Dutch Tobacco Farmers in Indonesia Case

CourtCourt of Appeal of Bremen (Germany)
Date21 i 1959
Federal Republic of Germany, District Court of Bremen.
Court of Appeal of Bremen.
N. V. Verenigde Deli-Maatschappijen and N. V. Senembah Maatschappij
Deutsch-Indonesische Tabak-Handelsgesellschaft m.b.H.

Jurisdiction Territorial Over property Recognition of foreign confiscatory legislation Whether forum may review validity of foreign legislation Indonesian confiscatory legislation The law of Germany.

State responsibility For revocation of concessions Confiscation Adequacy of compensation Conditions of payment Effect of failure to apply for payment Effect of unimplemented legislation providing for payment Discrimination Former colonial territories Position of nationals of former colonial authority Alleged political motivation Revocation of Concessions owned by Netherlands nationals in Indonesia The law of Germany.

State responsibility Damages Whether damages exclusive remedy for illegal act Effect of illegal taking of alien property Whether open to review by courts of third States The law of Germany.

Aliens Position of Respect for property Expropriation Adequacy of compensation Conditions of payment Effect of failure to apply for payment Effect of unimplemented legislation providing for payment Discrimination Former colonial territories Position fof nationals of former colonial authority Alleged political motivation Revocation of concessions owned by Netherlands nationals in Indonesia The law of Germany.

Treaties Termination of By act of party Mutual Consent Round Table Conference Agreements of 1949 between Netherlands and Indonesia.

Recognition of acts of foreign States and Governments Foreign confiscatory legislation Effect of Whether forum may review validity of foreign legislation Validity in relation to international law Constitutional validity Relevance of public policy of forum Lex rei sitae Extraterritorial effect of Termination of foreign concession Crop harvested on land formerly subject of concession Crop exported to country of forum Indonesian confiscatory legislation against Netherlands nationals The law of Germany.

The Facts.The plaintiffs were two Netherlands joint stock companies with registered offices in Amsterdam. For many years, the plaintiffs had been engaged in the cultivation of tobacco in Indonesia, where they had been granted concessions.

After the Second World War and the subsequent disputes with the Netherlands, Indonesia demanded political independence and self-government. At the time of the granting of independence to Indonesia, the so-called Round Table Conference Agreements were concluded between the two States. In one of these Agreements, the Financial and Economic Agreement of 1949, the validity of concessions granted to Netherlands concessionaires was confirmed.1 In 1956, Indonesia left the Union with the Netherlands, and thereafter the Republic of Indonesia enacted legislation curtailing the rights of Netherlands enterprises in Indonesia.

In pursuance of a command issued on December 6, 1957, by the Commander of the First Army District of North Sumatra, in his capacity as Army Commander, and of subsequent orders and commands, the plaintiffs and other Netherlands enterprises were removed from direct possession and control of their plantation estates. The military measures were confirmed by Government Decree No. 23 of April 16, 1958, which expressly stipulated that all Netherlands enterprises had been placed under public management by the Government of the Indonesian Republic. The Pusat Perkebunan Negara Baru (P.P.N. Baru), a corporation established and founded by the Republic of Indonesia, was charged with the management of the Dutch estates, andwhile initially recognizing the property rights of the firms concernedcontinued to manage them on behalf of these firms.

On December 31, 1958, Act No. 86 of 1958 concerning the nationalization of Dutch enterprises in Indonesia2 was promulgated. Subsequently, on February 23, 1959, Government Decree No. 2 concerning the regulation of the main points with regard to the execution of the Act on the Nationalization of Dutch Enterprises (Act No. 86 of the year 1958),3 No. 3 concerning the institution of a committee for the nationalization of Dutch enterprises,4 and No. 4 concerning the determination of the Dutch agricultural enterprises/tobacco estates, which are affected by the nationalization5 were passed. On April 2, 1959, Government Decree No. 9 concerning the task of the committee for the assessing of compensation for the Dutch enterprises affected by the nationalization6 was promulgated.

Act No. 86 of 1958 provided, so far as here material:

Article 1: Netherlands-owned enterprises within the territory of

the Republic of Indonesia which will be determined by Government Ordinance are nationalized and declared full and free property of the State of the Republic of Indonesia

Article 2: 1. The owners of the enterprises referred to in Article 1 will be given compensation, the amount of which will be determined by a Committee whose members are appointed by the Government.

2. The owner of the enterprise as well as the Government may appeal against a decision of the Committee referred to in paragraph (1) above to the Supreme Court, which will give a final decision according to the procedure for appeal made to it between the owner of the enterprise and the State of the Republic of Indonesia as the parties concerned.

3. The payment of compensation as referred to above will be further regulated in a separate act.

From 1958 onwards, the Indonesian Government decided not to continue to offer Indonesian tobacco for sale in the Netherlands, as had previously been the practice, but to consign it to other countries. For this purpose it appointed the defendant company to effect sales in Germany. The defendant company, which had a registered office in Bremen, was founded by the P.P.N. Baru and four Bremen tobacco import companies. According to its articles of association, the defendant's activities comprised; Carrying out commercial transactionsespecially commission transactions in Indonesian tobacco, as well as performing all activities pertaining thereto, such as storage, sampling, sale by tender or in any other way.

The Indonesian Government harvested the 1958 crop of Indonesian tobacco grown on plantations of which, among others, the plaintiffs had held concessions until the enactment of Act No. 86. In March 1959, a consignment of this tobacco was sent to the defendants in Bremen by the S.S. Ulysses, and the defendants sought to sell it there as, in accordance with the relevant contract with the Indonesian Government, they considered themselves entitled to do. Of this consignment, 1,147 bales of tobacco originated from the estates formerly run by the first plaintiff, and 412 bales from estates formerly run by the second plaintiffs.

The plainiffs applied to the District Court of Bremen claiming an injunction to restrain the defendants from selling or attempting to sell the tobacco of which they claimed to be the lawful owners.

So far as here material, the plaintiffs put forward the following contentions in support of their claim: (i) the confiscation for which Act No. 86 provided was discriminatory because it was concerned only with Dutch enterprises and left others, such as Swiss and United States enterprises, intact; (ii) Act No. 86 constituted a violation of generally recognised principles of international law in that it failed to provide for the payment of prompt and adequate compensation; (iii) in fact, Act No. 86 was an instrument of political pressure in that it was intended to exert compulsion on the Netherlands to surrender West New Guinea to Indonesia, and it should therefore be disregarded; and (iv) whatever the position in international law, the recognition of Act No. 86 by the German courts would offend against the ordre public clause (Article 30)1 of the Introductory Law to the German Civil Code. The plaintiffs submitted that the Court should refuse to recognize the effect of Act No. 86 and that, accordingly, in view of their concessions which granted them rights almost the equivalent of full ownership, they were the owners of the bales of tobacco specified in the petition.

The plaintiffs' petitions were in the following terms (mutatis mutandis): [The first/second plaintiff] requests [the Court] to decide by way of summary proceedings: (1) that the 1,147/412 bales of tobacco, to wit, the bales bearing the following marks and numbers [descriptions omitted] shall be surrendered by the defendant to a sequestrator to be appointed by the Court, or that the persons in possession of the aforesaid bales and/or the documents concerning these bales shall surrender same to the sequestrator, (2) that the defendant, on pain of a fine unlimited in amount, to be fixed for each violation, shall abstain from any negotiation for the sale of the tobacco mentioned in paragraph (1), and shall refrain from selling or disposing of the aforesaid tobacco.

The defendants contended that the petition for an injunction in summary proceedings was inadmissible, because of the absence of the requisite need for legal protection. At most, a request for attachment would be admissible. On the merits, the defendants argued that (i) the plaintiffs had never been owners of the tobacco in question, for they never were owners of the land and soil, they did not own the estates, and did not acquire a status equal to proprietors under the concessions granted to them. If one wished to derive rights of hereditary leasehold from the contracts concluded with them, the majority of the contracts had already expired when this tobacco was harvested. Moreover, the contracts had been cancelled. Finally, by reason of the fact that the tobacco was harvested and prepared and thus made into a new product on behalf of and with means furnished by the Indonesian State, the latter acquired ownership through specificatio; (ii) The proprietary right of the State of Indonesia followed from...

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