The Chorzow Factory Case (1928, Germany v Poland)

Principle: It is a general principle of law as well as International law, that any breach of
agreement creates an obligation to make reparation.

Fact: There was an agreement between Germany and Poland and that bilateral treaty
was known as the Geneva Upper Silesia convention 1922. It had been provided in that
treaty that on transfer of sovereignty of certain territories from Germany to Poland after
the 1st world war, existing proprietary right were to be maintained except that the Polish
Government was granted a right of expropriation under certain condition with respects of
all property belonging to German nationals in Upper Silesia. The present dispute arose
when Poland seized to companies there in breach of its international obligation under the
Upper Silesia convention of 1922. The Germany demanded compensation from the
Poland.

Issues:

Whether a state can be held responsible for expropriation of alien property.

Whether a state can be made responsible at International Law, for acts of Government
organs or officers

Whether it is a basic rule of international law that reparation is to be made for violations
of international law

Decision: The reparation of wrong may consist in an indemnity corresponding to the

damage which is contrary of International Law. Right or interests of an individual the
violation of which rights cause damages are always in a different plain to rights belonging
to a state, which rights may also be infringed by the same act.

Reasoning: The action of Poland was not expropriation in its real sense, it was rather a
seizure of property, right and interest which could not be expropriated even against
compensation, save under the special conditions fixed by Art. 7 of the Upper Silesia
convention of 1922. in doing so, therefore, Poland acted contrary to its obligations. It is
general principle of international law and even a general concept of law that a breach of
an agreement involves a duty to make reparation. Reparation is the expendable
complement of a failure to apply a convention and there is no necessity for this to be
stated in the convention itself. This case is one of an unlawful expropriation and in such
cases expropriating sates must in addition to paying the compensation due in respect of
lawful expropriation, pay also damages for any loss continued by the injured party.