German Law Aims to Speed Investment : Economy: The controversial statute frees disputed property to break the logjam in the east.

In an attempt to breathe new life into the collapsing eastern German economy, the Parliament enacted a controversial law Friday that effectively frees property for immediate investment even when its ownership is the subject of a legal dispute.

Proponents of the new law hope it will break an investment logjam that has seriously hampered efforts to rebuild what used to be Communist-controlled East Germany and has accentuated the pace of decline in a region where industrial production has fallen by nearly 50% in the last 18 months.

Critics say it is morally wrong and amounts to an open invitation to unscrupulous business people interested in trading hastily rigged, poorly conceived plans for choice property.

The law, which went into effect upon passage Friday by the Bundesrat, the German Parliament’s upper house, allows local and regional government authorities to sell land to investors in eastern Germany, even though the question of rightful ownership remains open. Parliament’s lower house, the Bundestag, approved the law last week.

The measure is expected to unshackle thousands of potential investment projects that have been held up by an estimated 1.2 million claims from western Germans on old family property in the east that was confiscated by the Communists and redistributed during the 40 years of Communist rule.

Experts familiar with the problem predict that legal wrangling over property ownership will continue for decades. It has already become one of the most complex, emotion-charged issues of the German unification process.

The new law effectively amends last year’s State Treaty governing the unity between East and West Germany, which declared that the return of confiscated property to rightful owners would be preferred to monetary compensation.

Now, local governments can sell disputed property to potential investors but must keep the proceeds, which would then be passed on to the owner as decided by the courts.

Such compensation could eventually cost the government $80 billion, according to figures from the German Justice Ministry.

Passage of the measure followed protracted negotiations within Chancellor Helmut Kohl’s center-right coalition and reflected growing political pressure on the chancellor to take steps to ease the dramatic collapse in the east.

A malaise of rising unemployment and growing sense of alienation among eastern Germans, who feel themselves being treated as second-class Germans by the Bonn government, have brought new street demonstrations and angry calls for action to counter the decline.

Economics Minister Juergen Moellemann said the law gives “a super-priority to investment.”

Observers predict that it could have immediate results.

In the southern city of Chemnitz, for example, Mayor Dieter Noll recently complained that a leading bank’s proposal to redevelop idle land across the street from the town hall had been held up for months because of seven legal claims to the property.

Smaller investments, such as filling stations, shops and other modest commercial ventures, have also been held up by such disputes.

Not everyone is happy about the move. Some, including many of those western Germans who have registered claims, complain that the new law sharply diminishes the chances that legal owners will regain possession of their land.

“This law opens the gates for an era of robber barons,” said an Economics Ministry official who argued strenuously against the bill. “It’s just the latest method of confiscation.”