Relations between Switzerland and the Allies 1945-1952
The Washington Agreement (WA) of 25 May 1946 Historical Setting,
Content, Partial Implementation and Final Settlement
The purpose of this Note is to recall, against the background of the current debate,
some important historical facts concerning the historical setting, content, partial
implementation and final settlement of the Washington Agreement of 25 May 1946
- 1. The historical setting of the Washington Agreement
- 1.1 The objectives of the contracting parties
- The Allied Powers pursued two main objectives:
- Discovery and seizure of German assets in neutral states (Europe, South America, Asia),
to prevent the re-arming of the German Reich (Safehaven Programme from 1943).
- Confiscation of German assets abroad for purposes of reparation (from 1945).
Switzerland pursued the following main objectives:
- Ending of international isolation.
- Respect for Swiss sovereignty.
- Normalisation of its relations with the Allied states.
- Abolition of the blacklists against Swiss companies, and lifting of controls on Swiss
private holdings in the USA (approx. 4.5 bn Swiss francs).
- 1.2 Means of implementing these objectives
- The Allied Powers had the following means at their disposal to implement their
- Monopoly in the supply of raw materials worldwide.
- War economy mechanisms to exert control and pressure (blacklists, blocking of Swiss
assets in the USA).
- Access to German archives and sources of information, which allowed them to obtain a
clear picture of German financial transactions.
- Prestige resulting from victory and conviction that they were morally in the right.
- Monopoly over the formation of public opinion worldwide and opportunity to launch
large-scale press campaigns against recalcitrant states.
Switzerland had the following means at its disposal to implement its aims:
- Appeal to international law
- Proof that neutrality had been respected
- Description of the difficult situation between 1940-45, when Switzerland was completely
surrounded by Axis Powers.
- Opportunity to make a contribution to the reconstruction of Europe.
- 1.3 The legal basis for the Allies claims
- During the War itself and above all after the end of the War, the Allies strove, by
means of declarations, decisions and international agreements, to draw up a legal basis on
which to found their claims:
- Warnings about gold (5.1.1943, 22.2.1944, 19.8.1944): references to German confiscation
of gold. The Allies warned all states against accepting German looted gold and did not
recognise the legality of such transactions.
- Bretton Woods Resolution VI (19.8.1944): discovery, removal and restitution of assets
illegally expropriated by Germany. Non-recognition of such transactions in neutral states
- Yalta Conference (1945): total amount of German reparations fixed at US$ 20 billion:
principle that all German assets abroad should be impounded for the purposes of
- Potsdam Conference (1945): division of reparations between the Western Allies (USA, GB,
France) and the USSR. German assets in neutral west European states were to go to the
three Western Allies (and 15 other Allied states); the USSR and Eastern European states
were not involved in this.
- Enactment of the Allied Control Commission Law No. 5 (30.10.1945): deprived German
owners of the right of disposal over their assets abroad, and assigned this to the Control
- Paris Conference on Reparations (November-December 1945): 18 signatory states created an
Inter-Allied Reparation Agency (IARA) in Brussels. They laid down a percentage-based
distribution scale for the total amount of reparations. They commissioned the USA, Great
Britain and France to commence negotiations with the neutral states on the handing-over of
the German assets.
- 1.4 Preliminary measures taken by Switzerland
- Principally because of pressure from the Allies, Switzerland had taken a series of
measures concerning its financial relations with Germany at the beginning of 1945:
- Freezing of German assets in Switzerland (16.2.1945).
- Switzerland prohibited trade in foreign currency and bank notes in Switzerland
- Switzerland undertook to carry out an official investigation of German assets in
Switzerland and to advise the Allies of the findings (Currie Agreement with
USA/GB/France, Berne 8.3.1945).
- Switzerland undertook to make arrangements to identify and earmark German looted
property (Currie Agreement, 8.3.1945).
- Switzerland undertook to create a legal basis for the restitution of assets proved to
have been stolen to their rightful owners (Currie Agreement, 8.3.1945).
- Switzerland undertook not to buy any more gold from Germany (Currie
- Federal Council Decree concerning claims for the restitution of assets confiscated in
occupied war zones (10.12.1945).
- 2. The Washington Agreement of 25.5.1946
- 2.1 The Contracting Parties
- The Contracting Parties were Switzerland on the one hand, and the USA, Great Britain
and France on the other. However the three Western Allies were also acting on behalf
of 15 other IARA states: Albania, Australia, Belgium, Canada, Czechoslovakia,
Denmark, Egypt, Greece, India, Luxembourg, Netherlands, New Zealand, Norway, South Africa
and Yugoslavia. The IARA states were to share in the proceeds of liquidation of the German
assets and the gold payment of 250 million Swiss francs. In exchange, they relinquished
their own claims against Switzerland and accepted the definitive settlement of the gold
- 2.2 The question of the gold transfers
- The three Allied states prepared themselves thoroughly for these negotiations. Above all
they wished to achieve factual clarification, from documents and the questioning of
witnesses in Germany, concerning transfers of German looted gold, and to ascertain how
much of this gold had flowed into Switzerland and other neutral states. Early in 1946 they
reached the conclusion that Germany had appropriated looted gold worth US$ 410 million in
total. Of this, US$ 130 million (ca. 560 million Swiss francs) of Belgian gold had
definitely found its way into Switzerland, after the bars had been recast and given
pre-war stamps and papers. American investigations suggested that even more looted gold
could have found its way into Switzerland. They assumed amounts of between US$ 185 and 289
million. These estimates were regarded as plausible, but were thought to be extremely
uncertain. The Allies tried to persuade Switzerland to recognise, in law, their concept of
looted gold and to demand the restitution of all looted gold by Switzerland in general.
Faced with the Swiss refusal to recognise the facts of the matter concerning looted gold
or an obligation to make restitution, the Allies agreed amongst themselves to submit a request
for the return of US$ 130 million to Switzerland.
The representative of the Swiss National Bank (SNB), Mr A Hirs, conceded at an internal
meeting in Washington that the SNB had been deceived by the German Reichsbank and, to all
appearances, had accepted 551 million Swiss francs worth of Belgian gold, but
he stressed the good faith of his institution and the duty of care which had been
respected. The SNB relied on the principle that, according to the Hague Land Warfare
Convention of 1907, cash and valuables of an occupied state - but not of private
individuals - were subject to the occupying states right to the spoils of war. Thus
Germany could have acquired gold from occupied areas legally, and sold it on. Moreover, it
was significant that the SNB had acquired the gold in good faith.
The expropriation of Dutch gold, which had been sold from 1941 to 1944 by the
German Reichsbank to the SNB and the Swiss commercial banks, was not raised in the
Washington negotiations. At the beginning of 1947 documents had come to light in the
Soviet occupied zone in terms of which 562 million Swiss francs worth of Dutch gold
had been sold by Germany to the SNB and the Swiss private banks. In a Note the USA, Great
Britain and France asked Switzerland on 20.5.1948 to comment on these documents. In its
reply Switzerland gave them to understand that in making the payment of 250 million Swiss
francs in gold under the Washington Agreement, all the claims of the IARA states had been
conclusively met. The governments of the USA, Great Britain and France left the matter at
- 2.3 The course of the negotiations
- The negotiations in Washington lasted more than two months (from 18.3.1946 to
25.5.1946). They were conducted robustly by both sides. The legal views of the two
sides were irreconcilably opposed. Switzerland could not recognise the Allied Control
Commission Law No. 5 as the legal basis for the liquidation and handing-over of the German
assets to the Allies. It also did not acknowledge, either in law or in fact, that it had
received looted gold. Conversely, the Allies did not recognise Switzerlands legal
view that German assets in Switzerland ought to be protected and that in cases of
expropriation, suitable compensation should be paid to the rightful owners. Above all, the
Allies could not recognise the legality of the Swiss acceptance of gold from Germany. The
procedure suggested by Switzerland, that of judicial settlement of the matter, was
not acceptable to the Allies either. Under such circumstances it quickly became clear that
only a political agreement with the necessary compromises on both sides could lead
to a satisfactory solution. In Washington both sides very quickly abandoned a legalistic
approach in their arguments in order to achieve, pragmatically, an advantageous solution
for all parties. In doing so, moral scruples and principles were set aside. Put
bluntly, Switzerland aimed to normalise relations with the Allies at the lowest possible
political and financial price, while the Allies endeavoured to obtain as high a price as
possible for the reparations fund in exchange for dropping their war economy measures
against Switzerland. The time factor was also significant: since the Allies were
coming under pressure finally to abolish the controls and sanctions of the wartime economy
one year after the end of the war, they had to act rapidly if they still wished to deploy
the instruments of pressure in the negotiations with the neutral states. Postponing the
negotiations until later - perhaps until the facts surrounding the acceptance of gold from
Germany had been definitively clarified - was therefore out of the question for them. They
were pressurised by the IARA and the other 15 IARA states to arrange for the payment of
the proceeds from the neutral states into the reparations pool as soon as possible. The
Allied governments wished to reach an acceptable settlement in a very short space of time.
They did not consider it likely that they would achieve a better result at a later date.
- 2.4 Negotiations with other neutral governments
- Besides Switzerland, the Allies intended to conduct negotiations with Sweden, Spain,
Portugal and possibly also Romania and Turkey on the liquidation and surrender of
German assets in these states and the restitution of German looted gold. The negotiations
with Switzerland were treated as a precedent. They were determined to demonstrate a
success, to show the above-mentioned states that Switzerland had at least partially
yielded to their views. A breakdown in the negotiations with Switzerland would, in their
view, have threatened the successful conclusion of the negotiations with these states. The
Allies were therefore inclined to reduce their substantive claims as well, if necessary.
In August 1946 a similar agreement was concluded with Sweden, and later with Spain and
- 2.5 The content of the agreement
- In the preamble to the agreement the Contracting Parties recalled that they had not
renounced their legal views, but had reached this agreement for political reasons. The
main points were:
- Switzerland undertook to trace and liquidate assets belonging to Germans in Germany
which were located in Switzerland.
- Switzerland would pay 50% of the proceeds of liquidation to the Allies for purposes of
reconstruction, with the Federal Council being free to dispose of the remaining 50%.
- The owners of liquidated assets would receive compensation in German currency.
- A joint commission (Switzerland, USA, GB, France) would be set up as an organ of
information and consultation to implement the agreement.
- In case disputes over the interpretation of the agreement might arise, a two-tier appeal
procedure was created: Swiss appeal court, and in the event of disagreement further
recourse to an ad-hoc court of arbitration.
- To settle the gold question conclusively, Switzerland would pay the Allies
gold to the value of 250 million Swiss francs. In exchange for this payment the Allies
would renounce, on their own behalf and on behalf of their central banks, and also the
states forming the IARA, further claims against the Swiss government or the SNB in
connection with gold acquired by Germany during the War (The Allied Governments
declare on their part that, in accepting this amount [250 million Swiss francs in gold],
they waive in their name and in the name of their banks of issue all claims against the
Government of Switzerland and the Swiss National Bank in connection with gold acquired
during the war from Germany by Switzerland. All questions relative to such gold will thus
be regulated. Art. II.2).
- The USA undertook to release Swiss assets in the USA in accordance with a
procedure to be negotiated jointly.
- The Allies would abolish blacklists affecting Swiss companies.
- Switzerland confirmed that it would take a favourable view of the Allied request to
transfer holdings of Nazi victims who died without leaving heirs to the Allied
governments for the benefit of refugee organisations.
- Furthermore, in a confidential letter the Allies requested that Switzerland simplify
the restitution procedure for looted property. The Swiss negotiator referred to the
Federal Council Resolution of 10.12.1945, which had proved to be satisfactory, but was
willing to submit the request to the Swiss government.
- 3. From partial implementation to final settlement of the WA
- The WA contained many loopholes. The Swiss and the Allies had approached the matter from
diametrically opposed opinions and interests. In order nevertheless to produce a
successful outcome in the prolonged negotiations, lack of clarity and ambiguities were
accepted. The liquidation mechanism for German holdings had not been adequately settled.
The compensation provisions were not clearly specified either. The Allied governments did
not attach great significance to these provisions. They were principally interested in the
liquidation and rapid payment of the Swiss franc sums to which they were entitled.
Conversely, in Berne great importance was placed on the correct and legally irreproachable
implementation of the agreement. Without a rate of exchange acceptable to both sides, or
binding guarantees as to how such compensation could be paid to the dispossessed owners in
Germany, Berne was not prepared to undertake the liquidation.
- 3.1 Partial implementation of the WA
- The other provisions of the agreement were implemented fairly quickly and without
- The American government lifted the controls on the official assets of the Swiss
government and the SNB (over 3 billion Swiss francs) in the USA as early as 27.5.1946.
- The Allied governments cancelled the blacklists on 8.7.1946.
- Switzerland concluded a certification agreement with the US government on 22.11.1946, on
the basis of which assets to the value of almost 4.5 billion Swiss francs in the USA were
released by the end of 1948. Holdings of over 400 million Swiss francs could not be
certified as non-enemy assets, and passed to the US enemy assets administrator.
- Switzerland transferred the 250 million Swiss francs in gold to the Allied
governments on 6.6.1947.
- Switzerland set up the necessary implementation authorities: the unit for the
liquidation of German assets; the joint commission held numerous sessions from autumn 1946
to 1948; Switzerland paid the Allies an advance of 20 million Swiss francs on the
liquidation sum due to them, for the benefit of refugee organisations, in July 1948.
- 3.2 Obstacles to implementation
- Three obstacles hampered the rapid liquidation of German assets in Switzerland:
- Disagreement over the question of the rate of exchange at which the German owners should
be compensated in German currency.
- Disagreement over the settlement of inter-custodial conflicts relating to German enemy
assets (where should foreign shares in a German-owned enterprise in Switzerland be
liquidated? In Switzerland, or abroad?).
- Disagreement over the question of concrete procedures for payment of compensation to
As long as these three questions could not be resolved satisfactorily, Switzerland was
not prepared to commence the liquidation of German assets.
- 3.3 Change of circumstances in foreign policy
- In addition to this, the general foreign policy climate corresponded less and less to
the wording and spirit of the WA. The break with the USSR, the beginning of the Cold War
and the new partnership with the democratic Federal Republic of Germany (FRG), founded in
1949, made an agreement to punish Germany seem increasingly anachronistic. The
Safehaven interests had long since been satisfied: it was clear that the German assets in
Switzerland to be liquidated (ca. 500 million Swiss francs) could not constitute a threat
to peace. With the introduction of a hard currency in West Germany the problem of payment
of compensation to dispossessed Germans also became technically more difficult. Apart from
financial motives - their half share in the proceeds of liquidation - the Allies had lost
interest in the implementation of the WA. The USA therefore took soundings as early as
1947 in London and Paris as to whether the Allies should not propose a final settlement
agreement (lump sum settlement) in order to find a way out of the impasse.
However such a solution was rejected by the British and the French at that time.
- 3.4 The negotiation of a final settlement package in 1951/52
- After even greater difficulties materialised in 1951 as well, this idea was revived. In
the meantime the FRG had expressed its views. It indicated that it would be
prepared to make the necessary resources available to meet the Allies claims if the
plan to liquidate German assets in Switzerland was relinquished. At the same time the
Federal Republic offered to repay part of the German clearing debts dating from the war to
Switzerland. After extended negotiations, a final settlement package acceptable to
all parties was achieved in August 1952:
- The Allied governments received a lump sum of 121.5 million Swiss francs from
Switzerland. In exchange for this indemnity, they and the states forming the IARA
renounced their rights to German assets in Switzerland.
- The government of the FRG paid Switzerland 121.5 million Swiss francs for releasing
German holdings in Switzerland.
- Holdings worth up to 10,000 Swiss francs were released in their entirety. Owners with
holdings over 10,000 Swiss francs were obliged to relinquish a third to cover the lump sum
settlement. If they were not prepared to do so, their Swiss franc assets were liquidated
and they received - after the deduction of taxes and fees - the equivalent in German
- The government of the FRG undertook to pay back 650 million Swiss francs to Switzerland
in graduated tranches, in settlement of half of the proceeds of liquidation to which
Switzerland was entitled and in compensation for the claims of the Swiss state against the
former German Reich (ca. 1.2 billion Swiss francs in total).
- 3.5 Implementation of the final settlement package
- Unlike the WA, the final settlement package was implemented without difficulty:
- Following the ratification of the agreement by Switzerland and the FRG, the sum of 101.5
million Swiss francs to which the Allied governments were entitled (121.5 million Swiss
francs minus the advance of 20 million Swiss francs granted by Switzerland in July 1948)
was paid to them on 20.3.1953. Thus the Allied claims arising from the WA were finally
met. The further implementation of the final settlement package had become a purely
- From March 1953 to December 1957, applications for the release of holdings were
submitted by 20,830 German owners. 15,507 holdings worth almost 100 million Swiss francs
in total were repaid in full. 4,834 owners received two-thirds of the value of their
holdings, worth 588 million Swiss francs in all. 489 holdings worth 9.3 million Swiss
francs were liquidated and the owners were repaid by the German government in German
marks. German assets in Switzerland amounted to 697 million Swiss francs at that time.
- The government of the FRG settled the final payment of 650 million Swiss francs in
compensation for the German Reichs debts to Switzerland.
After the Swiss Compensation Offices work of releasing and liquidating assets had
been virtually completed by the end of 1957, a final protocol was signed on 1.8.1958. From
this date onwards the provisions of the final settlement agreement had expired. The
resolution on the obligation to register German assets as well as the embargo resolution
of 1945 were repealed. The Political Department and the German federal government
established in an exchange of Notes dated 30.9.1960 that the agreement on German assets in
Switzerland had now been implemented in full and was therefore no longer in force.
Dr L. von Castelmur
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