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Last spring, with a signing ceremony for the $5 billion settlement of Nazi atrocity claims against the German government and businesses set for June 1, the appeal of five dismissed class actions in the 3rd U.S. Circuit Court of Appeals was on the back burner. Both President Clinton and German Chancellor Gerhard Schroder were scheduled to attend the signing ceremony in Berlin. But in late May, the ceremony was called off when the German delegation demanded a tighter guarantee of what was politely phrased in the language of diplomats as “enduring legal peace,” recalled New York University Law Professor Burt Neuborne, the American lawyers’ chief negotiator. Suddenly, the appeal was full steam ahead for June 15. Yet, a bare day or two before arguments were to be heard, and after a weekend of high-level talks that involved U.S. Solicitor General Seth Waxman and Deputy Treasury Secretary Stuart E. Eizenstat, new language was hammered out, giving the Germans more protection against future lawsuits, according to Neuborne. The crisis was averted, and on July 17 an accord was signed, even though neither Clinton nor Schroder was able to be on hand. The last-minute wrangling over how the U.S. government would help the Germans ward off future lawsuits was a premier example of how intertwined diplomacy and litigation became in the settlement process. The 15-month negotiations were conducted at a diplomatic roundtable that alternated monthly between Washington and Bonn or Berlin. As many as 80 people — representing eight nations, German businesses, Jewish organizations and American class-action lawyers — were at the negotiating table, with each speaker’s comments simultaneously translated into English, German, and Russian. Clinton became personally involved, according to several lawyers who participated in the talks, and wrote a crucial letter in December to Schroder, proposing the $5 billion figure that both sides adopted. LABORERS GET 80 PERCENT The pact that emerged from that process allocated 80 percent of the $5 billion fund, which was to be established by equal contributions from the German government and German businesses, to people who had worked as either “slave” or “forced” laborers under Nazi domination. Of that $4 billion, $1.8 billion is to be paid to “slave” laborers, about 70 percent of whom were Jews in concentration camps, and $2.2 billion to Eastern European “forced” laborers, who were shipped by the Nazis to work in factories in lands controlled by the Third Reich. Many more forced laborers survive today than slave laborers: approximately 1.2 million, compared with 240,000. As a result, surviving slave laborers will each receive about $7,500, depending upon the exchange rate for German marks, and payments of $2,500 will be made to forced laborers. Another $500 million is earmarked to compensate those who had their property, including bank accounts and insurance policies, confiscated by the Nazis. In addition, $350 million will be devoted to promoting international tolerance and preventing a resurgence of Nazi-type atrocities. This clause came at the insistence of the German negotiators, several lawyers said. The American negotiators, particularly the Jewish organizations, wanted to see those funds paid directly to Nazi victims or their heirs, said Melvyn I. Weiss, who was also a principal spokesman for the American lawyers. GENESIS OF TALKS The door to the talks was opened when the Berlin Wall came down in 1989. Until then, a post-war international pact, the London Debt Agreement of 1953, explicitly deferred any litigation against Germany or German corporations for claims stemming from Nazi wrongs. Two years after the Berlin Wall came down, a new international agreement ended all limitations on German sovereignty stemming from World War II and supplanted the London agreement. The German Federal Supreme Court in 1996 expressly recognized that the protection against Nazi-era claims had been eliminated by the 1991 pact. Nonetheless, questions remained over what claims remained uncompensated because West Germany had paid $60 billion in reparations, starting in the 1950s. As class actions began to be filed in this country, plaintiffs’ lawyers contended that the question of compensation for forced and slave laborers had never been previously addressed, even though some of them had received payments reflecting other wrongs committed by the Nazis. In addition, it was charged that only the West German government — but never that of East Germany — had contributed to reparations. Against that backdrop, the parties first sat down for discussions in early 1999. They were far apart on a settlement figure, with the Germans floating $750 million and the American lawyers suggesting figures as high as $30 billion. The talks were also heavily influenced by the Germans’ insistence that, while they had a moral and humanitarian obligation to provide compensation, they were under no legal obligation to do so. Given the nature of the obligation, said Roger M. Witten of Washington, D.C.-based Wilmer, Cutler & Pickering, who represented the German business delegation, a class action approach was “unthinkable” because it would have given credence to the notion that the Germans were under a legal duty to make the payments. With a class action off limits, the two sides adopted a very different approach from the one used in a reparations suit against Swiss banks, even though that case had been a model for the 56 lawsuits against German entities filed in this country. The Swiss case, which has a $1.25 billion settlement pending, provides sweeping protection to the Swiss government and business community against any future litigation. Without a class action vehicle, the Germans had no assurance that their agreement to make further payments would give them any protection against future litigation. In place of the binding protection that a class action gives defendants against future litigation by class members, Witten proposed that the U.S. government commit to file a statement in the future Nazi-related lawsuits that it is in the “foreign policy interest” of the United States that those cases be dismissed. Neuborne called Witten’s development of a diplomatic solution to a legal problem — getting protection against future litigation — “a highly inventive approach modeled on the Iran hostage case.” VIEWS DIFFER ON GAMBIT It was the Germans’ last-minute gambit, Neuborne noted, to strengthen the protection it would gain from the U.S. government’s “statement of interest” that sent the talks into a tailspin in late May. Neuborne suggested that the Germans gained very little from the last-minute maneuver. “The [final] wording was slightly better, but it was far short of what they wanted,” he said. In the appeal, which would have been argued by Neuborne, the Nazi victims disputed the conclusion of two federal trial judges in New Jersey that the 1991 agreement ending all restrictions of German sovereignty foreclosed all future legal claims stemming from World War II because it made no reference to them. Weiss of New York-based Milberg Weiss Bershad Hynes & Lerach faulted the German business delegation for taking an approach fundamentally at odds with its government’s insistence that it was fulfilling a moral obligation. The business delegation, he said, was intent “upon getting as much legal protection as it could.” Witten, however, downplayed the notion that the pending appeal in the 3rd Circuit had been an important pressure point in the negotiations. The appeal was “a complete sideshow,” he insisted. “Everyone was concerned that if the appeal went forward, statements would be made that would cause the parties’ positions to harden.” “This was an international negotiation in which private parties played an important role in dealing with issues of a moral and historical dimension,” he said. Israel Singer, the secretary general of the World Jewish Congress and chief negotiator for the Jewish Claims Conference, agreed that diplomacy, rather than law, drove the negotiations. After 55 years, Singer observed, the German government wanted “political closure” from the atrocities committed by the Nazis, and German businesses had a strong incentive to be freed of economic recriminations demanding further redress of Nazi wrongs. LAW AND DIPLOMACY There is little doubt that the July 17th accord is a hybrid of law and diplomacy. On the one hand, it is embodied entirely in the documents of diplomacy: a “joint statement” issued by all parties to the negotiations and two agreements between the United States and Germany. But on the other hand, the agreements specifically stipulated that none of the money is to start flowing to survivors and their heirs until a federal multi-district litigation panel dismisses all the pending litigation in the U.S. It is anticipated that the dismissals will be finalized and the payments will start before the end of the year The documents also contain an annex setting forth the “elements” of the statement of interest to be filed by the U.S. government in future lawsuits. The precise nature of the protections German business will get from future litigation through those statements is still being negotiated, according to Witten. To date, 3,500 German businesses, many of which did not exist during World War II, have contributed $1.6 of the $2.5 billion they have pledged as their half of the $5 billion fund. With neither the dismissal of the multi-district litigation finalized, nor the exact wording of the statements of interest fleshed out, there is still time for German businesses to raise the final $900 million needed to fully endow the $5 billion fund.

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