Old bonds

A US court of appeals in Miami has ruled that the German government may be sued by American investors in an American court for failing to pay out on pre-Nazi era bonds.

"The court decided that the complaint filed against Germany can proceed to discovery and that the case should not be dismissed because Germany is a 'foreign sovereign,'" said Michael Elsner, who represents Tampa-based World Holdings investment group, one of a handful of plaintiffs suing the German government.

"We requested damages in the hundred of millions of dollars range. It's a number over $450 million (354 million euros)," Elsner told news agency AFP.

The bonds were issued in the 1920s and early 1930s by the Weimar Republic, Germany's government from 1919 until Adolf Hitler's rise to power in 1933. During that time, the government printed an enormous number of bonds to cover rebuilding costs in the aftermath of World War I.

Many of these bonds were purchased by American investors - with the encouragement of then US President Calvin Coolidge.

Although Hitler defaulted on the bonds as Germany's new chancellor in 1933, they continued to be traded by investors around the world, who hoped to someday turn them into cash.

Reviving dead bonds

The plaintiffs in this case, contemporary investors who stockpiled the old bonds in order to bring suit against the Germany, have argued that, should today's Federal Republic of Germany default on the Weimar Republic's bonds, global trust in government bonds would collapse.

"Any government - German or any other government - needs to understand that if it's going to borrow from people who put up money in good faith, the government will be held responsible for what it promised to do," said Sam Dubbin, a Miami lawyer involved in the case.

"People who invest in government bonds deserve to be paid back and that's what this litigation is intending to vindicate: that basic right," said Dubbin, who is best known for representing Holocaust survivors seeking to reclaim stolen fortunes.

Germany contends bonds were paid - and 'maybe stolen'

Germany, meanwhile, has opened a store of arguments to dispute it is defaulting at all.

"They were paid already," said Ingrid Jaeger of the Federal Office for Central Services and Unresolved Property Issues in Berlin. "The bonds have no value anymore."

Jaeger claims that under an international agreement in the 1950s, Germany repaid most of its outstanding bonds, including all of those now held by American litigants:

"There was a deadline [for claims] in 1958," Jaeger added.

The German government has also alluded to a number of Weimar Republic bonds stolen by Soviet soldiers from Nazi coffers at the end of World War II, long after the government had bought them back.

Dubbin said his clients' bonds couldn't have been those stolen by Soviet soldiers, adding that Russia returned most of the stolen bonds and alleges that claim is supported by German documents.

Letting dead dogs lie

With hundreds of millions - and potentially billions - of dollars at stake, others have dismissed the dispute altogether.

"Sometimes people have to accept that the past has happened … and it's best just to leave it alone," said economic historian Tim Leunig of the London School of Economics. "Certainly when it's some really dramatic event like ... Hitler, the Second World War and the post-war German settlement, that's enough history to accept that. The past is the past."

Leunig said the American litigants are just out for a quick buck and have no moral claim against today's government in Berlin.

"These are not people who paid a dollar and are now looking for a dollar back," he said. "These are people who have gone out and found things that they're thinking: maybe this will work. It's a gamble, not an investment."

Author: Stephen Beard, David Levitz

Editor: Sean Sinico