CONTRACTS WITH ALIEN ENEMIES. (Hansard, 17 September 1914)

§ Mr. JOYNSON-HICKS

Before I deal with the points I wish to put to the Attorney-General, perhaps I might mention to the Prime Minister the question of the allowance to soldiers' wives. The Prime Minister told us this afternoon that the maximum would be 22s. for four children. As a matter of fact I have just heard the Secretary of State for War in another place intimate that there would still be 2s. for each additional child. I think it very essential in the public interest that the two statements should be put right as soon as possible. The points I desire to mention to the Attorney-General are two that arise out of the debate of Thursday last. Some little time ago, I asked the Prime Minister whether the Law Officers of the Crown could be authorised, under the very peculiar circumstances of the time, to make a statement for the benefit of the commercial community regarding the law as to contracts with aliens. An enormous number of contracts were entered into by the commercial community of this country, in London, Manchester, and so forth, prior to the commencement of the War, and it is quite impossible for anybody to advise these merchants as to what the law is on the subject. There has been no decision of 998 any kind in any Court at all, certainly for sixty years, and there are only one or two decisions under American law some sixty years ago. I asked the Prime Minister whether it would not be possible, under the very exceptional circumstances, that the Law Officers of the Crown should make a statement, in order, seeing it is quite impossible for the Courts to give an exact decision to our merchants and commercial communities until the War is over, that the position should be made as clear as possible.

It is impossible for merchants to know what are their rights in regard to contracts which are still running with an alien enemy, whether they are, in effect, abrogated altogether, or merely suspended for the period of the War. The Prime Minister gave me an answer that under normal circumstances he could not consider any such suggestion, but under the existing conditions, though there were serious practical difficulties in the way of its adoption, the matter was being carefully considered. The same afternoon I mentioned the matter to the right hon. Gentleman the Attorney-General, and asked him whether he would consider it, and he stated that the point was under consideration. I have given the Attorney-General private notice that I intended this afternoon to raise this point, and I do venture, with the greatest deference, to suggest to the Government that they really will be doing a vast amount of good to the commercial community if the learned Law Officers of the Crown will go out of the ordinary scope of their duties—for I quite agree with what the Prime Minister said, that under normal circumstances it would be impossible for the Law Officers of the Crown to state what the law is—and give an answer to what I ask. It is impossible for any commercial man to go to law at the present time with a German firm so as to find out what his rights are, and what is his position. Therefore I suggest, on behalf of the great commercial communities of this country, that at least we are entitled to the best opinion that the Law Officers are able to give as to what is the law on this very difficult question.

Contradictory opinions have been expressed by barristers on both sides of politics. The whole commercial community respects both the Attorney-General 999 and the Solicitor-General, and would accept what they said. Therefore we should like their opinion on this important and difficult question.

There is one other point upon which I desire to ask the Attorney-General his views. He has also given me a pledge to deal with it before the Prorogation, and this is the last opportunity that I shall have to ask the right hon. and learned Gentleman's views on this other and somewhat difficult point—that is the question of reinsurance treaties with alien insurance companies. I explained this matter a week ago, and I will not go further into it now, except to say that there are large numbers—nearly all, in fact—of our insurance companies here have what is called reinsurance treaties with German and other alien companies. What the insurance companies want to know is what is their position in regard to these treaties. Under the Proclamation issued a week ago the matter was apparently clear, for Clause 5, Sub-section (6), said that no insurance company is—

"to make, or enter into any new marine, life, fire, or other policy, or contract, or insurance with, or for the benefit of an enemy; nor to accept, or give effect to any insurance of, any risk arising under any policy or contract of insurance (including reinsurance) made or entered into with, or for the benefit of, an enemy before the outbreak of the War."

That portion of the Proclamation is perfectly clear, but if one reads further on towards the end of the Proclamation, Clause 6 says:—

"Provided always that where an enemy has a branch locally situated in British, allied, or neutral territory, not being neutral territory in Europe, transactions by or with such branch shall not be treated as transactions by or with an enemy."

I would ask the Attorney-General if he would explain to the House, and through the House to the commercial community, exactly what relation there is between these two Clauses in the Proclamation? It seems to me, as it seemed to my hon. and learned Friend the Member for the Exchange Division of Liverpool, who after- 1000 wards spoke in this House on the same day, that Clause 6 of the Proclamation is directly contrary to the original Clause. The hon. and learned Gentleman the Member for the Exchange Division of Liverpool spoke in the Debate of last week. He said:— I say candidly that I have always advised that reinsurance treaties are dissolved. That, I think, is very largely the opinion that is held by many lawyers. It seemed to many of us that Clause 6 of that Proclamation—provided the reinsurance company had a branch in London—and nearly all these German companies have—would enable the business to go forward just in the same way as if the Proclamation had not taken place. My hon. and learned Friend said that he desired to call the attention of the Attorney-General to this, and that in his view the position was that Clause 6 of the Proclamation must go. The learned Attorney-General promised that he would go into the matter, and would see what could be done. I am this afternoon asking the Attorney-General if he will deal with this question.

§ The ATTORNEY-GENERAL (Sir John Simon)

Both matters to which the hon. Member referred are important, and I will try to deal with them clearly. Let me take the second matter first, because I recognise that that is an important and immediate question in the minds of many persons concerned with insurance in this country. I understand a treaty of insurance to be an arrangement which may be made between an English company and a German company by which premiums and risks and losses may be shared as between them on the terms arranged during 1001 the period of the treaty. The peculiarity of such a treaty is, at any rate in most cases, that one of the parties to it can bring into the common enterprise a new risk without consulting the other. Understanding a treaty of reinsurance in that sense, it is the intention of the new Proclamation, and I think it is the effect of the new Proclamation, that even although the treaty of reinsurance had been entered into before the War began, still no premium paid after the outbreak of the War can be shared during the War, and no loss arising after the outbreak of the War can be shared during the War under that reinsurance treaty if one of the parties is bound by the Proclamation and the other is an enemy. I think that is a clear statement and an accurate statement. If it be a fact that the new Proclamation does not make that arrangement abundantly clear, it will be possible to take steps to make it clearer under a further Proclamation. I make the statement now in order that those interested may consider whether the principle I have enunciated is not clear, definite, and reasonable, and if not we shall do our best to promulgate it without delay.

Then the hon. Gentleman said that although that may be a true principle, and I think he will agree it is, it is, to a large extent, nullified because of the permission in the Proclamation to deal with branches established in this country of enterprises whose headquarters are in the enemy country. That provision was designed principally to permit trading with branches in this country, or it might be elsewhere, in the ordinary commercial sphere, and I agree that financial enterprise or insurance enterprise stand in a rather different position, and it is for that reason we found it necessary to put certain special restrictions on the branches in London of certain German banks, and I agree the same consideration to a large extent applies to insurance companies, and I should propose, therefore, when we make any further announcement, as we will shortly, to clear up any doubt on this point and to make it clear that as far as insurance and reinsurance business is concerned this privilege of continuing business with a London branch with headquarters in an enemy country is not to be understood to apply. That is one case.

1002 The other is a very difficult and important question which the hon. Gentleman has raised. He pointed out, and it is quite true, that there is a good deal of doubt and uncertainty in the minds of many persons in the commercial world as to how the outbreak of war has affected their rights and liabilities in contracts entered into before the War began. I do not mean the case of a man who wishes he had not entered into a contract because the prices or freights had risen. He does not want any lawyer to advise him about that, because everybody agrees that you must stand by the contract unless you can persuade the other party to come to your assistance. But I mean the case where one party to the contract is a subject of our own, and the other is an enemy in the sense that he resides and carries on business in the enemy country. He says, we have made our contract in times of peace and the performance is not yet completed—perhaps the time of the performance has not yet come. How does the outbreak of war affect the performance of that contract? It is quite true that the Government have been considering whether or not they could usefully and properly intervene to solve these difficulties. I feel it a great compliment to myself and to my hon. and learned Friend, the Solicitor-General, that it should be believed that if we express an opinion the commercial community—I notice the hon. Member opposite does not include the judges—will instantly bow down and worship it. That never happened to me before, and I take it as a great compliment. But the real difficulty, and it cannot be got over by some formula or abstract statement, in these cases arises from the complexity of each individual case. I do not think competent advisers will differ, whatever other people may say, that the law on a matter like this is not, as an eminent authority once said, "an ass," but is reasonable and sensible. I do not feel any hesitation in saying this much, and I do not think any lawyer will deny, or any sensible man possibly question, this proposition, that if a party entered into a contract before the War began and it was a lawful contract to enter into, and if the time to perform it is not come when war breaks out, then, if performing the contract during the War is 1003 unlawful, no man is liable in the Courts of this country because he does not perform it.

That proposition is plain. The real difficulty is not in laying down such a proposition, but in applying it owing to the large and infinite complexities of hundreds of thousands of cases, and although I have seen but a fraction of the difficulties, I have seen enough to know that it is not possible for me or my hon. Friend, or anyone, or any number of people to lay down in advance a series of elaborate and particular rules that will govern these cases. Therefore there is no alternative but for those who feel any doubt in these matters to take the best advice they can. There is plenty of good advice to be got, and I should not now be justified in going further. There are other Members who want to take part in this Debate, and I have only taken up so much time because the questions raised were important.