HC Deb 24 November 1914 vol 68 cc1055-83

(1) Any sum which, had a state of war not existed, would have been payable and paid to or for the benefit of an enemy by way of dividends, interest, or share of profits, shall be paid by the person, firm, or company by whom it would have been payable to the Custodian to hold subject to the provisions of this Act and any Order in Council made thereunder, and the payment shall be accompanied by such particulars as the Board of Trade may prescribe, or as the Custodian, if so authorised by the Board of Trade, may require.

Any payment required to be made under this Sub-section to the Custodian shall be made—

  1. (a) Within fourteen days after the passing of this Act, if the sum, had a state of war not existed, would have been paid before the passing of this Act; and
  2. (b) in any other case within fourteen days after it would have been paid.

(2) Where before the passing of this Act any such sum has been paid into any account with a bank, or has been paid to any other person in trust for an enemy, the person, firm, or company by whom the payment was made shall, within fourteen days after the passing of this Act, by notice in writing, require the bank or person to pay the sum over to the Custodian to hold as aforesaid, and shall furnish the Custodian with such particulars as aforesaid. The bank or other person shall within one week after the receipt of the notice comply with the requirements and shall be exempt from all liability for having done so.

(3) If any person fails to make or require the making of any payment or to furnish the prescribed particulars within the time required by this Section, he shall, on conviction under the Summary Jurisdiction Acts, be liable to a fine not exceeding one hundred pounds or to imprisonment, with or without hard labour, for a term not exceeding six months, or to both such fine and imprisonment, and in addition to a further fine not exceeding fifty pounds for every day during which the default continues, and every director, manager, secretary or officer of a company, or any other person who is knowingly a party to the default shall, on the like conviction, be liable to the like penalty.

(4) If in the case of any person firm or company whose books and documents are liable to inspection under Sub-section (2) of Section two of the Trading with the Enemy Act, 1914 (hereinafter referred to as the principal Act), any question arises as to the amount which would have been so payable and paid as aforesaid the question shall be determined by the person who may have been or who may be appointed to inspect the books and documents of the person firm or company, or, on appeal, by the Board of Trade, and if in the course of determining the question it appears to the inspector or the Board of Trade that the person firm or company has not distributed as dividends interest or profits the whole of the amount properly available for that purpose, the inspector or Board may require the whole of such amount to be so distributed, and in the case of a company, if such dividends have not been declared, the inspector or the Board may himself or themselves declare the appropriate dividends, and every such declaration shall be as effective as a declaration to the like effect duly made in accordance with the constitution of the company:

Provided that where a controller has been appointed under Section three of the principal Act this Sub-section shall apply as if for references to the inspector there were substituted references to the controller.

(5) For the purposes of this Act the expression "dividends interest or share of profits" means any dividends bonus or interest in respect of any shares stock debentures debenture stock or other obligations of any company, any interest in respect of any loan to a firm or person carrying on business for the purposes of that business, and any profits or share of profits of such a business, and where a person is carrying on any business on behalf of an enemy any sum which had a state of war not existed would have been transmissible by a person to the enemy by way of profits from that business shall be deemed to be a sum which would have been payable and paid to that enemy.

Mr. H. TERRELL

I beg to move, in Sub-section (1), to leave out the words "and paid" ["would have been payable and paid to or for the benefit of an enemy"].

I do not quite appreciate what is intended to be effected by the introduction of the words "and paid." The introduction of those words would practically make the Sub-section nugatory. Before it can be applied, and certainly before it can be enforced under Sub-section (3), it would be necessary for the person seeking to enforce it to prove not only that if a state of war had not existed the debt would not have been payable, but also that it could not have been paid. How can one predicate that it would not have been paid if certain circumstances had not arisen that have arisen? If those words are left in it would make it practically impossible to enforce Sub-section (3), and unless there is some reason which I do I not appreciate for the insertion of those words, I shall insist on my Amendment.

Sir J. SIMON

The question which the hon. and learned Gentleman has raised is an entirely reasonable one, and I quite appreciate that, as one looks at Clause 2, and even as one studies it rather closely, as I have no doubt the hon. and learned Gentleman has done, it is not at first sight apparent why those words should come in. I may, perhaps, say that the suggestion that they should be omitted has been made to me by other hon. Members of the Committee, and I have had the opportunity of conversation with one or two of them, who may take part in this discussion. I hope that Members of the Committee, in spite of the fact that I seemed to be obstinate in regard to the last Amendment, will realise that I have no idea of doing anything in this Bill except to help to make it as good as it can be made. If, after the point has been considered, the Committee really wish to leave out the words "and paid," and I gather that is the general desire, I shall not resist, but I think the result will be found to be other than what is intended. Let me take the case of a company, say, a brewery company, which has debentures held by debenture holders who are entitled to be paid debenture interest. Of course, if it does not make sufficient profit to pay debenture interest it is unfortunate, and they may possibly wind up your company, but, after all, it is not a criminal offence. If you say that every English brewery company which has debentures, some of which are held by enemies and some of which are held by our own friends, shall pay any interest which is payable on those debentures to the Custodian which, if it was not war time, would have been payable to the enemy, and if it does not, then every director, the secretary, and the manager shall all go to prison for six months, you are obviously providing that every brewery company that has not got the money to pay interest on its debentures, because some debenture holders are enemies commits a criminal offence not so to pay it. That is the effect.

I quite admit that it occurred to me after the Bill had passed through several drafts—it is criticised by those who claim to speak for the commercial community which shows how unfortunate mere human effort is, because I do not think any Bill has been more carefully considered in its phraseology than this Bill—it did occur to me and others who advised me, that unless we guarded against that case we might produce consequences that were never intended. The point of criticism the hon. and learned Gentleman makes is a perfectly fair one. The explanation I am offering to him is that that is the reason for adding the words "and paid" in order to avoid that consequence. He took the point, "Do you not, by adding the words 'and paid,' make your Clause very difficult to work?" I quite appreciate the force of his criticism. I meet it in this way: this Clause is retained at present, although there is an Amendment afterwards to extend it, and it applies primarily to dividends and shares, interest on such things as debentures, and, in some cases, to shares of profits which are divided between different persons.

Take such a thing as dividends on shares. I apprehend there is not much difficulty in saying whether or not such a dividend is payable and would have been paid if there had been no war, because what happens is that the company has shareholders, some of whom are not alien enemies, while others of them are alien enemies. They declare their dividends and distribute their available profits straightaway to those shareholders who are not alien enemies. They do not, and they must not, pay the corresponding dividends to shareholders who are alien enemies, but there can be no doubt that if war had not broken out they would have paid them, because, of course, you have to pay all your shareholders at the same time. The same thing is true about interest on debentures, and the explanation—I agree the point is rather a fine one—really lies in what I have endeavoured to say. I think it will be found that if you do not put in these words "and paid" you have that consequence which I have indicated, which no one, of course, intends. It is not in the mind of any of us. On the other hand, we shall not in practice have any difficulty in imposing this penalty if this Clause is disregarded, because, of course, the question whether or not it would have been paid, like many another question, is after all one of evidence, and I cannot think of evidence more conclusive than that you have in fact paid all your shareholders or debenture holders who are not alien enemies, but have not paid those who are alien enemies.

Mr. H. TERRELL

Interest on an ordinary mortgage.

Sir J. SIMON

I quite agree that would be a difficult case, and it is partly because it is a difficult case that I have done something which brings down upon me the vials of wrath of some hon. Members and have limited this Clause as I have. In Sub-section (5) we have said that the compulsory provisions are in substance limited to dividends and debenture interests and shares and profits, and the like, arising in commercial matters, and the case therefore put by the hon. and learned Gentleman of interest on a private mortgage, which I agree would not be an easy one to argue, is excluded. I am not saying that makes the Clause, even as it stands, entirely easy. Some hon. Members who have approached the subject, and certainly some of those many correspondents who have written to me, have given me to understand that if they had the business, they would do it in five minutes, because it is so simple. But I suffer under the great disability of having had to work at the thing for weeks, and I find it rather difficult. I recommend to the Committee that we should keep in the words "and paid," because if we do not it will be found to be rather inconvenient, and we had better at any rate avoid that unexpected consequence by keeping them in.

Mr. CAVE

When I first read the Bill and studied it I took entirely the view expressed by my hon. and learned Friend (Mr. Terrell) and I was very desirous that these words should be cut out. But after going further into it I rather doubt whether it is worth while. The Clause goes upon a curious and a new system altogether, and makes it a criminal offence not to pay these moneys to the Custodian, and the moment one has understood that one comes to the conclusion that it is not desirable unduly to extend the effect of the Clause. For myself, I rely much more upon Clause 4, under which any property and any debt may be vested in the Custodian by a simple order, than upon Clause 2, and I do not look for any great result from this particular Clause. It is for the same reason that, although I had intended to move an Amendment to extend this Clause to all debts—in fact I have an Amendment on the Paper which would have that result—I do not to-day propose to move it, because I do not want to create conditions under which it would be criminal for a man not to pay his debts. He may not be able to pay his debts. It would be very unreasonable that such a penalty should fall upon those who are simply prevented from paying money which they owe and which may, no doubt, be recovered by civil process. For that reason my own view at present is against omitting these words. I agree there will be a difficulty in proving in many cases that the money would have been paid. It is easy to say when money would have been payable, but it is often very difficult to say when it would have been paid. Therefore the effect will be very limited, and may, in practice, be confined to cases like the instance given by the Attorney-General, where dividends are payable to whole classes, and you have paid everybody else, but because this man is an alien you have not paid him. In such a case it is clear that the money would have been paid but for the fact that the man was an alien.

Mr. TERRELL

After the explanation of the Attorney-General I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. RUTHERFORD

I beg to move, after the word "enemy" ["for the benefit of an enemy"], to insert the words "whether payable to such enemy direct or to any agent or person on his behalf."

This is not an Amendment to which I personally attach very great importance, but I have been asked to move it on behalf of a very important body of traders, whose counsel considered this question and drafted this Amendment, and they have sent it to me and say, "it is submitted that it should be stated in the Act that property here should include all sums of money owing to enemies, whether payable to them direct, or to agents or to persons carrying on business on their behalf." I think it ought to be put into the Bill, but, of course, we are entirely in the hands of the Government. If I spoke rather strongly just now, I hope the Attorney-General will try to forgive me. We are not dealing with this matter in any carping or political controversial spirit. What we are exceedingly anxious to do is to see that this Bill is made as strong as possible, because these are the very people who are suffering to-day in Germany and in Austria. Their shares and property have been taken possession of, and what they are very anxious to be done is that everything that belongs to an alien enemy and can be got hold of should be taken possession of and taken care of here, so that at the end of the War, if Germany and Austria, are not prepared to make compensation, we may have a fund out of which we can compensate them. The idea is to prevent the alien enemy from getting present pecuniary assistance, and, secondly, to protect our own people at the end of the War, so that we shall have a fund out of which our own people can be compensated. I move this at the request of the British Engineers' Society, who seem to think a great proportion of the sums of money which are paid to alien enemies to-day are payable to agents on their behalf and ought to be stopped.

Sir J. SIMON

I quite understand the spirit in which the hon. Member proposes this, but I am going to suggest that really in this regard the Bill as it stands meets what he has in mind so far as it is proper to meet it. The result of not doing what this Clause says you ought to do is that you become a criminal, and it is very undesirable that we should treat anyone as a criminal because he fails to pay a sum of money which would otherwise have been paid to an agent of an enemy, if he does not know that he is an agent of an enemy. That would be a most disastrous thing. If the intention is, as I suppose it is, to limit it to cases where payment may be made with the knowledge of the payer that, either directly or indirectly, the money will go to the enemy, that is covered by words in Clause 3, which we shall reach shortly. I think the hon. Member will see that his Amendment is one which is not required.

Mr. RUTHERFORD

I do not press it.

Amendment, by leave, withdrawn.

Mr. JOYNSON-HICKS

had given notice of an Amendment in Sub-section (1), after the word 'enemy" ["for the benefit of the enemy"], to insert the words "or a limited company registered in Great Britain or Ireland whose shares are held as to upwards of seventy-five per cent. by enemies."

The CHAIRMAN

I have some doubt whether this Amendment is within the scope of the Bill. It introduces a new subject.

Mr. JOYNSON-HICKS

The Bill is "to amend the Trading with the Enemy Act, 1914, and for purposes connected therewith." What I am doing is seeking that the definition of the word "enemy" should be widened. Under the original Act "enemy" was a human being. I am going to add to that enemy a limited company, and I venture to say that the suggestion I am going to make is one of considerable substance and one of great importance outside the House. It was discussed to some extent on the Trading with the Enemy Bill, and it was suggested that an alteration would be made. I submit that I am proposing to-day to add to the human enemy the impersonal enemy, and I believe that is within the scope of the Bill.

The CHAIRMAN

It is rather a nice point, and I do not propose to exercise my power to rule the Amendment out, although I am still doubtful if it is not going beyond the original Act.

Mr. JOYNSON-HICKS

I beg to move the Amendment. It is important to prevent the enemy from getting money, whether the money is payable to a human being or to a limited company trading in this country. I am prepared to say that there are companies 75 per cent. of whose shareholders are German. There are a large number of companies in this country with English names which are simply alter egos of alien enemies. There are Germans in Germany promoting companies here which are composed entirely of shareholders residing in Berlin. I have no doubt Members of the House have heard of a company bearing the name of "The British Incandescent Mantle Works." It is a company with 30,000 shares which are held by three gentlemen residing in Berlin. That is not a British company at all. There is another company with the useful English name "Henry Hill and Co., Ltd." Who would imagine that that is a German concern with 30,000 shares, 29,997 of which are held in Vienna? That is an entirely alien enemy concern. There was recently in our Courts a case in which the "Continental Tyre Company" sued an English citizen for £4,000 or £5,000. The defendant said, "This is a purely German firm, I am going to pay the money to anybody who can give a good receipt for it." He said he would rather pay it over to the Government as custodian to be kept for any purpose for which it was being held. The Court held that under the provisions of our law, as it now is, the Continental Tyre Company and all those other companies are really English concerns, although the whole of their capital is held by Germans. An English debtor was ordered to pay £5,000 to a German company, and I have no doubt that we shall find before very long that that money will find its way to Germany in meal or malt. When this matter was brought before the House some time ago, the President of the Board of Trade assured me that the position was receiving the careful consideration of the Government. The Attorney-General said the matter had been engaging the attention of the Government and that it was the intention of his right hon. Friend to produce immediately a proposal dealing with this question.

Sir J. SIMON

was understood to say that the question had been dealt with.

Mr. JOYNSON-HICKS

If the Attorney-General refers to the Clause for allowing an inspector to be appointed, I venture to say that that does not deal with the question. At all events, he did not deal with it effectively, as was proved by what took place in the Court yesterday. I read the report of the case in the newspapers. Nothing has been done by the Government to deal with such a case. I think this Amendment does afford some means of dealing with this difficult question. If the Attorney-General has another mode, I will accept any suggestion he makes, but, in default of any other Amendment, I move my Amendment.

Sir J. SIMON

I am glad that you have seen your way to let the hon. Gentleman raise this point, because it is one which excites a great deal of interest and concern, no doubt, among those who have thought over this subject, and which it is very proper should be considered in this connection. When I say that, I include the Government and those who have been doing their best to make what they thought were good suggestions about this matter. It is perfectly true that when you are at war with a great industrial community like that in the Empire of Germany, our modern joint-stock company law does justify any reasonable business man in saying, "I do not quite like the position. It seems to be unjust that merely because some enterprise is registered at Somerset House as a joint-stock company, therefore, whatever the composition of its directorate, or the national attachments of its shareholders, it is treated not as an alien enemy." That is a perfectly natural point of view, and one which has been very carefully considered since the beginning of the War, and one as to which it is desirable to make much more stringent regulations, and to make them in the Bill. But it does not follow, because all that is true, that the right way to do it is to say bluntly, "You are going to call this English company an alien enemy, and there is an end of it." There may be other and better ways, but it is a very fair question to raise, and I would point out what has been done already, and what we propose to do if the House accepts the suggestions which are contained in this Bill, improved, as no doubt they will be, by the general consent of the Committee. In the first place, the hon. Gentleman will find that after I made the statement which he quoted from the OFFICIAL REPORT, in September, the Trading with the Enemy Bill was introduced, and it was to the proposals which were contained in that Bill that I was referring. I am not asking the Committee to say that this was adequate, but let us begin by seeing what it was, and not by assuming that nothing was done. The provisions contained in the original Act of September last dealing with this matter were in Section 2, and the provisions that are important are these: Where you have a limited company in whose case one-third or more of the issued share capital of the directors of the company, immediately before or at any time since the commencement of the present War, was held by or on behalf of, or consisted of persons subjects of or resident in or carrying on business in, States for the time being at war with His Majesty's Government, then the Board of Trade could appoint not merely an inspector, but a controller. The test there applied is much more severe than the test which the hon. Gentleman now suggests. He says where you have 75 per cent. of the share capital held by alien enemies, whereas in the Act already passed there is power in any case under the Section to which I have referred—

Mr. CAVE

That Section only authorises the appointment of an inspector. It is the next Section which authorises the Board of Trade to appoint a controller.

Sir J. SIMON

I am much obliged. I should have put it rather more accurately. Where you have one-third or more of the shareholders or the directorate belonging to the class indicated, then the inspector can be appointed, and in the next Section 3 there is power for control. This has turned out to be rather too narrow, and it is because experience has gone to show that that is the case that we are asking to have much wider powers now. But let it be remembered that there was power to appoint a controller in any case where the Board of Trade in reference to the company thought that an offence under the Act had been or was likely to be committed in connection with the trading or business. I only mention this in order that we may have it before us. I am not contending that it was enough, but it is better to see what it was; and further, then we propose in the present Bill quite a number of other regulations, and I think that the combined effect ought to go a long way to meet the case which the hon. Gentleman suggested. First of all, under the Section which we are now discussing any company, not only a company predominantly German, but any British company which has got any shareholder who is an enemy, and which is distributing dividends, has got to pay the dividend that goes to that shareholder or those shareholders to the Custodian. That does not merely apply to companies that have got their directorate or shareholding list predominantly German. It applies to all. But of course the cases which are important are cases such as those which the hon. Gentleman gave by way of illustration—I do not know the facts but I take the illustration—where the whole of the shareholders of the company are people who are in Germany. There, of course, practically all the profit for dividend en bloc will be transferred into the custody of the Custodian.

10.0 P.M.

It may be said that a company like that which is controlled by alien enemies is not likely to go on declaring dividends when the only result will be to pass the dividends over to the Custodian. We thought of that and so we have got a provision which the hon. Gentleman will find in the Clause that if you have a company of that sort which is substantially German, and if the question arises as to what is the sum which, if there was no war, would be distributable by such a company, then the inspector or the controller, as the case may be, can in a proper case after full investigation decide that it shall be subject to the action of the Board of Trade. That is a very stiff regulation, and will have to be exercised, of course, by the control of inspectors who are accomplished accountants, and who will be able to see that the effect of the Clause is not avoided. You find that many of these companies, though they profess to be British, none the less have got in trust or in other ways, whether as debts or whatever it may be, certain property which really belongs to alien enemies, and they are accountable for it to some alien enemy. Nobody knows what they are doing with it. We have provided in Section 3 that any British company that holds or manages or controls any property not merely on account of, but on behalf of any enemy, shall have to make a return to the Custodian, the object being when we find a case where the amount is substantial and where it is profitable—I am far from saying every case—I think it would be quite wrong to do it in every case—to provide that in proper circumstances the Custodian may get the property transferred to him.

Mr. JOYNSON-HICKS

Does the right hon. Gentleman suggest that any person who controls or manages the business on behalf of the company does not mean the whole company?

Sir J. SIMON

My words should not be reasonably so interpreted, but the fact that they could be so interpreted is shown by the hon. and learned Gentleman having interpreted them in that way. The illustration I gave is something to the point. It is said that there may be enterprises in this country which, under the eye of our law, are British, but which are so hostile in character that they would transmit funds directly to Germany, or if not directly, they might, none the less, create a credit. For instance, in the minds of many people there is the case where some German company here has got a certain balance which it does not turn immediately into dividends, but declares the balance in New York, and New York in turn may inform some kindred enterprise in Germany that there is this credit available. That would happen in companies the directorate of which, or the general flavour of which, is German, or hostile. These are just the cases where we could put in an inspector or a controller. We have provided in Clause 10, Subsection (3):— If any person without lawful authority deals, or attempts, or directly or indirectly offers, proposes, or agrees to deal with any money or security for money or other property which is in his hands, or over which he has any claim or control for the purpose of enabling an enemy to obtain money or credit thereon or thereby he shall be deemed to be guilty of the offence of trading with the enemy within the meaning of the principal Act. In the case of a company the penalties are very severe. I want the Committee to feel that we have seriously approached this question. We have not in the least acted like a Government which thought that what it did in the month of September was good enough in the month of November. On the contrary, those who advise me—and I have received a great deal of most valuable help—have not spared any effort to find out what are the directions in which we can very effectively put a stop to this danger. It is our duty to do that, and many tradesmen feel that it is the way in which they can serve their country, by making quite certain that in carrying on their business they do not really finance the enemy. I fully sympathise with the view, therefore, that we should make the thing as effective as we can, and I suggest to the hon. and learned Gentleman that it is by methods such as this that we shall most wisely deal with this matter. It is a very serious thing to say that a company registered under the English law, and so undoubtedly a British enterprise, to insist that it is an enemy. That would be a most unfortunate result, because the gain to our own company law is that it should be regarded by other companies in the world as the model within which they are prepared to come and live. Therefore what we ought to do is to take adequate precautions in this national emergency. No precautions are too great, but do not let us undermine the great principle on which a great deal of our commercial credit and reputation has grown up. I quite agree that while the War is going on we ought not to allow new registration merely to disguise what are German concerns assuming in time of war the appearance of a British company.

In order to prevent that we have Clause 9, which in terms prohibits it. I suggest that that is really the wise way. Are we to call a limited company in this country German because of the fact that it has got German shareholders, though it is actually carrying on business in this country, is actually paying rent to a British landlord, paying rates and taxes to a British municipality, and which is probably employing British labour and paying them wages? To say such a company shall not receive a single copper of its profits, is to deprive the British landlord of his rent, the British Treasury of his taxes, the British rate collector of his rates, and the British people employed of their wages. And it should be remembered that some of those enterprises are, in their turn, supplying British manufacturers and British purchasers of things which they want. It is not that I do not sympathise with the view so widely expressed that we really must deal with these companies of German character, but I do submit that the proper and British way to do it is not to say that a company registered under British law is an enemy. While this War is going on, if a company is registered under the British law, we will, by legislation such as this, take security of an absolute kind for inspection and control, in order to see that in carrying on the business it does not help the enemy.

Mr. SANDERSON

I sympathise with my hon. Friend in raising this matter, which is of the very greatest importance. I have given considerable thought to it since the Bill was introduced, but I do think the Amendment of my hon. Friend goes too far, for the reason which the Attorney-General has put so forcibly before the House. I think the result of his Amendment would be to prevent a company which is German in its constitution carrying on business in this country at all; it would prevent it, as the Attorney-General pointed out, from employing British labour; it would prevent it from manufacturing things which this country wants manufactured; but, at the same time, I do think it is most important to see that a company is not put in the position of using British money for the purpose of supplying it to Germany. I submit that the proper way to deal with such a company as that concerned in the case reported in to-day's "Times," and where every single shareholder is in Germany and the only resident shareholder in this country is also a German, is to put in a receiver. With that kind of company the only feasible way of dealing with it is to put a receiver in. Very often you want a particular man to carry on the particular business, but you ought to have the receiver put in who can deal with the money and see that it is paid to the proper people, and not used for the purpose of supplying funds to Germany to carry on the War. It seems to me that may be done under Clause 11 of this Bill if it is extended a little further. I have intimated to the Attorney-General that I intend to move an Amendment to make it a little more effective than it is. It seems to me that the Board of Trade might very well say, "Here is a company which is really a German company; inasmuch as this is really a German company, we ask the Court to appoint a controller." Then if the controller is appointed I cannot see that any great hardship is done, because he will see that the German company is not taking British money and sending it out of the country.

Sir A. MARKHAM

The Committee have listened to a very forcible speech from the Attorney-General and a speech which was very special pleading, but I must say my sympathy is with the Mover of this Amendment. Let me give a case. The largest electrical firm in the world, known as the "A. E. G.," practically controls all electrical industry in Germany. This company is held largely by a German company and the Dresdner Bank, and has now a trading house in London, carrying on a large business, buying electric goods and selling them of British manufacture and of American manufacture and other manufactures. It is carrying on a general trade in this country—why? It is doing so in order that after the War is over its business will still be a going concern.

I feel that this War is so wicked and so wrong that, although I have done a very large business with Germany, both buying and selling, I will never in my life either buy or sell with a German company again. That is my feeling, and therefore I regard the view of the Attorney-General as very different from the general view of the House. Let me put this case. In to-day's German Marconi official intelligence the managing director of the A. E. G. is cited as being an authority which the German people should recognise as one of chief hatred against this country. That is a gentleman whose firm you are going to help to keep going in London, merely for the purpose of carrying on their business so that they may have a going concern at the end of the War. What would the Germans do in a like case? Does anyone seriously think if Germany had a limited liability company's law, such as ours, she would permit what we are going to permit. I know there are great difficulties in the matter, but at the same time, if the House is going to look at this question from the point of view of Germans and the company law, surely the right way to deal with the company law is this. We pride ourselves on our commercial integrity, and on our company law, but surely anyone who looks at this question from the standpoint of a public company at work would say that the provisions of the company law should not apply to such companies during the War, and that the company should cease trading. There is nothing unreasonable in that, or nothing to bring discredit on commercial trading in this country. Nobody in these days when we try to come to an agreement likes to go against the Government, but I feel that there is a great deal of trading going on by alien enemies. When I say that I shall never have any more trading with the enemy the House will feel the reason I have come to the conclusion to support the Amendment of the hon. Gentleman.

Mr. DUKE

I can share to a very great extent the personal view the hon. Member has expressed. As to one's future relations with those who are at present enemies; but I cannot follow the hon. Member in the course he proposes, which is that we should so transform the commercial life of this country—that, because we are at war with Germany at the present time, we should make it impossible for any German private citizen to possess any interest in a British company. That is an act of war upon the individual citizen of the enemy country which transcends anything I believe that has ever been done, at any rate since the middle ages.

Sir A. MARKHAM

The hon. Gentleman is misrepresenting what I said. All I wanted was that alien enemies should not trade.

Mr. DUKE

I think I fully understand. The meaning of the proposal is that if an alien enemy has a share in a British company, that share shall be extinguished. [HON. MEMBERS: "No!"] Then there is no logical force in anything that has been said. If you are not carrying it to that extent you are not consistent with the proposals you make. The position is this, as I understand it. There are, carrying on legitimate business in this country and under the sanction of our law, certain companies, the capital of which has been provided by foreigners. Foreign capital has been imported here and is being employed in English concerns and to a very great extent for our purposes. As the Attorney-General said, these concerns are to a large extent employing British labour; they are occupying premises of British landlords; they are bearing British burdens. It so, happens that the capital of the alien enemy is locked up in this country. But the present proposal has the effect, so far as the company is concerned, of practically prohibiting it from carrying on business here. Take either, of the extreme cases to which reference has been made. Is it really intended that these companies shall be blotted out? There is no intermediate course. If hon. Members are ready, in the face of the civilised world, to take the course of blotting out enemy property, let us set about it with the deliberate design. But I think we have arrived at a point where it is quite plain that we are not dealing with the question of trading with the enemy; we are dealing with the question of transforming the municipal law of this country so that if an enemy state comes into being every citizen of it shall be penalised.

As I have said, I take the personal view of the hon. Member opposite; but I am not content to join in a course of procedure which will have the effect of confiscating enemy capital and the capital of individual citizens. That is the effect of it—to destroy the concern, to make it impossible for it to be carried on here, to confiscate the personal interest of all these alien enemies. I think that would be wrong. I do not think the country is prepared to do it. If the people outside this House, who have not given to it the study which all of us know the right hon. Gentleman has given with a desire to promote the public interest, really realise that every assistance which is given to the enemy by means of these commercial concerns is given with the peril of involving the person who gives it in prosecution and conviction in this country, I do not think that public opinion outside this House will run on the lines upon which we know it does run. The real safeguards are those which the right hon. Gentleman pointed out—that immediately this money which is made or exists in this country is even proposed to be used for the purpose of assisting the public enemy, every person who is party to that proposal or attempt becomes a criminal, and may be prosecuted. The real remedy is that citizens of this country who know the danger should bring to the notice of the proper authorities, especially the Board of Trade, those quarters in which the danger exists, in order that the money which is made in this country may be kept and circulated here, and the enemy prevented from getting the benefit of it, without our going in defiance of our own law or damaging our own interests.

Mr. RADFORD

I do not yield to the hon. Baronet in the matter of patriotism, but I disagree with him in the measure by which he proposes to give effect to his sound sentiments. I cannot help thinking that if we were to carry out the proposal contained in the present Amendment, we should be disfiguring our municipal law, and doing something which is not in accordance with the law of nations as recognised amongst civilised people. I merely rise to point out that in the Preamble of the Bill it is stated:— Whereas it is expedient to make further provision for preventing the payment of money to persons and bodies of persons resident or carrying on business in any country with which His Majesty is for the time being at war (which persons and bodies of persons are hereinafter referred to as 'enemies').… The purport of the Bill, as described in the Preamble, and as described in the principal Act, is to deal with persons resident or carrying on business in a country with which this country is at war. It is, therefore, inconsistent and incongruous, if not almost an absurdity, to introduce by this Amendment something which is altogether foreign to the scope of the Bill, and to divert our legislation into a channel which was apparently never contemplated by the authors of this measure. I do not know whether the point has been raised, but having regard to the preamble, I would ask whether this Amendment is admissible at all?

The CHAIRMAN

That point was raised from the Chair. I stated that I had considerable doubt whether this matter did come within the scope of the Bill, but that I was anxious on an important discussion of this kind to err rather on the side of freedom than on that of restriction.

Mr. GERSHOM STEWART

After listening to the speech of the hon. Baronet the Member for Mansfield. I would like to say that I, as a layman, support his view. I do not think that the answers of the Government are quite satisfactory, because we have seen in the newspapers of late exhortations to Englishmen to enter upon a war with German trade. An hon. Member below me seems to think that if we do this we will do damage to the trade of our own country. I do not see, if we interfere with the working of a German firm in this country, that we need necessarily damage our own people. Because the work they at present do can be equally well done by Englishmen. We know that the Attorney-General's idea of what is hostile is a question of domicile and not personality, and though we hear objections to alterations to the common law in this Bill, I would like to ask the Attorney-General whether the Proclamation of the 9th September was not an alteration of the common law with regard to trading with the enemy.

Sir J. SIMON

So far as the definition of an enemy is concerned, I believe it practically corresponds to the common law, and that is also, I think, the view formed by every learned judge.

Mr. STEWART

I should like to give an instance as to the contention that domicile affects a man's hostility. The particular case I have in mind is the Proclamation in September which made a German resident in Hong Kong not an alien enemy. Since that Proclamation was issued the conduct of the Germans in that colony has been so unsatisfactory that the Governor, by the permission, no doubt, of some Government department, has interned every man of military age, and has deported everyone else. That proves that domicile does not turn an alien enemy into a friend. I myself listened to what the hon. Member for Brentford said with entire approval. I really do not see why we should be so tender-hearted towards Germans. I think if their companies come here, and there are profits, after the War is over these profits will go to Germany, and help Germany to build another navy that it will cost us large sums of money to defeat in years to come. I heartily support what the hon. Member for Mansfield has said. I think we ought to make our terms as strict as possible.

Mr. HUME-WILLIAMS

I have listened with the deepest attention to what the Attorney-General has said. I am sure we all recognise so fully the hard work he has done and the care he has given to the preparation of this Bill that I hesitate to urge a view that is not in accord with his. I cannot, however, help thinking that there is more in this point than perhaps seems at the moment. The object of this Section is to prevent dividends, interest on share of profits going to Germany. The remarks which have fallen from some of those who have addressed the House have gone to show it would be inequitable to do that. If a German named Schmidt is carrying on trade here, and the profits are payable to him by those with whom he is trading, this Section says these profits ought to be paid to the public official. The Attorney-General shakes his head. Dividends, interest on shares of profits, which would be payable if a state of War did not exist shall not be payable for the benefit of an enemy.

Sir J. SIMON

I do not think the hon. and learned Gentleman followed the earlier parts of this subject very closely. "Enemy" means somebody, of whatever nationality, who is resident or carrying on business in a hostile country. That is the first point to know before you discuss trading with the enemy. I do not think the illustration of Mr. Schmidt is very clear.

Mr. HUME-WILLIAMS

I am much obliged to the Attorney-General, but if we get Mr. Schmidt abroad, where he ought to be, then the purview of this Section is to keep the profits that would be paid to him and they are to be paid to the public official. What is the difference between the profits going to Schmidt abroad and going to German shareholders through the conduit pipe of an English company carrying on trade here?

Sir J. SIMON

But they do not.

Mr. HUME-WILLIAMS

If it is wrong in one case, why is it not in another? This Section, as it stands at the present moment, does not prevent it. If there is an English company with German shareholders resident abroad they do not come under the definition of "enemy" in this Section.

Sir J. SIMON

They come in exactly. If an English company has got a shareholder named Schmidt in Berlin, then under this Section moneys that would be paid for the benefit of Schmidt would not be paid when a state of war is existing. That is what the Section is about.

Mr. HUME-WILLIAMS

I am sorry I do not make myself clear. The terms of the Section are as to the amounts payable to, or for the benefit of an enemy—that is, an enemy resident abroad. Supposing he keeps out of the way from this country. Supposing, instead of having an enemy abroad, you have a trading company, English in name and corporation, but consisting of German shareholders resident abroad, the amount payable to that company have got to be paid now. ["No!"] Of course if they were sent direct to the shareholders, then they would come under the purview of this Act, because they would be for German shareholders. But would an enemy, within the definition of the Clause, not get over the whole point if it were the case of an English company with premises and trade in England? That company would not be so foolish as to send the moneys direct to alien shareholders abroad, but the money would be credited to Mr. S. in England, who would credit it to Mr. S. in New York, and Mr. S. in New York would credit it to his firm in Frankfurt.

Sir J. SIMON

When we come to Section 10, Sub-section (3), it will be found that that is provided for.

Mr. HUME-WILLIAMS

It seems to me to be perfectly proper that if you adopt this system at all, the logical conclusion is that you should define "enemy" as something which it really is. I think there is more in this point than hon. Members seem to think, and I press the Attorney-General to accept the Amendment.

Mr. DAVID MASON

It is quite clear that the difficulty raised by this Amendment is provided for in the Clause. Surely it is not suggested that when a minority holds the shares the same law should not apply. Why should a British company be ruled out because the majority of the shares are held by the enemy? Germans might hold the majority of the shares in the London and North-Western Railway Company, but it is still a British company. The Clause proposed preserves our British registrations and will encourage all people after the War to come here and trade—[HON. MEMBERS: "No!"]—and we do not wish to close the door to them. I fail to see what object there is in the Amendment. The Clause amply provides that no benefit can go to the enemy, and if you cripple or stop those companies you stop many people deriving benefit who are domiciled in this country. I am sure that is not the object of the mover of the Amendment, for he does not wish to do harm to people deriving benefits as tenants or landlords. If these people are prevented from doing any trade here you will be doing harm to many innocent persons who are British citizens. The Bill as it stands covers shareholders, even should they be Germans, and it provides for the object which the mover of the Amendment has at heart. I hope the hon. Member will be satisfied with the powers given to the Controller which will adequately prevent any help going to the enemy, and I trust that he will not press his Amendment, which would do a great injury to many British subjects and citizens without in any way doing any additional injury to the enemy.

Mr. CAVE

I agree with much that has been said, and I think there is a real danger lest moneys which become vested in these wholly German companies should be transmitted to the hostile territory no doubt through the medium which my hon. and learned Friend suggested of a neutral country. We all feel the danger; the thing is to find the right remedy. I venture to think, with all respect to my hon. Friend, that his Amendment will not provide the remedy. The only effect of his Amendment would be to amend Clause 2, so that any interest or dividend or profits of other businesses coming to these companies would go to the Custodian. That is a very small matter. It is not the interest, dividends, and profits of other businesses coming to these companies that you want to put your hands upon; it is the profits of the companies themselves.

Mr. JOYNSON-HICKS

I would remind the hon. and learned Member that his Amendment comes next.

Mr. CAVE

That is the effect of the Amendment as it stands. We want to put the hand of the State upon the receipts and the moneys of these foreign-owned companies, and we want to find the right way to do it. These companies require more supervision than individual aliens trading here, because these companies which are entirely foreign-owned are really the enemy living in this country under a different name, and you have to treat them in a different way from the manner in which you treat foreigners living here in person and carrying on their business here. Let the Attorney-General say if he will extend radically the power to appoint a receiver. I know well that he has upon the Paper a new Clause to which he has not referred, but which would enable the Board of Trade to appoint a supervisor. I am not quite sure that is enough, and I should like to see the law as he rather for a moment thought it was in his speech—that in all cases where a third, or whatever the proportion of the capital may be, is owned by aliens there shall be a receiver appointed, not to interfere with the carrying on of the business or to appoint some manager to do the actual trading, but to keep his hand upon the moneys of the company and to see that it cannot and shall not go abroad. If the Attorney-General will consider that and deal with the matter in that spirit I think probably we should all be satisfied.

Sir HENRY DALZIEL

I hope that, while we may not be doing injustice to any honest trader, we shall not be too squeamish with regard to our policy. We are employing our Fleet in the North Sea to do everything that we can in order to destroy German trade. The first thing we have to do is to hit them as often and as hard as we can, and we should not consider too sympathetically what may happen after the War, or during the War, so far as German trading is concerned. The hon. Gentleman gave an illustration. I will give one which shows how this has been very seriously thought out by the big German firms. There is a firm called Orenstein and Koppel, with a capital of £2,500,000, which, at the end of July, registered a dummy company here with a paid-up capital of £2. They must have had an idea the War was coming. It is called the Montania Engineering Company. On the 4th August, just after War was declared, they increased the capital of the £2 company to £2,000. I should say the manager of the Berlin company holds over 1,000 of the 2,000 shares and the rest are held by representatives of the parent company. A contract was made between the two companies to collect the debts of the former in this country, the smaller company undertaking to pay 25 per cent. of the debts collected to the parent company. The debts amounted to a very large sum indeed. It is clear that this large financial firm thought out well how they were going to avoid the law of this country and at this moment, while they are really an alien enemy, this small company, being registered in this country, will be regarded as a friendly firm. If an alien company like this, by a subterfuge of this kind, is going to be allowed to trade in this country I say it is totally wrong. I have no doubt that the Attorney-General will provide against something of that kind. This is not the only company doing this kind of thing and I say we should make it absolutely impossible for a limited company which is representative of a German company, controlled by German money with a majority of German shareholders, to do this. We should treat them as we would treat an individual. We want to destroy their trade and if possible to get that trade after the War is over. I hope that the Attorney-General, who I am sure will take a fair view of the matter, will see that such a subterfuge is not possible under the Bill he is now promoting.

Mr. POLLOCK

I think the last speaker has made out an excellent case for the appointment, as soon as this Bill passes into law, of a supervisor and inspector to look after the Montania Company, and that can be done under a Clause which the right hon. and learned Gentleman is to propose later on. I look at this whole controversy from the same point of view as the hon. Member for the Mansfield Division. I take as another illustration the A. E. G., one of the largest and most important companies, with a large number of branches in this country. The A. E. G. supply a great deal of electrical work which is essential to other electrical firms throughout this country—large firms which at the present moment are employing British labour for the purpose of supplying munitions of war to our own naval and military authorities. The difficulty is this: that with every desire to put an end to the interference of what I may call the enemy parent, we do not wish to stop the business carried on by branches with English firms, which is undoubtedly important at the present moment.

Sir A. MARKHAM

It is purely a selling business in this country.

Mr. POLLOCK

It is important from this point of view, that if it is stopped other firms and companies will not be able to complete their contracts for electrical apparatus. What middle course is it possible to take? It is impossible immediately to declare that these foreign companies are outside our law. You would only put them out of connection with persons who are at present relying on these supplies, and who would be unable to complete the contracts they have in hand.

Sir A. MARKHAM

All these electrical goods of the A. E. G. are British manufactured, and the firms could buy them.

Mr. POLLOCK

I accept that. Then it is an English business. That is the difficulty. What you really want to do, and what we are all seeking to do, is two things—one to prevent the remitting of money abroad, and the other to provide that business shall continue in this country, and that at the end of the War we shall be able to take up that business for the purposes of the English people. What are you going to do? Are you going to declare everybody an enemy? From my point of view that is going too far, but you should adopt the principle embodied in the Clause and appoint a receiver in almost every case, so far as may be necessary. I hope the Board of Trade will use their powers. I am not quite satisfied myself that the Board of Trade—and I am not saying this unpleasantly—will have sufficient knowledge to know where the companies are for which they ought to appoint supervisors. I should be glad if the hon. Member for the Mansfield Division and one or two other Members of this House could be appointed as a sort of advisory committee to help the Board of Trade to exercise their powers. You want to have the power to stop money going out of this country, and at the same time you want to keep up the English business. I believe the present Amendment goes too far. You want to stiffen up some of the other Clauses in the Bill. I hope we shall secure a real control by the Board of Trade in the matter of appointing a receiver. I hope my hon. Friend will withdraw this Amendment and seek in later Clauses to assist the Committee, because we are all on the same side, to stiffen up those Clauses which will have the effect that is desired. Above all, I hope the Government will say before the discussion is closed that they will give the Board of Trade some sort of assistance in order to ensure that these powers are exercised to the full, as the Committee intends them to be.

The PRESIDENT of the BOARD of TRADE (Mr. Runciman)

As the point of the administration by the Board of Trade of the powers we already have has been raised in this Debate, I may as well inform the House that we have appointed inspectors in 278 different cases—that is to say, affecting 278 different companies—that we have had reports on those, and in only three of those cases have we found any evidence or anything which might lead one to believe that there had been trading with the enemy, and in each one of those cases we have taken the necessary steps for instituting prosecutions; and that we have in nine of those cases, under the rather slower procedure of the original Act passed some weeks ago, had controllers appointed. We have used for the purposes of inspection seventy-five or seventy-six of the best chartered accountants in the United Kingdom, and they have inspected not only the books, cheque books, and bank books, but also the correspondence of the firms where they have carried on their inspection. It is clear from the experience we have had that these concerns are carefully avoiding any trading with the enemy.

But it is necessary that the powers should go further. Indeed, that it is necessary that we should have further powers is evidenced by the fact that we are asking for them. We have found during the last few weeks that unless we could have our Controllers or supervisors appointed with greater speed, there is bound to be delay. It is also necessary that we should have powers to prevent any remittance, either directly or indirectly, finding its way into the enemy country. These are some of the objects which are sought in this Bill. I think the Committee will clearly understand that we are not only not neglecting our duties but are going ahead as rapidly as we possibly can in dealing with these companies, and we are not content with our inspection. We are carrying on inspections from time to time, and one of the proposals made in this Bill is that these inspections should be constant inspections. The companies did not know when we were likely to visit them, for we have done what we could to watch their operations with a very critical eye. I cannot pretend that we have covered every company which has a majority of German shareholders but we have gone a long way to examine the cases which are most prominent first, and I suggest to the Committee that it should now come to a decision on the point. I hope they will be unanimous upon it and will give us the extra powers which are necessary without going as far as has been suggested in some parts of the House, the wholesale confiscation of property owned by natives of enemy countries. If we did that and went in for wholesale confiscation of property owned by Germans, Austrians—

Sir A. MARKHAM

No one suggested that.

Mr. RUNCIMAN

Will my hon. Friend allow me to finish my sentence? If we went in for the wholesale confiscation of property owned by Germans, Austrians and Turks in this country, which I have no doubt the hon. Member did not suggest, we should be going a great deal further than any of the belligerents, as far as I know, except Turkey. I do not think it is in the least necessary for the protection of British interests that we should do that, but I think it is necessary that the executive authority should be given wider and prompter powers. Those powers will be given if this Bill is passed, but if we cannot get it through the Committee stage with greater rapidity, it is going to be a difficult matter for us to extend the powers as far as hon. Members themselves would wish and as is demanded by the necessities of the case.

Mr. NIELD

I am sure that there is not a member of the Committee who does not desire to facilitate the passing of the Bill, but in facilitating it to take care that it is strengthened. There are a great many observations which have fallen from both sides to-night which lead one to suppose that the Committee is going to be oversensitive with regard to the way in which the proceedings are to be conducted. May I remind the right hon. Gentleman of the powers he took in September last by Section 2 of the principal Act? Before you can get anything like an inspectorate you have to satisfy the tribunal, which is presumably a stipendiary magistrate in London, that there is reasonable ground for suspecting that an offence under the Act has been or is about to be committed.

Sir J. SIMON

I do not think so.

Mr. NIELD

May I read it? "If a justice of the peace is satisfied on information on oath laid on behalf of the Secretary of State or the Board of Trade that there is reasonable ground for suspecting that an offence under this Act has been or is about to be committed by any person, firm, or company, he may issue a warrant authorising any person appointed by the Secretary of State or the Board of Trade named in the warrant to inspect all the books and documents."

Sir J. SIMON

I still do not think it is so. If the hon. and learned Gentleman will read Sub-section (2) he will see it is not.

Mr. NIELD

Sub-section (2) refers to another case. However, the time at my disposal is brief. When the hon. and learned Gentleman (Mr. Duke) talks about going behind the municipal law of this country, I wonder if he realises that in order to try and screw up Englishmen resident in Germany to the last possible pitch of endurance a claim has been levied by distress for ten years' rent in advance—the whole period of the term—at £1,000 a year, making £10,000, in order that British money shall flow into the coffers of Germany, and the unfortunate firm which is doing business in many cities on the Continent has been compelled to pay or secure that large sum. We only want to make this effective, and the instances which have been given us to-night have made it an imperative duty. Why should we be so susceptible about companies? Is it not a fact that the authorities have closed the doors of many personal firms which are purely German, and, if that is so, where is the argument about despoiling the landlord or dismissing employés? There is no difference between the companies which have been described to-night and the individual whose doors you have closed under this Act. If you are going to be just you should apply the same law and the same remedies to each.

Committee report Progress; to sit again to-morrow (Wednesday).