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German Post-WWI Agra Bonds Not Enforceable Unless Validated

By Gabriella Khorasanee, JD on November 04, 2013 | Last updated on March 21, 2019

While the U.S. may not be respecting the privacy interests of the German Republic (or of its Chancellor Angela Merkel), its courts are upholding treaties dating back to the 1950s surrounding the issue of post-WWI Agra Bonds. Last week, the First Circuit affirmed the dismissal of a $7 billion claim against German banks.

History of German Agra Bonds

To bolster the country's agricultural infrastructure, in 1928, Germany issued "German Provincial & Communal Bank Consolidated Agricultural Loan US$1000 Secured Sinking Fund Gold Bonds Series A 6-1/2% Dated June 1928 -- Due June 1, 1958" ("Agra Bonds"). The Agra Bonds were listed on the U.S. Stock Exchange and traded in the U.S.

In 1933, the Third Reich stopped payment on bonds, and tried to repurchase outstanding bonds, and as a result German bank vaults had many Agra Bonds within them. In 1945, after the Third Reich's surrender, through 1949, Soviet troops looted banks, and introduced into circulation many of the invalid Agra Bonds. To protect financial interests in valid Agra Bonds, the U.S. signed two treaties with Germany in 1953.

The 1953 Treaties

The February Treaty of 1953 set forth the procedures, enumerated in German Law, for validating bonds including Agra Bonds. The April 1953 Treaty set forth conditions that U.S. courts could enforce outstanding Agra Bonds, specifically stating that no bond is enforceable "unless and until it shall be validated."

Here, plaintiff was trying to enforce non-validated bonds -- that they were non-validated, he did not contest. Instead, he tried, unsuccessfully, to ask the court to adopt his interpretation of the Treaty's language. The First Circuit stated that plaintiff's "interpretation conflicts with the Treaty's clear text and the Executive Branch's interpretation."

The First Circuit is not the first to address this issue, and it came to the same conclusion as the Eleventh Circuit and Second Circuit. It probably won't be the last circuit to address the issue either. The case in the Eleventh Circuit was denied cert in October of this year, and because the legal analysis seems to be pretty straight forward, it's unlikely that the Supreme Court will grant cert on any other appeals on this issue.

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