century is not yet clear, and despite the fact that these settlements will add billions of dollars to the Holocaust-era compensation payments, these recent settlements are dwarfed by the much larger sums paid as a result of the settlements negotiated in the period from 1945 to 1952. Nevertheless, the efforts of the State Department and the World Jewish Congress, together with other Jewish organizations, have transformed Holocaust awareness for those born many years after the events of World War II. Many governments were inspired to reexamine the role of their own countries both during the war and afterward concerning the fate of Jewish property, reflected in the creation of more than 30 separate commissions of investigation into the events of the Holocaust and its aftermath.

Suggested Reading

Michael Bazyler, Holocaust Justice: The Battle for Restitution in America’s Courts (New York, 2003); Stuart E. Eizenstat, Imperfect Justice: Looted Assets, Slave Labor, and the Unfinished Business of World War II (New York, 2003); Marilyn Henry, Confronting the Perpetrators: A History of the Claims Conference (New York, 2006); Christian Pross, Paying for the Past: The Struggle over Reparations for Surviving Victims of the Nazi Terror (Baltimore, 1998); Ronald W. Zweig, German Reparations and the Jewish World: A History of the Claims Conference, 2nd ed. (London, 2001).