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In Battleground Prussia Prit Buttar includes a chapter on the infamous sinking of the Wilhelm Gustloff in 1945. The author notes that the ship's captain, a Friedrich Petersen, had been captured by the British at the beginning of the war

but then repatriated to Germany because he was aged 66, on the condition that he did not command a ship again

A little later the author describes how in the panic of the retreat from the Red Army the the authorities were forced to use the Gustloff (which had seemed unlikely to put to sea again) in emergency duties ferrying refugees westwards, with Petersen thus

breaching his parole

It's possible that Petersen's age was crucial, nevertheless was it normal for the Allies to impose conditions when repatriating German POWs? Did they have any way of policing such conditions?

It's clearly suggested that if it hadn't been for the chaotic and disintegrating situation in Germany Petersen wouldn't have put to sea and the British demands would have been honoured. Is "parole" a word the parties would have used and understood in 1945 or is it Buttar's terminology? Did Nazi Germany habitually honour such conditions?

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Parole is indeed the word that all parties would have used and understood in 1945. In fact, this is a military tradition that has roots going back as far as Roman Empire - for example, Marcus Atilius Regulus was released on parole by the Carthaginians in 250 B.C.. It was relatively common through the end of the American Civil War, where it was done through POW exchanges on the condition that the prisoners exchanged would not return to military service.

I've run across some references to paroles occurring during World War I, but by that time they seem to have been limited to allowing POWs outside of camps during the day and not repatriations. This practice was ended by the French after the Germans failed to allow paroling of French officers. International law at the beginning of World War II recognized POW paroles, and was specifically mentioned in the Hague Convention of 1907, Chapter 2, Articles 10 through 12:

Art. 10. Prisoners of war may be set at liberty on parole if the laws of their country allow, and, in such cases, they are bound, on their personal honour, scrupulously to fulfil, both towards their own Government and the Government by whom they were made prisoners, the engagements they have contracted. In such cases their own Government is bound neither to require of nor accept from them any service incompatible with the parole given.

Art. 11. A prisoner of war cannot be compelled to accept his liberty on parole; similarly the hostile Government is not obliged to accede to the request of the prisoner to be set at liberty on parole.

Art. 12. Prisoners of war liberated on parole and recaptured bearing arms against the Government to whom they had pledged their honour, or against the allies of that Government, forfeit their right to be treated as prisoners of war, and can be brought before the courts.

The way that such arrangements have been policed have mainly been through means similar to article 12 of the Hague Convention. That is, if a combatant is recaptured on the battlefield and found to be in violation of a prior parole they would not be treated as a POW - in many cases this would mean that they would be executed.

Friedrich Petersen is actually the only reference that I can find for a traditional POW parole in World War II. Other instances seem to be confined to neutral countries such as Switzerland, Spain, and Turkey, but these were usually conditional on the parolee not leaving the country and obviously were not between belligerents.

See:
Brown, Marcus, Prisoner of War Parole: Ancient Concept, Modern Utility, Military Law Review Vol. 156

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There's this source describing temporary parole for a British officer during WW1 to visit his dying mother uk.news.yahoo.com/… –  Opflash Jul 10 at 11:40

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