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.