The relationship between the Directorate, which was more pro-Lithuanian as it was indirectly appointed by the President of Lithuania, and the local parliament, which was more pro-German, was tense.
A procedural dispute over the dismissal of the Otto Böttcher's Directorate in 1932 was only resolved by the Permanent Court of International Justice.
According to the Treaty of Versailles of June 1919, Klaipėda Region was detached from East Prussia and placed under provisional French administration.
[6] Lithuanian Prime Minister Ernestas Galvanauskas took great care to represent the revolt as a genuine uprising of the local population against oppression by the German Directorate.
Such plan was designed to direct Allied protests away from the Lithuanian government and to exploit the anti-German sentiment in Europe.
[11] While the region became integral part of Lithuania, it was also granted extensive legislative, judicial, administrative, and financial autonomy to preserve "traditional rights and culture of the inhabitants".
[14] The Directorate had the right to initiate legislature, issue regional passports, appoint tribunal judges for life, various officials, and one member of the three-member Harbor Board in charge of the port of Klaipėda.
[16] The relationship between the Directorate, which was more pro-Lithuanian, and the local parliament, which was more pro-German, was tense and often led to conflicts over the interpretation of the Klaipėda Convention and Statute.
[19] After 1931 customs agreement between Lithuania and Germany, exports of agricultural products from Klaipėda to East Prussia fell sharply.
Merkys then appointed Jonas Tolišius and Eduardas Simaitis as the Presidents of the Directorate, but neither of them were able to obtain vote of confidence from the parliament.
[23] Germany submitted the dispute to the League of Nations, which referred the case to the Permanent Court of International Justice.
In an attempt to normalize the situation, Governor Merkys was replaced with more liberal career diplomat Vytautas Gylys and President Simaitis with Ottomar Schreiber, who was an industrialist and not a politician.
The local German activist began organizing pro-Nazi parties (Christlich-Sozialistische Arbeitsgemeinschaft or CSA and Sozialistische Volksgemeinschaft or SOVOG) in spring–summer 1933.
To combat spreading Nazism, CSA and SOVOG were outlawed, its leaders and over 100 members were arrested and put on trial for anti-state activities (the Neumann–Sass case).
[27] Navakas demanded that the Directorate dismissed teachers and other officials who were members of anti-state parties or otherwise disloyal to the state.
[31] Nevertheless, Lithuania responded by replacing Governor Navakas with Kurkauskas and President Reisgys with Brūvelaitis and including a majority of Germans in the Directorate.
The Convention outlined organizational structure, competency, and relationship to the central Lithuanian government of the autonomous institutions – the Directorate, local parliament, and governor.
[39] The Protestant congregations in the Memel Territory were disentangled from the old-Prussian Ecclesiastical Province of East Prussia and formed the Regional Synodal Federation of the Memel Territory (Landessynodalverband Memelgebiet) since, being ranked an ecclesiastical province directly subordinate to the Evangelical Supreme Church Council.