Kaplan, R (on the application of) v Appeal Adjudicator, Enemy Property Claims Assessment Panel & Anor

The claimant, Yakob Kaplan, challenges the decision of the Rt. Hon Sir Christopher Staughton sitting as an Appeal Adjudicator. By that decision the Adjudicator dismissed the claimant’s appeal from a decision of the Enemy Property Claims Assessment Panel (“EPCAP”) which rejected in whole or in part three claims made in respect of sums of money deposited in the Midland Bank Ltd., London and subsequently confiscated by the United Kingdom Government.

Moses Kaplan and Boris Baksht were Jewish businessmen and Estonian nationals. At some time prior to June 1941, Moses Kaplan had deposited a sum of money, which at the time of its confiscation amounted to £3,659.25. Boris Baksht had deposited a sum which at the time of its confiscation amounted to £1,777. A third sum had been deposited by a company (or possibly a partnership), of which Moses Kaplan and Boris Baksht were the owners. At the time of its confiscation that sum amounted to £1,938.25.

As Mr Engelman for the claimant said, “they may well have deposited the money fearful for the future of Estonia and of themselves and their families”. Whatever fears they may have had, I doubt that they could ever have foreseen what was to happen to them and to so many others during the early years of the 1940’s. It may be that London was chosen because of the links between Estonia and this country. In the words of the claimant, his father’s kinsmen fought in the First World War with the 38^th Royal Fusiliers under General Allenby.

To understand what was to happen to Moses Kaplan and Boris Baksht and also to understand the arguments in this case, it is necessary to give a brief account of the events of this period.

In 1926 Germany and the USSR entered into a neutrality agreement. On August 23^rd 1939 both countries entered into what is known as the Ribbentrop-Molotov Pact. In the part of the pact published at the time, both parties obligated themselves to desist from any aggressive action on each other. Attached to that pact was an infamous secret additional protocol. By Article 1 of that protocol to use the words of Professor Robert Service (273) “Hitler and Stalin divided the northern half of Eastern Europe into two carefully delineated areas of influence.” Estonia fell into the Russian sphere of influence. In the words of Professor Service:-

“This enabled Hitler to start his Blitzkrieg against Poland in 1939. The Eastern provinces of Poland, however, were specified as falling within the Soviet Area of influence. It was the wish of Hitler and Stalin that the Red Army should overrun these provinces and take them under soviet control so that no residual independent Polish state could survive. This duly happened; and having gobbled up Eastern Poland, Stalin set about reducing the Baltic States to the status of Soviet Republics within the USSR. Among them was Estonia. After diplomatic threat, political subterfuge and military action the Estonian Soviet Republic came into existence in August 1940. Hitler’s ultimate and abiding intention nevertheless was the conquest of the USSR when conditions became propitious. Operation Barbarossa commenced against the USSR on 22 June 1941. Within weeks Estonia was under direct German military occupation and political administration”.

Only weeks before the German invasion of Estonia, Moses Kaplan and Boris Baksht were deported to Siberia on 14^th June 1941 by the NKVD. Moses Kaplan born in 1902 was sent to ‘K’ camp, a Siberian concentration camp within the territory of the USSR. Incredibly he survived the war in that camp and died in Israel in 1965, having emigrated there. Boris Baksht was not so fortunate. He was deported on 14^th June 1941 to another Siberian concentration camp and he died there on 14^th November 1941.

On 29^th August 1941, following the invasion of Estonia by Germany, Estonia acquired enemy status under the Trading with the Enemy Act 1939 (“the 1939 Act”). At some point thereafter on a date unknown an order was made both confiscating the three sums and vesting them in the Custodian of Enemy Property.

Although the Adjudicator said in his decision that he found it more likely that the confiscation occurred in or soon after August 1941, before me both parties agreed that it would have been some time later when the property was identified by a specific order and confiscated.

It follows that at the time of the confiscation, Moses Kaplan was in the Siberian concentration camp and Boris Baksht was probably dead.

Section 2 of the 1939 Act defines the expression “enemy” as meaning for the purposes of the Act, amongst other things “any State, or Sovereign of a State, at war with His Majesty and any individual resident in enemy territory.” Section 7 provided that:

“With a view to preventing the payment of money to enemies and of preserving enemy property in contemplation of arrangements to be made at the conclusion of peace, the Board of Trade may appoint custodians of enemy property”.

Section 7 authorised the making of orders vesting property belonging to an “enemy” in the Custodian. Given that Moses Kaplan and Boris Baksht were not resident in Estonia at the time that their property was confiscated it might seem that their property would fall outside the provisions of the Act. However, as Mr Grodzinski for the second defendant pointed out, by virtue of sub-section (3) of section 7, any vesting in the custodian pursuant to an order shall not be “invalidated or affected by reason only” that “some person who was ….. interested in the property” and “who was believed by the custodian to be an enemy subject, was not an enemy or an enemy subject.” It follows that the custodian having, it appears, believed that Moses Kaplan and Boris Baksht were individuals resident in an enemy territory, the confiscation of their assets could not be invalidated by reason of the fact that they were not.

What then is the effect of an order vesting property in a custodian of enemy property? That matter was considered and resolved by the House of Lords in Bank Voor Handel en Scheepvaart N.V. v Administrator of Hungarian Property [1954] A.C. 584. The House held by a majority of 4 to 1 that a person whose property has been confiscated under the 1939 Act can neither sue the custodian for the property nor assert any right to it. In the words of Lord Reid (at 621) “he must wait until something is done either by Act of Parliament or by the Crown to restore his property to him”.

No legislation has been passed which would have had the effect of re-vesting the property with which this case is concerned to its original owners. At the end of the war, a distinction was made between technical and belligerent enemies. The former covered those countries which had been invaded by the Axis powers, such as Estonia, and the latter being the Axis powers themselves. As far as technical enemy property was concerned, the aim was (broadly speaking) to re-establish the ownership of the property in the original owner. In contrast the property of nationals of belligerent enemy countries was confiscated and used to compensate British nationals whose assets had been confiscated by the belligerent enemies (see page 202).

From 1949 residents of the Baltic States were invited to “reclaim” their property. In practice however, claims could only be made by those who had left the Soviet Union because of the Soviet Union’s policy towards private property.

I turn now to the Foreign Compensation Act of 1969 (“the 1969 Act”). In the words of Mr Christopher Van Beck, Head of the Enemy Property Claims Assessment Panel Secretariat (page 203):

“This legislation was enacted in light of an agreement that had been reached in 1968 between the UK and the USSR, which had settled a number of bi-lateral property problems, some going back as far as the Russian revolution. The gist of the 1968 Agreement (see articles 1 and 2) … was that the governments of the United Kingdom and USSR would not pursue, on their own behalves or on the behalf of their own nationals, claims relating to property situated in the territory of the other. The 1969 Act thus empowered the Custodian of Enemy Property to dispose of property belonging to Baltic States, the proceeds of which property would be released to the Foreign Compensation Commission, to enable it to meet claims from UK nationals who had claims in relation to property they had held in the USSR and Baltic States.”

During the passage of the Bill, Lord Chalfont, the relevant Minister, told the House of Lords that there were “some vested assets formerly belonging to individuals which were not covered by the Anglo-Soviet Agreement”. He went on to say:-

“If the original owners of these assets, or their legal heirs, whether they are now inside or outside the borders of the Soviet Union, come forward to claim these assets and can prove their title, they are of course…entitled to them back…..”

Lord Chalfont gave the House an assurance that nothing would be done under Clause 1 of the Bill for a period of two years after the passage of the Bill in respect of the assets of individuals not covered by the Anglo-Soviet Agreement. Only after that period would any still unclaimed assets be transferred to the Foreign Compensation Commission for distribution. He continued:-

“I can go further and say that if, even after that two year period has passed, such a person should come forward and prove his case, his property or the proceeds of his property will be returned to him under the provisions of this Bill, or, if that is no longer possible, then compensation will in a proper case be paid to him from public funds.”

The scheme for the return of the property of individuals from the Baltic States became known as the “Baltic States Scheme”. No formal terms of reference for the Baltic States Scheme have been found notwithstanding extensive searches. It may well be that there were no terms of reference. The Scheme was not set up pursuant to any statute or delegated legislation. It reflects the exercise of executive power.

It is known that claims under the Scheme were made on behalf of Moses Kaplan and Boris Baksht and that in 1971 the sums of money to which I have referred to in paragraph 2 above were returned to their successors in title. Whether because no claim was made or more likely because the claim was refused, the successors did not receive back the property which had been confiscated from the company owned by Moses Kaplan and Boris Baksht. It is not known whether a claim for interest was made.

Whether claimed or not, no interest or uplift was paid to the successors of Moses Kaplan and Boris Baksht in respect of the period from the date of confiscation to the date of repayment in 1971. As was made clear by Mr Impey who was head of the EPCAP Secretariat but who sadly died some months ago, those dealing with the claims “were only authorised to make repayments at the original value of the asset.”

I now move forward to 1999. In that year the Enemy Property Payments Scheme (“EPPS”) was set up by the Department of Trade and Industry after representations were made by interested groups, predominantly from the Jewish community. Prior to 1999, the nationals of belligerent enemies (i.e. the nationals of the Axis powers) had not been able to recover property confiscated under the 1939 Act. They were now able to do so provided neither the original owner of the property nor the claimant, had “willingly assisted the Nazi war effort” (paragraph 12(vii)).

The EPPS applied to nationals of technical enemies such as Estonia as well as nationals of belligerent enemies. Unlike the Baltic States Scheme, paragraph 16 of the terms of reference of the EPPS provided for an uplift to take account of inflation from the date of confiscation.

The purpose of the scheme is described as follows:

“This scheme is to provide compensation to victims of Nazi persecution who had property in the United Kingdom which was confiscated by the British Government during the Second World War under UK legislation on trading with the enemy, and who have not had their property returned.” (30)

Claims under the scheme are administered by the Secretariat of EPCAP and are determined by the Panel in accordance with the terms of reference, which give a right of appeal to an adjudicator.

There is no dispute that the claimant has the right to make a claim on behalf of the original owners, that he is the proper claimant in this case and that the decision of the adjudicator is subject to challenge by way of judicial review.

Before turning to the terms of reference, I shall deal with the issue of the property confiscated from the company. Although the Panel concluded that that property fell outside the 1999 EPPS, it decided that the claim fell within the terms of the Baltic States Scheme and recommended payment of the amount confiscated (i.e. the amount set out in paragraph 2).

Although Mr Engelman sought to argue the contrary, there is no doubt that there was no right of appeal under the Baltic State Scheme. The Adjudicator recognised and accepted that. However, he expressed the view that the conclusion of the Panel was “bizarre”. If the claim was validly made in 1971 but was refused, he asked whether the claimant ought to receive a sum adjusted from 1971 to the present day. At the outset of the proceedings, I asked Mr Grodzinski what the second defendant intended to do about this part of the claim. Mr Grodzinski asks me to proceed upon the assumption that the defendant will not only pay out the sum recommended by the Panel, but a sum reflecting an uplift for the period from 1971 to the date of payment. I proceed on that assumption.

In the light of that assumption and in the light of the two payments made in 1971 in respect of the sums confiscated from Moses Kaplan and Boris Baksht, the claimant now seeks compensation under paragraph 16 of the EPPS. This provides for a payment of an uplift defined as the applicable value times the rate of increase in the retail prices index from valuation date to payment date, i.e. from the value at the date of the confiscation to the date of payment.

Alternatively, the claimant seeks under the Baltic States Scheme a payment reflecting either an uplift or the lost interest from the date of confiscation to the date of payment to 1971. I shall consider this claim first.

Mr Grodzinski submits that it is now far too late to raise the issue of interest in so far as the property of Moses Kaplan and Boris Baksht is concerned. I do not need to deal with this procedural argument, given my conclusions on the merits.

So far as the payment recommended by the Panel under the Baltic State scheme in respect of the property of the company is concerned, Mr Grodzinski accepts that that decision having been made in June 2002 different considerations applied. Given that the Adjudicator had no jurisdiction to deal with that aspect of the case, he sensibly and fairly accepted that he would not object to an amendment the claim form to challenge that part of the decision of the Panel. Notwithstanding his procedural concession, he maintains that the Panel was right to make no recommendation in respect of an uplift for the period from the date of confiscation to 1971.

I shall briefly give my conclusions on the claimant’s submissions that under the Baltic States Scheme a sum reflecting an uplift for the period from the date of the confiscation of the property of Moses Kaplan and Boris Baksht to 1971 ought to have been made by the Panel. I asked what was the amount of money involved in this part of the claim, but no help could be given to me.

In the light of the Bank Voor Handel case, it is in my view that the submissions made by the claimant cannot possibly succeed. It is for the executive to decide what payments should be made. If the executive chose to return property, it was for the executive to decide whether to return the original property or an amount representing the value of the existing property and it was for the executive to decide whether to make an additional payment which reflected interest on the money, or interest which the executive itself had received (if any) or the impact of inflation.

On the evidence, there seems no doubt, contrary to the submissions of Mr Engelman, that under the Baltic States Scheme no compensation for lost interest was paid or payable. Mr Engelman relied upon the preamble of the Foreign Compensation Act 1969 to support his argument. The Scheme was not, however, set up under the Act. It was a non-statutory scheme. The executive having chosen not to pay interest, it is not possible for this court to interfere with that conclusion, however much it may wish to do so.

Mr Engelman then submitted that the provisions of Section 7 of the 1939 Act which in effect deemed Moses, Kaplan and Boris Baksht to be enemies when they were not, was incompatible with the ECHR. That was an argument, which was revealed to the defendant only some ten minutes before the start of the hearing. Mr Grodzinski asked me to allow him time to consider whether to present any arguments on proportionality if I were to find if the claimant’s submissions were to find favour with me. They do not. The ECHR cannot be used to impugn the 1939 Act. Mr Engelman made a further submission which had not been made to the Adjudicator, namely that this Court, the Adjudicator and the second respondent, being obliged to give effect to Article 1 of the First Protocol of the ECHR, should therefore make an award reflecting interest on the confiscated sums from the date of confiscation until 1971. Not only, as Mr Grodzinski submits, does the Bank Voor Handel case prevent the owners of confiscated property from having the necessary possessory rights to fall within Article 1 but also the Human Rights Act 1998 does not render unlawful actions which were lawful at the relevant time prior to the coming into force of the Act (see Wilson v. Secretary of State for Trade and Industry [2003] UKHL 40[2003] 3 WLR 568 (HL).

I turn now to the claims under the EPPS for awards reflecting the uplift provided for in paragraph 16 of the Scheme covering the period 1941-1971. Paragraph 12 sets out the criteria. Paragraph 12(i) provides that the property to which the claim relates must have been in the United Kingdom and confiscated during he Second World War by a custodian of enemy property under United Kingdom legislation concerning enemy property or trading with the enemy.

The Adjudicator found that the claims failed under paragraph 12(ii) of the scheme, which, in so far as material to this case, requires that the original owner or the claimant to have:

“suffered Nazi persecution ... through action in pursuance of de facto state policy taken by the relevant enemy state.”

The Adjudicator wrote:

“It is argued that Mr Moses Kaplan and Mr Boris Baksht came within that provision when they were deported to Siberia by the Russians, by reason of the Ribbentrop Molotov pact. This provided, in a secret additional protocol, that Estonia would be in the sphere of influence of Russia. Hence it is said that the action of the Soviet Union in deporting people from Estonia to Siberia – until the Germans invaded Estonia – was Nazi persecution. It is enough to say that I cannot accept that argument. It may have been similar to Nazi persecution, but it was not itself Nazi persecution.”

To succeed Mr Engelman must show that no rational decision maker could have reached this conclusion or that some error of law was made.

As Mr Grodzinski points out, the claimant’s case before the Adjudicator had been that his father and uncle were deported because they were Jewish. That was effectively abandoned, having been undermined by expert evidence (see respondent’s skeleton argument, page 5). They were deported because they were, in the view of those responsible for their deportation to Siberia, “bourgeois businessmen”.

Mr Engelman submitted that the persecution of the claimant’s father and uncle was Nazi persecution because but for the Ribbentrop-Molatov Pact, the persecution would not have occurred. The persecution was enabled by (or consequent upon) the action of Nazi Germany, namely the action jointly undertaken with the USSR to divide up Europe.

Apart from the difficulty caused by the fact this argument was not presented to the Adjudicator, it seems to me that, as Mr Grodzinski submits, this argument involves an impermissibly wide and unnatural construction of the words: “suffered Nazi persecution”. Furthermore, as Professor Service wrote in his report, Stalin was not following Hitler’s orders, he did things his own way and pursued his own ideological objectives irrespective of whether the pursuit caused harm to those who would have been sympathetic to the Nazi cause.

The claimant faces a further difficulty in that the persecution must be by a “relevant enemy state”. The Adjudicator did not find it necessary to deal with this issue. A “relevant enemy state” is, in my view and contrary to one of the submissions of Mr Engelman, a reference to a state so declared under the 1939 Act. Mr Engelman submits, firstly, that the relevant enemy state is Germany. I reject that argument. Germany did not persecute the claimant’s father and uncle, the USSR did. War was not declared on the USSR and thus it was not an enemy state even if, as Professor Service suggests, it was a de facto enemy state. Mr Engelman also argued that the Soviet action was enabled by Nazi Germany. Whilst accepting this proposition as a matter of fact, I reject for reasons similar to those set out in the preceding paragraph, the submission that this makes Germany the relevant enemy state

The Adjudicator also dismissed the appeal for another reason:

“The terms of Reference of the present scheme, under which I operate, contain these provisions:

14....The Panel shall ensure that, so far as is reasonably practical:”

(i)

no one is compensated twice in respect of the same property, and in particular no compensation is determined to be due in respect of any claim which corresponds with an earlier claim settled in the past under any previous British Government Scheme unless the earlier claim was settled only in part and the Panel considers that not to reconsider it would cause a substantial injustice .........

15.

In considering whether any compensation is due, and if so how much:

.........

(ii)

any payment made by the British or any other Government or other body (for example under the German Government Schemes) in respect of the property shall be taken into account by the Panel.

The payments made in 1971 were not under the present scheme, which only came into force in 1999. It is thought that they were made under the Baltic States Scheme of 1969. This is not within my remit, and I know very little about it. I have however been told that it provided for reimbursement of the normal amount of the monetary sum that was confiscated, and not the equivalent amount in the money of the day when reimbursement was made. That would seem to be confirmed by the fact that reimbursement was made, as the Claimants say, in the nominal amount of money confiscated.

I have had occasion to consider this problem in another appeal, MYS2/0770, on 18^th September 2001. As I then said, there was a time when it was not regarded as essential to add interest on payment of a debt, or to revalue the sum that was owed, unless there was express provision to that effect. What I have to consider is, in the climate of 1971, whether it can be said that the claims were then “settled only in part”. I do not think that it can. The claim was settled in full, but not with the added advantage of interest or revaluation.”

I confess to certain reservations about this conclusion. From the point of view of the state, the previous claims were settled in full, irrespective of whether a claim for interest was made in 1971 and refused or not made because it was clear that under the Baltic States Scheme no such claim could be made. From the point of view of the claimants in 1971 assuming (as seems inevitable) that they would have wanted interest, the claims were not settled in full. Moses Kaplan and Boris Baksht were not resident in Estonia (whatever the Custodian may have believed) having been forcibly removed to Siberia prior to the German occupation. They were not enemy subjects but two of many millions of victims of the War. The loss of the interest on the money which they had placed here to preserve it, may be a small insult compared with their sufferings at the hands of their Russian persecutors, leading in the case of Boris Baksht to his death in November 1941. Nonetheless it remains an insult which has not been remedied. Given that the purpose of the Scheme is to remedy a wrong, I might have given a more generous reading of this part of the Scheme than that given by the Adjudicator.

It is not necessary for me to reach a final view about this finding by the Adjudicator given that the Adjudicator was entitled to find that they were not victims of Nazi persecution as the Scheme requires and would have been entitled, I believe, to find that the persecution which they suffered was not at the hands of an enemy state.

Whilst having considerable sympathy for the claimant, this application must fail.