The accession of the German Empire in 1871

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The war of 1870 and 1871 delayed the German contribution. After the proclamation of the German Empire in January 1871 the new Reich took over the obligations that the North German Confederation and the southern states had negotiated. On 28 October 1871 Germany, Italy and Switzerland signed an agreement by which Germany acceded to the convention of 15 October 1869 and undertook to pay CHF 20 million towards the subsidy. The agreement was published in the Reichsgesetzblatt of 1871.¹ It confirmed the total subsidy of CHF 85 million and the distribution among the three states. One third of the subsidies was payable in nine equal annual instalments. The remaining two thirds were tied to verified progress on the great tunnel, so that the states paid in proportion to the work actually done.

The German motive was both economic and strategic. The Gotthard offered the shortest connection between the Rhineland, Baden and Württemberg on the one hand and Italy and the Mediterranean ports on the other. It also ran through a neutral state that both Germany and Italy could regard as a reliable transit country. In the Reichstag the subsidy was defended as an investment in German trade with Italy and as an alternative to routes through France and Austria.² For Switzerland the German accession completed the financial plan. It also brought into the enterprise a second great power with treaty rights over a Swiss railway, which became politically sensitive in 1909.

Contributor 1869/1871 1878 Total Italy 45 10 55 German Empire 20 10 30 Switzerland 20 8 28 Total subsidies 85 28 113 Market capital (plan) 102 – –

Table: State subsidies to the Gotthard railway under the treaties of 1869, 1871 and 1878, in millions of Swiss francs.³

The legal character of the subsidy treaties

From the perspective of modern law the Gotthard treaties were early examples of a technique that is now familiar in international infrastructure finance: grants by states to a private project company, combined with performance obligations, technical specifications, time limits and tariff caps, and with a payment schedule linked to verified progress. The subsidies were non-repayable and gave the states no share in the capital, but they gave them a right to the realization of the project in the agreed form. That right made any change to the programme subject to the consent of the subsidizing states. When the company's cost estimates proved wrong in 1875 and 1876, it could neither reduce the network nor postpone sections without a new international agreement.⁴

The treaties also left open a question that became important forty years later. The concessions of the Gotthardbahn, like those of other Swiss private railways, contained a clause allowing the Confederation to repurchase the line at fixed intervals at a price based on a multiple of average net revenues.⁵ Whether the subsidizing states had to consent to such a repurchase was not regulated. The Federal Council later took the view that repurchase was a sovereign right of the Confederation, while Germany and Italy argued that their subsidies gave them a say in the fate of the line (see the section on nationalization below).

Essentials. The convention of 15 October 1869 between Switzerland and Italy, to which the German Empire acceded on 28 October 1871, fixed the cost of the Gotthard railway at CHF 187 million and its financing at CHF 85 million of non-repayable state subsidies (Italy 45, Germany 20, Switzerland 20) and CHF 102 million of private capital. It defined a network of about 263 kilometres, including the Ticino valley lines to Locarno and Chiasso, fixed technical standards (maximum gradient 25 per mille, minimum radius 300 metres), time limits (three years for the Ticino plain lines, nine for the tunnel) and maximum tariffs. One third of the subsidies was paid in annual instalments and two thirds in proportion to progress on the tunnel. The Swiss share was raised from cantons, municipalities and the NOB and SCB without a contribution from the federal budget.

Notes

1. Agreement of 28 October 1871 (as above), Art. 1: Germany accedes to the convention of 15 October 1869 and contributes "zwanzig Millionen Franken". Convention of 15 October 1869 (as above), Art. 16, 17 and 20, for the total of 85 million, the payment of one third in nine annual instalments and the link of the remainder to progress on the tunnel, and the shares of the three states. ↩
2. Stenographische Berichte über die Verhandlungen des Deutschen Reichstags, 1871, debates on the Gotthard agreement. The characterization of the German motives is the author's. ↩
3. Figures from Convention of 15 October 1869 and Agreement of 28 October 1871 (as above) for 1869/1871, and from H. Etter (as above) and Federal Court, judgment of 1 November 1889 (as above) for the supplementary subsidies of 1878. The Handbuch der deutschen Aktiengesellschaften gives higher totals for all subsidies paid over the life of the company (Germany CHF 30 million, Switzerland CHF 31 million, Italy CHF 58 million, together CHF 119 million), which include later contributions: Universitätsbibliothek Mannheim, digitized edition of 1911, p. 551, https://digi.bib.uni-mannheim.de/~jkamlah/Handbuch_dt_AG_old/Auflage_1-14/1735531847_191100141/pdf/1735531847_0551.pdf. ↩
4. The interpretation is the author's. On the international conference required for the reduction of the programme in 1877, see the section on the financing crisis below. ↩
5. Handbuch der deutschen Aktiengesellschaften (as above), p. 551, on the repurchase right of the Confederation at 25 times the average net revenue (from the thirtieth year), 22.5 times (seventy-fifth year), 20 times (ninetieth year) and 18 times (ninety-ninth year). ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of August 2025.