HC Deb 26 May 1939 vol 347 cc2703-60

Question again proposed, "That this House do now adjourn."

11.50 a.m.

Mr. Alexander

When the Debate was interrupted I had just been saying that the Prime Minister had made a statement at Birmingham which was of very great importance in its expression of view with regard to the action of Germany in suppressing Czecho-Slovakia, but that he had not answered the questions which he had put in that statement. Since that date the Prime Minister and his colleagues in the Cabinet, without giving a verbal answer to the questions, have undoubtedly by their arrangements with Poland, Greece, Rumania and Turkey, and their negotiations with the U.S.S.R., given what seems to be a practical answer to the problem of having reasonable safeguards for the future. Now after the statement of the Prime Minister on Wednesday we are once more disturbed lest those very actions which have been taken partially in answer to the questions which the Prime Minister postulated will, in fact, detract from those measures and lessen the degree of security that we all want to see.

Therefore, we submit to-day that not only should the Government not give actual recognition to the annexation of Czecho-Slovakia, but ought not even to consider it. It is not necessary for us to set out at length the tragic story of Czecho-Slovakia. The bare fact is that the German Government, having tricked the Czechs into surrendering one of the strongest strategic positions in Europe, subsequently without a shadow of right annexed the whole country and brought to an end, to quote the words of one of His Majesty's Ministers, "the existence of a sovereign State." This was done despite the agreement which had been come to between Herr Hitler and the Prime Minister himself at Munich. It was also done in defiance of the guarantees given by His Majesty's Government to the Czech Government, on the faith of which the Czech Government made their surrender in the interests of European peace. The British Government made, in fact, no effort to redeem its pledges with regard to those guarantees, and many people to-day regard the Government as being in the position of a defaulting guarantor.

Therefore, in my view it is unthinkable that they should now propose to recognise the action of Germany. I would go further and say that even from the point of view of his own self-respect I should have, thought the Prime Minister would not even have considered it. But, after all, there is something at stake far more important even than the self-respect of the Prime Minister. Such recognition, if it were to be given, would be, in our view, entirely contrary to the principles of the League of Nations.

On sundry occasions in the past few years those principles have been abandoned by the Government, but we had begun to hope that they had really learned their lesson. We thought that the tragic dismemberment of Czechoslovakia and the ruthless acquisition of Albania by the other dictator had at last put a stop to a policy of so-called appeasement by complicity in illegality and violence, and that there was to be a return to the principles upon which alone can there be civilised intercourse between nations.

The formation of a peace front which we understand, or we hope we understand, is almost completed, surely implies a return to the conception of the rule of law instead of the reign of anarchy. No doubt hon. Members have noted the speech made by the Secretary of State for Foreign Affairs at the Council of the League of Nations at Geneva during the past few days. I take a few words from it: One principle is common to all these obligations that we have assumed, namely, resistance to the imposition of a solution by the method of force which, if continued, must result in reducing civilisation to anarchy and destruction. Everything that the Government have done is in strict conformity with the spirit of the League Covenant. Can any of us really maintain that the recognition of Germany's annexation of Czecho-Slovakia is in accord with the spirit of the League?

The more one considers the actions of the Prime Minister in these matters, the more they give ground for the gravest suspicion. From time to time the right hon. Gentleman does not appear to be following wholeheartedly the new orientation, as it has been called, of foreign policy, which is a return as far as may be and as quickly as possible to the principle of collective security. From the manner in which the Prime Minister treats these matters I doubt very much whether he appreciates the importance of the rule of law. In fact, it has been suggested that in these international matters the Prime Minister has pronounced recidivist tendencies, because he is constantly seeking to return to the company of the law-breakers in the hope that by his return he may appease them in their actions. It is curious that in all the discussions and statements about the U.S.S.R. the Prime Minister has, apparently, not been prepared to let a single friendly word pass his lips in relation to that country, but nevertheless he sends his Ambassador to the victory march of General Franco to watch the parade of Italian troops, who are still in Spain in violation of the pledges which were given to him directly by the Italian Government. The right hon. Gentleman now seems to hanker after recognition of the Czecho-Slovakian conquest. Is it not plain to Members of the House that such backslidings from the proposals to return to collective security must depress the friends of peace abroad? At best they are examples of the havering arid dithering which have in the opinion of a Member of the Government, characterised Government policy in another matter.

I ask the Chancellor of the Exchequer when he replies to this Debate to consider also the actual legal position. I have tried to put before the House what I feel is the right political position which we ought to adopt in this matter, but there is also the legal position. I cannot possibly pretend to be in any sense an authority upon legal matters in international affairs, but there are open to us authorities at which we can look from time to time for our personal views, and quote if necessary. It is plain from such evidence as is available to us that if de facto recognition takes place, the British courts thereafter will have to give recognition to the validity of the action of the German authorities in Czechoslovakia. For no other reason than that, this House ought immediately to persuade the Government to refuse to consider de facto recognition. The other point I would bring to the notice of the Prime Minister is that there has grown up in the last few years in international law a clear recognition of a principle to be observed in these matters, which is that in this so-called non-recognition, there must be a definite act taken by way of resolving not to recognise. This is of fundamental importance in the post-War legal position of international relationships. The statement which was made by Mr. Stimson over the invasion of Manchuria by Japan was one of the precedents which will, no doubt, be followed by other nations in such questions where aggression has taken place.

The effect of the principle will be that nations who are signatories to the Covenant of the League, or signatories to the Pact of Paris with the principles there laid down, must refrain from giving de facto or de jure recognition. I shall be glad if the Chancellor of the Exchequer will be good enough to look it up, because I think he will find there is another precedent in this matter to be found in the Treaty which was concluded m 1933 by the Latin-American States and to which, by the way, both Italy and the United States of America adhered. The Treaty stated that the high contracting parties recognised no territorial arrangements that were not obtained through pacific means, nor the validity of any occupation or acquisition of territory brought about by armed force. The Government would be well advised to reconsider the position from that point of view, and to make it plain to the House of Commons that they will not consider de facto recognition. The Prime Minister might argue in defence of recognition that the Covenant of the League cannot be held to mean that no change in the existing status of the members of the League can ever be made and that on grounds of practical politics it might be necessary to recognise changes made by armed force. It may be admitted that in the course of time international law may have to develop a rule corresponding to prescription, in order to validate a position which may have been wrong at its inception, but which has been de facto accepted for a long time.

In that matter I have been looking up what authorities were available to me, and I find in national systems of law that periods of prescription are legal for from 10 to 30 years when there has been no effective dispute concerning rights of possession. In the case of Czechoslovakia, that tragic victim of the failure of democracies to honour their bond, left in uncertainty and finally dismembered by a dictator, in spite of the Prime Minister's pledges to guarantee its boundaries, it is only two months since the final set of brutal aggression was performed. I therefore submit that there is no conceivable case for recognition by analogy from rules of national law concerning prescription. I could quote many other authorities, but I hope I have made a sufficiently good case to obtain independent and sympathetic support from all parties in the House in respect of the question which should be put to the Government in this matter.

In the course of my remarks I have referred to other matters which have been present in the minds of some hon. Members, particularly the procedure which has taken place with respect to the Bank for International Settlements. I hope later on in the Debate that my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) will say a word or two on this question. In conclusion, I would say that if the British Government were to grant recognition to Germany over the annexation of Czechoslovakia at this time, such an action would be inconsistent with the Covenant of the League just at the time when the speech of the Secretary of State at the League Council this week has given us hope that we were more inclined to a sane view in these matters. Secondly, it would be impossible for such an action to be reconciled with the previous decisions of the Council and of the Assembly. Thirdly, it is contrary to international law as accepted by the American States; and, fourthly, it is impossible to justify on grounds of prescription. Such action will strike a very heavy blow indeed at the hopes we have of beginning to rebuild a proper recognition of international law. It is not justified by the actions of the Government in the past. They still have not recognised Manchukuo; we still hope they will not recognise Albania as a conquest of Italy; and I beg this House to make it clear to the Government to-day that it is strongly of opinion, in all parts of this Assembly, that the Government ought not even to consider recognition of this brutal aggression at this stage.

12.6 p.m.

Sir Archibald Sinclair

There is no doubt that the right hon. Gentleman the Member for Hillsborough (Mr. A. V. Alexander) has constructed a massive case in opposition to the proposal for the recognition of the German annexation of Czecho-Slovakia. I do not intend to follow him into the main aspects of that case, though I was the first to raise the question in my speech on Friday of last week. To-day I wish to confine myself in particular to the possibility of the appointment of a consul at Prague, with the inevitable result that we should have to apply for an exequatur from the German Government in Berlin. The other important aspect of the question is, of course, that of the Czech balances in London, with which, I understand, my right hon. Friend the Member for Carnarvon Boroughs (Mr. Lloyd George) is going to deal in his speech, as he was the first to raise that question.

It seems to me that to apply for this exequatur to the German Government in Berlin and thus to recognise de facto German rule in Czecho-Slovakia, would be absolutely inconsistent with the main principle of His Majesty's Government's foreign policy, or, at least, the principle which they profess to have made the main principle of their foreign policy, namely, that of collective resistance to aggression. We are engaged, it seems to me, on a very dangerous enterprise—a very necessary enterprise, but a very dangerous enterprise—when we set ourselves across the path of these two dictators in Germany and Italy, and when we give guarantees to countries in Eastern Europe like Poland, Rumania and Greece. It is a very dangerous enterprise, and one which we shall not be able to bring to success without a tremendous national effort here at home, and without securing the loyal and confident support of a very large number of friends abroad. Anything which sows distrust between us and our friends in Europe and in other continents of the world must inevitably diminish greatly the chances of our success in this enterprise. I venture to say that the attitude of the French Government to this proposal of the appointment of a consul in Prague must be clear from the answer which was given to the Question of the hon. Member for Norwood (Mr. Sandys) this morning. It was quite clear from that answer that the French Government have so far refrained from appointing a consul in Slovakia. Although they were approached by His Majesty's Government, and were informed by His Majesty's Government of what they intended to do, they have neither appointed a consul themselves nor expressed any approval of the action of His Majesty's Government in appointing a British consul at Bratislava.

Personally, as I said last Friday, I dislike the idea of this appointment of a British consul at Bratislava, but I can understand that a case can be made out for the appointment of a consul there, because there you are recognising, not some foreign Government, but this new Slovak Government, which is an independent and indigenous Government For my own part I regard it as a puppet Government in the hands of the Germans, but I realise that it is possible to take a different view. It is, however, quite impossible to take a different view of the appointment of a consul in Prague. In that case you have to apply for your exequatur to the Government in Berlin, and that would necessarily involve recognition of the German annexation. This would undoubtedly have a very serious affect on opinion in France, and I believe it would have a very serious effect on opinion in the United States of America. I hope we shall have, in answer to the speech of the right hon. Gentleman the Member for Hillsborough, a declaration from the Government that they approve of the Stimson doctrine of non-recognition of the fruits of forceful aggression. I wish we could have that declaration. Nothing could be more likely to strengthen the understanding between ourselves and the United States of America than the making of such a declaration by His Majesty's Government. Moreover, the Czech legionaries have a very strong influence on public opinion in the United States of America and in Russia, and this contemplated action in regard to recognition of the German annexation in Czechoslovakia would swing the whole of that influence of the Czech legionaries against us in the United States of America, in Russia, and, indeed, in all Slav countries.

Moreover, what would the Germans think of it? In the last 12 months I have had a great many interviews with Germans, from Gauleiters on the one hand to refugees on the other, and a great many people in between those classes; and apart from the extremes on either side—the Gauleiters and the refugees, who take, of course, the extreme view on either side—moderate people in Germany, living there now, many of them in important and responsible positions, have said to me, "We are doubtful whether you, the democracies, are standing for any real principle in the world. We know what principles we stand for, although many of us are shocked at the infringement of those principles when Herr Hitler invaded and annexed Czechoslovakia, but until then we felt confident of the principles for which we stand. But are you really standing for any principle of resistance to aggression?" Many of these moderate men have pleaded with me to use such little influence as I possess to strengthen the Government against any condonation of this annexation, and to make it clear that we do stand on the principle, not of protecting British interests, the British Empire and British possessions, but of protecting the world, including the British Empire, from the threat of aggression.

I would like to ask the Chancellor of the Exchequer what interests in Slovakia, in the first place, we are protecting by the appointment of this consul at Bratislava, and what are the interests that we should be protecting by appointing a consul in Prague? No doubt we have a certain amount of trade still with those countries, and these consuls would perform a useful function; and there are, of course, the interests of the refugees to be considered. I can quite understand, and I am not denying for a moment, that there are such interests, some of which would be very important interests; but I would ask the Chancellor of the Exchequer, can they really be weighed in the balance against the suspicion and uncertainty that would be aroused in this country and throughout the world if His Majesty's Government were to take any action which involved recognition of the German annexation. The Government have long been considering this question. As long ago as last Friday the Under-Secretary of State told me clearly that an application to the German Government for an exequatur would amount to recognition. He said: No decision whatever has been taken to ask for an exequatur from the German Government which would, as the right hon. Gentleman reminded us, amount to the de facto recognition of Bohemia and Moravia."—[OFFICIAL REPORT, 19th May, 1939; col. 1889, Vol. 347.] There can, therefore, be no dispute about that, and the House is entitled now to an assurance, not that no consul will be appointed—that is not what I am asking for—not that the present vice- consul may not be continued in his functions without the necessity for applying for any exequatur, and therefore without the necessity for according any de facto recognition. I can quite understand that points of that kind may require more consideration. What I am pressing for is an answer to this point. Will the Chancellor assure us that the ultimate decision will be one which will in no case involve recognition of the German annexation of Czecho-Slovakia?

The question of consultation with Parliament has been raised. I fully recognise that the constitutional position is that the Government have a perfect right to recognise the annexation of Czecho-Slovakia without consulting Parliament, and we should have no ground for complaint. But politically that that is not true. Politically it would be an act of the highest and gravest significance if the Government did that. Politically the Government have no right to commit this country to condonation of a crime without consultation with the representatives of the people. The Prime Minister, for example, recognised the political aspect of a similar question when in the House of Commons in November last he referred to the terms of the guarantee of the frontiers of Czecho-Slovakia. He ended a passage of his speech by saying: Of course, before anything was settled the terms of such a guarantee and the names of those taking part in it would be brought before the House."—[OFFICIAL REPORT, 1st November, 1938; col. 79, Vol. 340.] Obviously, because it was a matter of such very grave consequence. But so is this and, if it was right then to give that assurance to the House of Commons, it is right now to give us the assurance for which we ask, that no such departure in policy will be made without consulting the House. If we are going to carry to a successful conclusion this hazardous enterprise of collective resistance to aggression, we must be prepared to make some sacrifices of financial interest, of economic advantage and of commercial convenience to the main purpose of rallying the world forces of resistance to aggression. To recognise the annexation of Czechoslovakia would be to poison the relations between those who are engaged together on this great enterprise. I beg the Government to give us the assurance that whatever action they may take to protect our interests or to help the refugees—I am not asking them to tell us exactly what that action may be—will not involve recognition of the German annexation of Czecho-Slovakia.

12.20 p.m.

Mr. Gurney Braithwaite

We have just listened to two right hon. Gentlemen and, according to all accounts, we are shortly to listen to three more. I hope the House will pardon an intervention from a back bench. I can assure them it will be of the brief character that we were told yesterday should characterise our proceedings. I have no knowledge of the diplomatic niceties of these matters such as is possessed by many right hon. Friends, but I want to put a layman's view of the present situation, which is that this country should withhold recognition, either de facto or de jure, for a lengthy period, as an indication of our indignation and abhorrence at this annexation of Czecho-Slovakia. From a logical standpoint however—although logic is not everything in these matters—it seems to me difficult to withhold indefinitely recognition in these circumstances unless one is prepared by force to restore the status quo. Those who take that view must be prepared in the event to go to that extreme. But I hope that in the present situation there will be no question, for at least a very considerable period, of any such recognition either de facto or de jure.

The right hon. Gentleman the Member for Hillsborough (Mr. Alexander) touched upon certain financial consequences arising from this matter, and it is upon this that I should like to say a word. It affects the situation which has arisen in connection with the Bank for International Settlements in connection with Czech deposits. I think we should do well to remember—what is often forgotten in these days when economic theorists flourish—that the primary function of the banker is to take care of his depositors' money and to produce it when required. Even if the bank manager knows that it is being withdrawn for mischievous or even immoral purposes it is still his duty to produce the cash as and when required. It is true of the Post Office Savings Bank, of joint stock Banks and even of the International Bank in its crudest form. [Interruption.] I was trying to give the actual situation, but I do not think my hon. Friend will quarrel with that definition of the primary function of the banker which in these days is so often forgotten. In the particular case under review, we have the Bank for International Settlements established at Basle to perform certain functions, notably the handling of the very difficult technical problem of passing reparation payments aross unstable and fluctuating exchanges. It is, in fact, an example of internationalism de luxe.

I should like to indicate some of the consequences which have resulted from this attempt to operate the international theory in this case. I think a parallel exists in the military situation. I remember very well immediately after the War coming home, very thankful to be alive, and being sternly rebuked for suggesting that a simple continuation of the war-time alliance was the best method of preserving peace on the Continent of Europe. I was told that that method was out of date and that all hopes were now centred in the new peace experiment, the League of Nations, and that if only the requisite number of genuflexions was made at the mention of the word "Geneva" and the formula "collective security" repeated with sufficient conviction, all would be well. I felt that that was an experiment which must be tried, and I think this country was right at the time, under the leaderhip of the right hon. Gentleman opposite, to enter the League of Nations and to make an attempt to operate it. But today the wheel has gone full circle, and this has a bearing on the financial situation. After denouncing alliances as being out of date, the Government are now being urged, impatiently and stridently, by hon. Members opposite to enter into military alliances with the least possible delay with various totalitarian and semi-totalitarian States in order to resist the challenge that is being made by other totalitarian States.

Sir A. Sinclair

Do you approve of it?

Mr. Braithwaite

Certainly, I support that policy. I am trying to say—if the right hon. Gentleman will be patient—that after the War I felt that the system of military alliances was one which might well have been continued, but I felt that the League of Nations system should be tried. The wheel has now gone full circle, and I feel that we should support the system of the balance of power in Europe.

Mr. Churchill

Would the hon. Member agree that the policy might be linked up with that of the League of Nations?

Mr. Braithwaite

If it is possible to have the best of both worlds, I have no objection. The right hon. Gentleman has great experience of League matters. I prefer to lean rather more heavily on the military side of the arrangement than on the Geneva atmosphere or technique, but he has more experience on the subject than I have. The international financial machinery has been set up, and there is some discontent and considerable discomfort because it is not functioning in accordance with the wishes of Britain and France. I do not think I am unfair in saying that, at least in this House, at the moment internationalism is being interpreted as the fulfilment of democratic aims. I welcome that new definition, but I doubt whether this facade can be prolonged logically or even fairly. In the financial, as well as the military sphere, we cannot be controlled at this period from either Basle or Geneva. I am one of those—and I hope the right hon. Gentleman the Member for Epping (Mr. Churchill) will at least allow me to say this—who hope that the League will be rebuilt, and rebuilt in our time, but I believe that that will have to be on the basis of economic co-operation, with many of the more sentimental clauses with which the League embarked on its career deleted.

I doubt very much whether the Bank for International Settlements has a useful function to perform to-day. I had the honour of being interrupted just now by my hon. Friend the Member for North Paddington (Mr. Bracken), who has had great experience in these matters, and who, through one of his organs, has been pressing this matter eloquently, and I think wisely, in the last few days. I agree with what he said about money being handed over under duress. That is the method employed in bank robberies, when insufficient staff is provided—a matter in connection with which I once presented a Private Member's Bill, which made no progress. But I want to make this final observation as the moral of this lamentable occurrence. I want to suggest quite seriously that the Bank for International Settlements has no longer a useful function to perform. It should be, I think, revived, if and when the League is reconstructed, on the economic basis that I have endeavoured to indicate. At the moment it is a hotbed of intrigue. I believe that its winding-up would require a two-thirds majority of the Assembly—hon. Members will correct me if I am wrong. If that is not possible, there is another method of dealing with the matter. That is, to withdraw the British and French deposits from the Bank, which would have the de facto—if that is the correct term—effect of preventing a similar lamentable incident. I would humbly submit to the House that point of view, while apologising for standing between hon. Members and other Privy Councillors who want to speak.

12.31 p.m.

Mr. Pethick-Lawrence

The hon. Member for Holderness (Mr. G. Braithwaite) has opened up a very important question relating to the Bank for International Settlements. Therefore, perhaps it will be convenient to the House if I raise this matter on somewhat general lines, in order that the Debate may thereafter run both as regards the main issue of recognition by the Government and the subsidiary issue of what is to happen to the Czech currency. I should like to begin by a statement of what I believe to be the facts. If I state them incorrectly I hope the Chancellor will interrupt me. I understand the position to be that the Bank for International Settlements—commonly known as the B.I.S.—held certain assets for the Bank of Czecho-Slovakia, and deposited them in the form of gold with the Bank of England. A few days ago the authorities of the B.I.S. gave instructions to the Bank of England to hand those assets over to the German Reichsbank. This instruction either has been or is shortly to be obeyed.

The facts of this transfer were referred to on Friday last by the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George), who, in his usual picturesque way, made certain comments upon it, and incidentally charged the Treasury with being a party to the agreement. The Prime Minister, speaking on that day, said that the whole story was a mare's nest, and added that the only releases that had been made were of relatively small sums to refugees in Czechoslovakia. Subsequently, in answer to questions, the Chancellor of the Exchequer and the Financial Secretary stated the facts in somewhat the same terms as I have done, but said that what was untrue in the statement of the right lion. Gentleman the Member for Carnarvon Boroughs was his charge that the Treasury were in any way responsible for the transaction. The Chancellor has not corrected my statement of facts; therefore, I assume that I have stated them correctly.

The Chancellor of the Exchequer (Sir John Simon)

In certain respects the statement made by the right hon. Gentleman is not quite right. He invited me to interrupt him, but I do not think I can deal with his points one at a time. It would not be convenient for me to pop up every minute in order to do that.

Mr. Churchill

Will my right hon. Friend deal with the matter early in the Debate, so that the House may know what the position is?

Sir J. Simon

indicated assent.

Mr. Pethick-Lawrence

Perhaps the right hon. Gentleman will correct me when he speaks, but I do not believe that I have made any serious misrepresentation of the facts. These facts raise certain highly important questions. The first question of supreme importance is the relationship of the Government to the British representative on the B.I.S. We none of us dispute that Mr. Montagu Norman and Sir Otto Niemeyer are on the Bank for International Settlements not as direct representatives of the Government, but as representatives of the Bank of England. But that is not to say, what apparently the Chancellor of the Exchequer said, that, in consequence of that, they are neither bound to consult with the Government before taking any action on the B.I.S., still less are they to take a line in accordance with what the Government wish on vital international matters, and finally, that they are not even to be expected to report a decision that they have taken on these international questions. If that really is the position of the Government vis-à-vis these representatives of the Bank of England, it is a most grave and serious position. I go further. I venture to think that in this case we have had, if that be true, a direct conflict of attitude between the Government and these men, who are in a very representative position on the B.I.S. The Chancellor of the Exchequer would have us believe that he knew nothing about what was happening, that he heard of it only by accident from a third party, and that the decision taken by the B.I.S. in no way necessarily represents the views of the Government.

We in this House, knowing the legalistic mind of the Chancellor of the Exchequer, believe what he says, but I am certain that no foreign Governments will believe it. They do not work in that way. When they have representatives of their country representing their central bank sitting on some important body—this very body itself—they take very great care that the views that these representatives put forward are the views of their Government. I am told that in every one of the other cases—this may be exaggeration—the views of the Government are put forward by the representatives on the B.I.S., and I certainly do not think that the Chancellor of the Exchequer will be believed abroad when he puts over the story that these representatives act on the whole independently, and, possibly, in certain cases, directly at variance with the views of the Government.

We come now to the second question, what in fact were the views that the British representatives put forward? Did they in fact, on the B.I.S., support the transference of these Czech assets to the Reichbank? Because if they did this, it is a most important thing. Even if the Government were contemplating recognition, they had not at that time decided to recognise, and I suggest that the decision that the Czech assets are to be handed over to the Reichbank constitutes a recognition of some kind at any rate of the control and the hold of Germany over the country that was Bohemia and part of Czecho-Slovakia. That is the second question, and it is a very grave one.

I do not believe that the foreign Governments will for a moment credit this Government with an attitude different from the one which the representatives of the B.I.S. supply, and we in this House are at least entitled to know what was the view of these British representatives. The third question—and it has been the policy of the Chancellor of the Exchequer all through these discussions to try to make the House believe that this was the only issue involved—is, if and when the B.I.S. gave these instructions to the Bank, of England, was the Bank of England bound to carry them out? That is a matter that can be argued, and is open to argument. But, granting for the sake of argument that it had no other course when the Bank for International Settlements had taken that decision, that does not in the least release the Government from their share of responsibility for the action that these men took when they were dealing with the matter in the B.I.S.

The fourth matter that arises is the statement that was made by the Prime Minister in this House. I know that the Prime Minister is a very busy man, and I do not in the least charge him with a breach of faith, but there was an interval between the statement of the right hon. Gentleman the Member for Carnarvon Boroughs and the Prime Minister's reply, and I have no doubt whatever that the Prime Minister made his statement as a result of information received from the Chancellor of the Exchequer on behalf of the Treasury.

Mr. Lloyd George

He said so.

Mr. Pethick-Lawrence

He said so the other day. I can quite understand, and I think on the basis which the Chancellor of the Exchequer now says it might have been correct for the Prime Minister to say that the facts mentioned by the right hon. Gentleman were not correct, meaning by that that the Treasury were not responsible, it is a matter of argument. But it was quite possible to say that. He did not say that, but that the whole story was a mare's nest. That is obviously untrue, and when he went on to say that the only releases that have been made have been releases of small amounts to refugees from Czecho-Slovakia, he finally painted a picture that was entirely contrary to the facts. We have the right to complain when a responsible statement which is not correct is allowed to be made by a Minister. These are the important issues: first of all, the position of the British representatives on the B.I.S. to the Government; secondly, the attitude that these representatives actually took at the B.I.S.; and thirdly, the misstatement of facts which the Treasury allowed the Prime Minister to make on Friday last.

12.43 p.m.

Mr. Boothby

I do not propose to detain the House for more than a very few moments, but I would like to say, on the political side, that I listened with complete agreement to what the right hon. Gentleman the Leader of the Liberal party said. We have to distinguish in this matter between the purely practical side of conducting normal business relations with a certain part of Central Europe—I mean by that the appointment of a consul or vice-consul to represent British business interests—and the question of recognition either de jure or de facto of Czecho-Slovakia. I believe that, in the opinion of this House and of the country, any kind of recognition by the British Government of the annexation of Czechoslovakia is quite unthinkable, and I cannot believe that His Majesty's Government are contemplating any such step. There would be the same kind of uproar—much worse, in my opinion—as greeted the Hoare-Laval proposals when they first came up. That is the kind of thing that would happen if the Government proposed or even contemplated taking such a step. Therefore, I am sure that the Chancellor of the Exchequer will be in a position to assure us that they do not contemplate taking any such step.

What I really want to speak about for a moment or two is the financial aspect raised by the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) and to say that, with regard to the Bank for International Settlements, I believe that the Government are on sound ground from the purely legal point of view. From my reading of the Statutes of the Bank of International Settlements, I believe that the Bank of England is bound by these Statutes to hand over any funds that may be entrusted to them. What we complain about, and have the right to complain about, is the evident lack of liaison between the British representatives on the Bank for International Settlements and the Treasury. I think that the right hon. Gentleman is quite right when he says that very few foreign countries would believe for a moment that these two directors could have acted on the Board of the Bank for International Settlements independently of the Treasury and of the Government. My right hon. Friend the Chancellor of the Exchequer told the House afterwards that he had heard of the transaction from another source, subsequently. I should like to know from whom he heard it. We always assume in this House there is the closest continuous contact between the Chancellor of the Exchequer and the Governor of the Bank of England. We imagine that the Governor sees the Chancellor of the Exchequer frequently and that they discuss all the aspects of financial policy. I once described the position of the Governor and the Chancellor of the Exchequer as corresponding to the position of the First Sea Lord and the First Lord of the Admiralty. The Governor tenders technical advice and the Chancellor of the Exchequer decides on policy, and between them they must make the thing work. It seems almost incredible that the Governor of the Bank of England, in close contact with the Chancellor of the Exchequer in so many ways, as the agent of the Treasury, did not mention this matter to the right hon. Gentleman about the transfer of some £5,000,000 or £6,000,000.

The position of the British directors on the Bank for International Settlements is a very invidious one if they are to proceed on their duties regardless of the Treasury. Such an invidious position leads one to think that we ought to examine the position of the Bank for International Settlements itself. I am by no means certain that this Bank has not long since ceased to fulfil a useful function or purpose. The main purpose for which the Bank was established, namely, to facilitate international transfers of funds can no longer be carried out in respect of many countries, and if it is to exist for the sole purpose of enabling transfers of funds to be made from the democratic States to the totalitarian States, which seems to be its main function at the moment, then the sooner it is wound up, the sooner our directors are withdrawn and our deposits withdrawn, the better for this country and for Europe. The Chancellor of the Exchequer would do well to consider the whole position of the Bank for International Settlements at the present time for, in the words of the hon. Member of Evesham (Mr. De la Bère), it is highly unsatisfactory.

We ought not to confuse the question of the recognition of the annexation of Czecho-Slovakia, either de jure or de facto, with any negotiations that may take place between the Treasury and the representatives of the Reichsbank with regard to the settlement of outstanding claims on our side arising out of the blocked Czech assets in this country. It was made perfectly plain in the Debate on the Bill that British holders of balances in Prague in the form of cash or bonds and bona fide Czech residents in this country who have claims in respect to cash or bonds, ought to be compensated to the full out of the blocked assets that we hold in this country, before there is any question of transferring anything to the German authorities. Once those claims are compensated out of the assets that we now hold, thanks to the quick and resolute action of the Chancellor of the Exchequer, I should like the remainder of the assets to be put into a suspense fund and used for the benefit of refugees of one kind or another, and for the assistance of Czechs outside Czecho-Slovakia. In any case, I think the whole of this business might be facilitated and quickened by direct negotiations with the German Government, and in those negotiations we shall occupy a very strong position because we have in our hands very considerable sterling assets.

The only other point is that I believe the assets of the Czech banks which we hold in London should be treated as one unit with the Czech National Bank. Before the annexation these banks held their funds by permission of the Czech National Bank; they were included in the weekly statement of the Czech National Bank and could not be sold or transferred without permission of the Czech National Bank. I hope that in the negotiations with the German Government, which will take formal shape in the near future, we shall treat the assets of the Czech Bank held in London as one unit, and I hope that in his negotiations with the Germans the Chancellor of the Exchequer will not give away the advantage that we have got, but that he will drive a hard bargain for the benefit of British claimants against Czecho-Slovakia and for the benefit of Czech residents here who may have claims and who are desperately hard up at the present time.

12.49 p.m.

Mr. G. Strauss

I should like to follow the main line of argument which has been adopted and to ask the Government a few questions. The first question is about the Prime Minister's statement last Friday, when he said that the statement made by the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George) was a mare's nest. I should like to draw the attention of the House to the fact that the Government spokesmen in trying subsequently to explain away that remarkable statement of the Prime Minister have been contradictory. I should, therefore, like them to try and explain away those contradictions. It will be remembered that in answer to a Supplementary Question which I put on the Tuesday asking why it was that the Prime Minister said that the story, which we now know to be substantially true, was a mare's nest, the Financial Secretary to the Treasury said: I should like to make it clear that my right hon. Friend (the Prime Minister) has no means of knowing whether the facts are, or are not, as stated by the hon. Member for North Lambeth (Mr. G. Strauss)"—[OFFICIAL REPORT, 22nd May, 1939; col. 1928, Vol. 347.] My question was whether the Czech balance in the hands of the Bank for International Settlements deposited in London would be handed over. The Financial Secretary to the Treasury said that the Prime Minister had no means of knowing whether that had happened and that consequently he was justified in his ignorance of the matter. However, the next day the Chancellor of the Exchequer said: I should like to make it plain to the House that the Treasury did hear indirectly that it was believed that the German Reichsbank was trying to get from the Bank for International Settlements an amount of gold with which it had been entrusted by the Czech National Bank.

Sir J. Simon

Surely that is a different thing.

Mr. Strauss

I do not think so. First, the Financial Secretary says that the Government cannot know anything about it in the circumstances, and then the Chancellor of the Exchequer, the next day, says: "As a matter of fact we did hear about it, and not only did we hear about it but we made investigations." There is a very obvious contradiction in the statement of the Financial Secretary and that of the Chancellor of the Exchequer, and the House is entitled to a further explanation of the matter. We on this side of the House are particularly suspicious in regard to this matter, because we have been accustomed in the last year or two to answers from the Treasury Bench on questions we have put, particularly in regard to Spain, where it was evident that the Government have been much more anxious to withhold information which was in their possession than to give it to the House of Commons.

Let me come to another point, which was dealt with by the hon. Member for East Aberdeen (Mr. Boothby) and my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) namely the position of Mr. Montagu Norman and Sir Otto Niemeyer on the Board of the Bank for International Settlements. The Chancellor of the Exchequer said: It is certainly not the fact that the Governor of the Bank of England reports to the British Government on a matter of this sort. It is a mistake to suppose that the Governor of the Bank of England serves on the Board of the Bank for International Settlements as a nominee of the British Government."—[OFFICIAL REPORT, 23rd May, 1939; cols. 2089–90, Vol. 347.] Then whose interests does he represent on the Bank for International Settlements? Is it seriously suggested that he is merely the representative of the interests of the shareholders of the Bank of England? Nobody in this country and nobody in any other country would swallow that story. He is obviously there as the representative of the Government. Yet on a matter so directly and seriously affecting the national interests of this country and affecting possibly the lives of many people in this country—for this money which is going to Germany will be used mainly for the purpose of building up their armaments—we are told that Mr. Montagu Norman does not even report on the matter to the British Government. If that be so, I suggest that it is an intolerable situation. If that is really true, and if the Governor of the Bank of England and Sir Otto Niemeyer sit on the Board of the Bank for International Settlements either in their personal capacity or as representing the shareholders of the Bank of England, then that is the strongest argument that has ever been put forward for the nationalisation of the Bank of England and for making the Governor of the Bank of England the servant of the British people. Indeed, we are always told by hon. Members opposite, when we argue that case, that in point of fact the Bank of England is in matters affecting the financial interests of this country the agent of the Government, but in a critical matter of this sort we find that the directors not only do not follow the instructions of the Government here but do not even bother to report back to the Government matters of immense national interest.

I want to put a further question about the actions of Mr. Montagu Norman and Sir Otto Niemeyer on the Board of the Bank for International Settlements. I want to ask whether they considered at any time the transfer of this Czech money from England to the United States of America? The United States did not sign the agreement which was signed by this country and, therefore the deposits of the Bank for International Settlements would not be immune from confiscation, or seizure or temporary restraint, in the United States. I should have thought that these directors on the Bank for International Settlements, if they thought there was a slightest danger of the money in London being taken by Germany, might have thought it desirable to transfer the money to the United States. If it is argued that the directors of the Bank of England acting on the Bank for International Settlements are in a minority position and that the Bank for International Settlements is under the influence, at the moment as has been alleged, of the Fascist countries, that again is an unanswerable argument for the abolition altogther of the Bank for International Settlements.

The next point I want to put is, could the British Government, taking into account the Protocol and British law, and knowing the facts, have stopped the transfer of this money to Germany? I suggest there are two grounds on which they could have done so if they wanted. In the first place, it is clear that the Czechoslovak National Bank was put under duress by the German Government. There was, in fact, considerable opposition to this move. I understand that influential Czech circles pressed that the transfer should not take place, but the demand was made under duress the Bank for International Settlements felt that they had to give way. I am not a lawyer, but I understand from some of my legal friends that the law of Switzerland, as well as of this country, is that when a Customer of a bank demands to take away a deposit which he has placed with the bank and the bank knows that the cus- tomer does not want to do so, but is being forced to do so by a third party, the bank in those circumstances is entitled to keep the deposit and prevent it being taken away by the depositor and handed over to a third party.

I also understand, again from some of my legal friends, that if I have a deposit at a bank and the bank knows that the money I hold there is being kept for some other purpose, is in trust for some other party, and I give an order to the bank to deliver the money, which the bank knows I am holding in trust for some other person, to a third party, perhaps to pay to my bookmaker, if I have one, in those circumstances the bank is entitled not to part with that money when it knows that the deposit is held in trust. If customer A has a deposit at a bank and asks for the money to be given to Y, the bank, according to British law, can say "The money is held in trust for X, and therefore, we cannot allow it to be paid out to Y." I submit that the facts in this case fall into such circumstances. The Bank for International Settlements held this money in London in point of fact in trust for the Czech people. The Bank of England knew that; and the Bank for International Settlements then asked the Bank of England that the money should be handed over to a third party.

In these circumstances I think the Bank of England is running the danger of committing, if it has not actually committed, a breach of trust, and I am informed by my legal friend that the matter is open to considerable doubt, and that if he were advising the Bank of England he would certainly tell them not to part with the money. In view of the doubt which exists in this matter, I submit that the Government should have held the money back, pending action in the courts of law, or should have come to Parliament and asked for the direction of Parliament. If the Government had really been anxious to prevent this Czech money being handed over to Germany they had quite a good legal case for holding up the transfer until the legal aspect had been settled or until legislation had been passed by Parliament. But neither the Bank of England nor the Treasury seemed at all anxious to prevent this transfer of money; their chief concern seems to have been to prevent the matter being made public to Parliament or the country.

What is the position now in regard to this money? I understand that the gold is still in the Bank of England, that it has not been taken away. If the Government really want to act in this matter in the direction in which I am perfectly certain the House wants it to act, it could still prevent that gold reaching the vaults of the Reichsbank by giving certain guarantees to the Bank of England and then putting through the necessary legislation. If the Government are anxious to prevent this money going to Germany, why do they not act? There is further a serious danger for the Chancellor of the Exchequer. One of these days it may be that an independent Czecho-Slovakia will arise and say to the Bank of England and to the British Treasury, "You held £6,000,000 of our money, but you handed it over to a third party without our permission. We want that money back." In those circumstances I am told that the National Bank of Czecho-Slovakia would have a very good case for demanding that the money should be refunded to the Bank of Czecho-Slovakia, and the British taxpayer would have to find £6,000,000 to hand over to the bank of an independent Czecho-Slovakia. I hope that aspect has not escaped the attention of the Chancellor of the Exchequer.

There is another very extremely important point. I want to ask the Chancellor of the Exchequer whether he will elucidate far more clearly than he has up to the moment what is the position of Czech balances which are being held here, quite apart from those held by the Bank for International Settlements. What is the policy which the Government are pursuing in this matter? As far as I can see, they can pursue one of two policies. They can say that they are holding the money here in order that British nationals or institutions who have claims against Czecho-Slovakia shall be satisfied and that when those claims have all been fully satisfied, the balance will be sent back to the Czech National Bank, which in fact means to the German Government. That is one attitude that can be taken. The Government can look upon the deposit which they are keeping here under restraint as a negotiating instrument to satisfy British claims. On the other hand; they can look upon the money as being held in trust for the Czecho-Slovak people and say that after the claims have been properly and fully settled, what balance there may be—and there may be a considerable one—will be kept here in trust for the Czecho-Slovak people and will in no circumstances be handed back to Germany where, as we know, it would be used for purposes quite contrary to the interests of the Czecho-Slovak people and those of world peace.

I hope the right hon. Gentleman the Chancellor of the Exchequer will make himself quite clear on the matter. From the statement that he made, it would appear that the Government contemplate making a general release to Germany of what balance there may be. On Tuesday, the Chancellor said that there will be no general release of the assets unless and until a satisfactory arrangement has been made in regard to the financial obligations of Czecho-Slovakia to British holders, from which one gathers, by inference, that when such an arrangement has been made there will be a release of the assets to the Czech National Bank and to Germany. I submit that this matter is of considerable importance not only to the people of this country, but to the people of the world. The people of the world are watching anxiously to see what is the foreign policy of the Government at the present time. If it appears that, in spite of all the pacts that have been entered into and the guarantees that have been made by the Government during recent months, they are continuing a policy of appeasing and satisfying the dictators by making sacrifices to those dictators at the expense of small nations, then I think the world will have little faith in any change of policy by the Government and will be convinced that the Government are continuing their old policy of appeasement.

Therefore, I think it is desirable, first from the point of view of the Bank of England, that the position in this respect should be clear. It may well be that the Bank of England, after what has happened, may no longer be looked upon as the safest place in the world and that the phrase "as safe as the Bank of England" may no longer apply. The Czech people and other peoples may look upon the Bank of England as being very unsafe, and the phrase may become "as unsafe as the Bank of England." The deposits of small countries may go to other countries, and not to the Bank of England, unless the Chancellor, even now, says that he will take what action he can to prevent money belonging to the Czecho-Slovak people, and still in the vaults of the Bank of England, from going into the hands of a third party.

Secondly, this matter is very important from the point of view of the safety of this country. It would be a very serious thing if £6,000,000 of free money were handed over to Germany for the purchase of raw materials for armaments which might be used in some great war in which England and Germany were opponents, and which might result in the destruction of millions of lives in this country. Thirdly, from the international point of view and from the point of view of the confidence of countries such as the United States of America, Russia and the smaller countries in Europe, whose confidence we must have if we are to have any real peace pact against aggression, it is essential that we should make it abundantly clear that we are no longer pursuing the policy of appeasement and giving in to the demands of the dictators whenever they make them, not as a sacrifice from this country, but as a sacrifice from small countries which are unable to resist those demands. If we hand over to Germany any part of the Czech money that is held by this country, we shall be shaming ourselves, and such reputation as we may have gained during the last few months of standing up against aggression, will instantly disappear.

1.10 p.m.

Mr. Bracken

I agree with a good many of the remarks made by the hon. Member for North Lambeth (Mr. G. Strauss), but I think he rather exaggerated the dangerous position of this House in relation to the deposits of Czech money in the Bank for International Settlements. I think it is very unlikely that we should ever be asked to provide £6,000,000 to satisfy damages against the Bank of England as a result of a law case that was won by a Czech national. I believe that once there was an experience of that kind in connection with a debt of £3,000,000 of the Bank of England, and that experience proved conclusive from our point of view. I agree with what was said by the hon. Member about the "sealed lips" policy of the two directors of the Bank for International Settlements who represent the Bank of England.

I am certain that my right hon. Friend the Chancellor of the Exchequer will give us an admirable legalistic defence of the British Government's arrangement with regard to the Bank for International Settlements' deposit. The Chancellor would be right in maintaining that the British Government have no power whatever over the deposits of the Bank for International Settlements, whether held in London or elsewhere. The Bank for International Settlements is what parsons call a peculiar. It is a bank that was put outside the scope of the laws of the many countries which were its founders, so that the Government can make out a very good case for possessing no power over its deposits.

It is most distressing to learn that the British directors on the Board of the Bank for International Settlements did not think fit to inform the Treasury of the arrangement to transfer Czech gold to the Nazi gangsters who have bludgeoned and robbed Czecho-Slovakia. The Chancellor told us that he heard of it from an unofficial Continental source. I think my right hon. Friend has been very badly treated by the two directors of the Bank of England who sit on the Board of the Bank for International Settlements. I entirely agree with my hon. Friend the Member for East Aberdeen (Mr. Boothby) who described so well the relationships that exist between the Bank of England and the Chancellor of the Exchequer. My hon. Friend described the position as being that of the First Lord and the First Sea Lord. I have often wondered who was First Lord and who First Sea Lord—not, of course, in connection with the present Chancellor of the Exchequer, because now the Treasury have a much greater control over the goings on in the Threadneedle Street department of national financial affairs. But it is very hard indeed on the Chancellor that he should have to depend on an unofficial Continental source for information of such vital importance.

One of the directors of the Bank of England on the Board of the Bank for International Settlements, Sir Otto Niemeyer, is a former Controller of Finance at the Treasury. I presume that he has access to the Chancellor of the Exchequer, and would regard it as his duty to consult with the Chancellor of the Exchequer—I should be very much obliged if my hon. Friend the Member for Southend-on-Sea (Mr. Channon) would not hold a discussion with his lord and master the Under Secretary for Foreign Affairs; I have no doubt he has important information to impart to him, but I suggest that he should do it outside the House. I am sure that the Chancellor will agree that Sir Otto Niemeyer and the other director read the Czechoslovakia (Restrictions on Banking Accounts, etc.) Act that was passed by the House. They would do so in their capacity as directors of the Bank of England. Surely, having read that Act, it must have occurred to them that they should mention to the Chancellor of the Exchequer that they, as directors of the Bank of International Settlements, knew that £6,000,000 of gold belonging to the Czechs was deposited in London, and also that the Germans were pressing for a return of that money.

They could have said: "We realise that the Chancellor has no legal power to tell us what to do, but in view of the fact that we did foster this Act, we should like to know the opinion of the Government on what our duty should be." I say that they should have gone further. I say that the two directors should not only have notified the Chancellor but should have gone to Basle and made the strongest possible protest. If their colleagues had attempted, in disregard of their views, to hand over this money to the Germans, they should have resigned from the Board and withdrawn the British deposits from the Bank. I say that these two British directors of the Bank for International Settlements are trustees for the unfortunate Czecho-Slovakians. They had a duty to those for whom they were trustees, those who had been bludgeoned by the Germans, to retain that money until they got a decision from the courts in Switzerland.

I do not agree with the hon. Member for North Lambeth that it is possible for the Bank of England to be sued in regard to this matter. I do not believe that it will be necessary for us to pass an Indemnity Bill to protect the Bank of England, but if I were a Czecho-Slovak who nourished the hope that the state of Czecho-Slovakia would one day be revived I should take some trouble under Swiss law to find out what my trustees did when the Germans attempted to get hold of this money. It might have been possible, through diplomatic negotiations, to have prevented the transfer of the gold until the Swiss courts had ruled on the legality of the German occupation. I think that is a sound point. It is also clear that the British directors of the Bank for International Settlements made no effort to protect those people, who had put their trust in them. Let us recognise that fact.

Mr. Boothby

Does my hon. Friend suggest that Mr. Norman and Sir Otto Niemeyer might in certain circumstances be held personally liable for this debt, under Swiss law?

Mr. Bracken

I am not a lawyer. [HON. MEMBERS: "Hear, hear."] The Chief Whip who is behind Mr. Speaker's chair says "hear, hear," which I suggest is out of order, but even gorgeously arrayed as he is to-day, I would say this to him. We all know that directors of any institution, whether in Switzerland or in England, who definitely break a trust with their depositors or shareholders, may be shot at in the courts. I do not believe it is possible that the Governor of the Bank of England or Sir Otto Niemeyer will be called upon to pay this £6,000,000. But I think they might be subjected to a good deal of what is known as legal mangling in the courts in Switzerland and I, personally, would like to see some mangling. It seems to me that they adopted the attitude, "The Nazis have got control of Czech bank balances by violence and we have to hand over the money to the gangsters who have broken into Czecho-Slovakia and seized the title deeds of the property of the Czechs." The directors of the Bank for International Settlements simply said, in effect, to the gangsters, "We realise that you are right." I think of these directors, it must be said that they came, they saw and they capitulated.

I ask the hon. Member for Holderness (Mr. G. Braithwaite) what would be the attitude of a British banker if a gangster came into his bank and attempted to cash a cheque signed by one of his customers, when he knew that that customer was under duress? It is perfectly clear that the banker would not cash the cheque, but would send it back for further and better particulars, and communicate with the police. He would go in for all sorts of delaying processes in the hope that the man who was held under duress might escape. That is the sound line to take in such a case. The Bank for International Settlements could, by engaging a lawyer to communicate with the Reichsbank, have started a correspondence which would have lasted two or three years. They would have been perfectly within their legal rights in starting inquiries into the real ownership of these assets. Nobody knows better than the Chancellor of the Exchequer how this can be done, provided you have the right kind of lawyer. Consider the irony of the position. The Bank for International Settlements, which was set up to facilitate international banking transfers and to promote good will in international relationships, is the bank which sanctions the most notorious outrage of this generation, the rape of Czecho-Slovakia.

I do not want to be very controversial. What I have said so far will lead no one to believe, I am sure, that I have been in any way over censorious of the Government. But now I propose to say a word or two about what the Prime Minister calls the "informal negotiations" which are going on between the Nazi German representatives of the Reichsbank in London and our Treasury officials. My hon. Friend the Member for East Aberdeen to my great surprise, blessed those negotiations. The Prime Minister is not so sure about them. He calls them "informal." What are the Government negotiating about? The assets and savings of the Czecho-Slovak people, lodged in London. With whom are they negotiating? One would imagine that it would be with the Czechs, but not at all. They are negotiating with the Nazis who garrotted Czecho-Slovakia and robbed her of her possessions. Those are the people with whom we are negotiating. Not one Czech is present at these negotiations. They created these assets, they own this property but they are not represented. The gangsters who came in and captured their country are those with whom the Government are negotiating. I am staggered by this idea of informal negotiations between our Treasury officials, whose austere head sits in this House and the representatives of such men. I remember reading in the works of Dean Swift a criticism of the Irish bishops in the eighteenth century. Swift said it was very true that the bishops who were appointed to Ireland by a Government in England and, when they had been consecrated in London, left this city with the highest reputation for morality, scholarship and discretion. But, he added, it was evident that when they were crossing Hounslow Heath they were seized upon by highway robbers who stole their robes and went to Ireland in their place, and greatly discredited religion in that country. Somebody is trying to steal the clothes of the Chancellor of the Exchequer and of our Treasury officials in this Czech affair.

I have not attempted to make any calculation of what shall be left by way of surplus, but there should be a fairly substantial surplus when the rights of British claimants have been met, and I entirely agree with my hon. Friend the Member for East Aberdeen about the destination of that surplus. The object of these informal negotiations is clear. The Nazi bosses of Czecho-Slovakia are trying to get as much Czecho-Slovak money or assets as they can for transference to the Reichsbank in Berlin. What are they doing here otherwise? Does anybody think that they are sitting round a table here talking amiably with Treasury officials about the weather and the price of fowls? No, they are trying to get as much of these assets as possible to take back to Germany in order to buy various metals of war which will be required on the day when Messrs. Hitler and Company really believe that the major smash-and-grab raid is ripe for delivery. So that we at the present time, in London, are actively helping the German rearmament programme, and our Treasury officials are sitting round a table talking to people about stolen goods or about how much of those stolen goods should be given back to Germany in order to facilitate her rearmament programme.

Really, this is the most squalid form of appeasement. Political appeasement at the present time is, of course, out of the question. The by-elections and the various political developments in the last few months show that that policy at any rate is dead and damned, but some form of appeasement is still, apparently, dear to the heart of the Government, so they go in for financial appeasement. But it is a very squalid form of financial appease- ment, because they are appeasing the Germans with the money of the unfortunate Czechs. I think it would be a better form of financial appeasement to give them some of our own money—not, of course, that I am recommending any such action. I say that these informal negotiations, which may shortly become formal, are highly dangerous, and no one in this House approves them. I agree with the hon. Member for East Aberdeen when he says that if the public find out that not only are the Government now willing to recognise the German conquest of Czecho-Slovakia, but are also going to take the savings of the Czecho-Slovakian people and transfer them to Germany in order to facilitate her rearmament, there will indeed be as mighty an uproar as there was over the Hoare-Laval proposals.

1.28 p.m.

Sir John Wardlaw-Milne

It is one of the great advantages of the House of Commons that in a Debate of this kind we are able to hear both sides of a question. Therefore, my hon. Friend the Member for North Paddington (Mr. Bracken) will understand when I say at once that I think I disagree with at least three-quarters of what he has just said. Of course, I do not disagree with every word, and I appreciate, as, I am sure, did the whole House, the very breezy way in which he put his argument forward, but when he was dealing with the position of the British directors of the Bank for International Settlements, I am bound to say that I found it impossible to follow him. As I understand his argument, it is that two directors, being a small proportion of the total Board of the Bank for International Settlements, should have objected to that bank giving an order to the Bank of England to dispose of assets which did not belong to the latter, but to the Bank for International Settlements, and that, if they had found that the rest of their colleagues did not agree with them they should have made a public protest and resigned from the Board.

Mr. Bracken

I must say again that the point at issue is this, that the two British directors on the Bank for International Settlements were perfectly aware that the British Government had passed an Act, called the Czecho-Slovakia (Restrictions on Banking Accounts, etc.) Act, and that the British Government would not recognise the Government of Czechoslovakia. They are two of the most influential directors of the bank and are regarded as its co-founders, and it was their duty to go to Basle and protest against this surrender of Czech assets and, if their colleagues would not take notice of them, they should have resigned.

Sir J. Wardlaw-Milne

It would be of great advantage if we did not mix up two things. I am dealing only with the position of these directors in connection with the demand on the Bank of England for the transfer of money which belonged to the Bank for International Settlements. I am not at the moment concerned with the issue as to whether they felt it their personal duty to make a public protest and resign—that is a matter entirely for themselves—but I am concerned with the position of the Bank of England, which had money deposited with it by another bank. As I see it, the Bank of England had no other course but to follow the instructions which they received from the people who owned the money. The money was the property, not of the Bank of England, but of the Bank for International Settlements, who were perfectly entitled to say to the Bank of England, "Transfer this money to America, to Japan, or to Germany," or to anywhere they choose.

The proposition which has been put forward several times in this Debate, that a banker in the position of the Bank of England, holding funds belonging to some other party, should be able to dispose of those funds in a way contrary to the wishes of the owner, merely because they think that the owner has no right to the funds or is giving improper instructions, is, to me, one of the most extraordinary statements that I have ever heard. I completely fail to understand that attitude, but I want to say that that does not necessarily mean that I disagree with anything that has been said this morning regarding the desirability or otherwise of continuing the Bank for International Settlements. I am not at all sure that I do not agree that the time has come when the Bank for International Settlements might well disappear. I think it has perhaps served its period of usefulness, but that is quite a different problem from the problem, which has been so often stated this morning in one form or another, that for some reason, namely, because we have sympathy—and I have as much sympathy as has any other hon. Member—with the position of Czechoslovakia, the Bank of England, under the instructions of the Government of this country, should have taken an action which no man could possibly take without being in the position of not fulfilling his trust. The hon. Member for North Lambeth (Mr. G. Strauss), I noticed with interest, said that the phrase "Safe as the Bank of England" would soon disappear if the policy that he advocated was not followed, but surely it would more quickly disappear if we had the position in which a banker was entitled to deal with money entrusted to him in a way contrary to the instructions of the people who owned the money.

Mr. G. Strauss

Will the hon. Gentleman answer my question? If a depositor has a trust fund with a banker and sends instructions to the banker which he knows are in violation of the trust, surely the hon. Member will agree that the banker under those circumstances is acting correctly to disobey those instructions, subject to confirmation, inquiry, and so on?

Sir J. Wardlaw-Milne

That is a very hypothetical case, but as I see it a banker is entitled to disobey his instructions only if he has reason to believe that they are given illegally, and if in this case it could be proved that the Bank for International Settlements did not give the instructions or had not the right to give the instructions, that would be quite a different position. But here is a case in which the Bank of England could not go farther back than the people who deposited the money with them. They could not go behind them and say, "Where did you get the money? Did you get it correctly?" This is a position in which definite instructions were given by the owners of the property to those who had it in trust, and clearly the Bank of England had no other course than to carry out their instructions.

Mr. Bracken

Let me give my hon. Friend a specific case. After Austria was attacked by the Germans, the Reichsbank in Berlin wrote to certain London banks and asked them to deliver moneys held on Austrian account to various branches of the Reichsbank, and these London banks refused to deliver that money.

Sir J. Wardlaw-Milne

I cannot, of course, say anything about a case of which I know nothing, but from my knowledge of anything that the German authorities may have done, it does not give me much confidence that we should follow such a course. To me it is quite clear that our actions must be in accordance with the procedure which any private banker would adopt. The hon. Member for North Paddington referred to the dangers of negotiations between the Government and the German authorities, and made the statement, which I have no doubt is correct, to the effect that no Czechs were represented in those negotiations. So far as he is anxious to avoid any transfer of money to Germany he can be assured that the whole House is with him, but the point which he suggests is, as I understand it, that there is little likelihood of any money being transferred to Germany at all because the bulk of these negotiations are in connection with claims on behalf of British subjects, and it may very well be that it is much to the interests of British subjects that these negotiations should go on. I should strongly object if the negotiations meant the transfer of a great deal of money to Germany, but if these negotiations mean the settlement of a large number of claims in favour of British subjects I do not think we should take up the attitude that we are not prepared to negotiate. My main object in rising was to emphasise the point that the attitude of the Bank of England was the only possible attitude that could have been taken up in the circumstances.

1.37 p.m.

Mr. Lloyd George

I really ought to apologise for taking part in the discussion at all, because it is the general desire of the House that it should be conducted mainly by private Members, and I can well sympathise with that, having been a Private Member longer than anyone in the House. As, however, this incident has developed as the result of my intervention in the debate last Friday, I feel bound to say a few words in regard to it. I came here last Friday to initiate a discussion on behalf of my hon. Friends below the Gangway on foreign affairs. On my way I read the newspapers and there found a statement in several news papers—

Sir J. Simon

It was the "Daily Telegraph."

Mr. Lloyd George

That is the one I happened to read—it is a highly reputable Conservative newspaper. I thought that what I read was so startling that when I was speaking I diverted from the topic which I was developing and I summarised the statement from memory. I said to the right hon. Gentleman "I think we ought to have some explanation of this." I was perfectly well within the rights of a Member of Parliament to ask that from a Minister. I drew some conclusions as to what the effect would be if the facts were such as they were represented to be by this important newspaper. The statement which appeared in the newspaper said that the Treasury had agreed to this transaction. I naturally asked the Treasury what the explanation was. Nobody now will say that the explanation was fair or straightforward. In fact, it was very disingenuous. The Prime Minister stated that he repeated in the House what he had been told by the Treasury. Obviously, therefore, it was the Treasury who were responsible. Let us see what the Prime Minister said in reference to this. He said that I took a very gloomy view of this transaction—

Sir J. Simon

Perhaps the right hon. Gentleman will be willing to read the sentence.

Mr. Lloyd George

He said: The right hon. Gentleman found another subject for gloom in a story in the press that a German representative was in this country engaged upon a sinister mission in consequence of which the British Treasury was to release £5,000,000 of Czecho-Slovakian assets to the Bank for International Settlements for the benefit of the Reichsbank. It is the statement in the "Daily Telegraph" which I have summarised. I am glad to be able to cheer up the right hon. Gentleman on that particular point, because the whole story is a mare's nest. Herr Wohltat—the name of the gentleman—is not in London at all, as it happens, and anyhow the Treasury has not agreed to release any Czecho-Slovakian assets to the Bank of International Settlements or to anyone else. The only releases that have been made have been releases of small amounts to refugees from Czecho-Slovakia, apart from some releases of small amounts to pay trade debts due under contracts made before March, 1939. That is a small matter.—[OFFICIAL REPORT; 19th May, 1939; Cols. 1841–2, Vol. 347.] Would anyone have believed from that what the transaction really was? Let us take it as it is generally admitted now by everybody in the House. An amount of £5,000,000—and I think nearer £6,000,000—of Czecho-Slovakian assets which were deposited in the Bank of England have been handed over to the Reichsbank. Would anyone have believed from the Prime Minister's statement that that transaction had occurred? It occurred with the consent of two of our representatives on the International Bank. The Chancellor of the Exchequer knew about it. He has said so. If he denies it I can quote what he said about it.

Sir J. Simon

It came indirectly to us.

Mr. Lloyd George

He knew about it; that is what I am saying.

Sir J. Simon

I am not making any quarrel about it, but I will explain how far I had any intimation.

Mr. Lloyd George

Here were two representatives of the British Government on the Bank for International Settlements. I am amazed at the way in which the position of the Bank of England has been misrepresented. It is treated as if it were purely an ordinary bank with no responsibilities to the Government, no responsibilities to Parliament, except the responsibilities that we all have as citizens of this realm, and no responsibilities to the Treasury. That was never the attitude adopted by the Bank of England or the Treasury in the days when my right hon. Friend the Member for Epping (Mr. Churchill) or I and others were at the Treasury, or even the Prime Minister. They were always consulting us. If there were anything that involved a great principle or a matter of policy, and certainly if there were anything which involved foreign affairs, they were constantly in touch with us. They would not have dreamt in the old days of entering into a transaction of this kind without seeing the Chancellor of the Exchequer. This is a slackness, a looseness of treatment, which must have been introduced within the last year or two, because that is not the view which any other Chancellor of the Exchequer or any other Governor, of the Bank of England would have taken as to the relations between the Bank and the Government.

When the Bank of England takes a certain line which impinges upon foreign policy there is nobody, either in this country or any other country, who does not believe that it is the policy of the Government. Chancellors of the Exchequer have very often held different views from those held by the Governor of the Bank of England on questions affecting foreign countries. I did not take the same view as the Governor of the Bank of England with regard to Reparations, for instance, but he never on his own authority as Governor of the Bank of England not merely declared that policy but acted upon it—even if he would have had the power to do so. He had a perfect right to put his views before the Government of the day, but he knew perfectly well that he could not act upon a matter which affected a great many other nations as well as our own without first obtaining the sanction of the Government of the day; and it is a most extraordinary doctrine that these two gentlemen who are representatives, not of the Bank of England, but representatives of the Government, who are appointed by the Government—[Interruption.] At any rate, they were directors of the Bank of England, one of them being the Governor and the other a very important director, and they could not have absolved themselves from the responsibility which they had under those circumstances as directors of the Bank of England.

Sir J. Wardlaw-Milne

Are they appointed by the Government?

Mr. Lloyd George

The Chancellor of the Exchequer tells me they were not appointed by the Government.

Sir J. Simon

I have already said they were not.

Mr. Lloyd George

I do not want to make any point of that, but they were directors of the Bank of England which, for all practical purposes, as far as policy is concerned, is a national bank, a national institution. It is not in the same position as the Midland or the Westminster Bank, and all the arguments which have been used upon that assumption are thoroughly false, are thoroughly misleading, and I shall be very much surprised if the Chancellor of the Exchequer will support any contention of that character. The facts are that £5,000,000 or £6,000,000 of gold has been transferred to the Reichsbank. That gold belongs to the people of Czechoslovakia. The Reichsbank have no more right to it than a burglar who has captured bearer bonds would have a right to take them to a bank and ask for the cash. If it were known that it was the burglar who was asking for the cash, would any bank manager give him the money? Of course not. Legally when they are presented the bank has no right to enter into an argument and ask, "Where did you get them? Have you got them honestly or otherwise?"—that is the whole point of bearer bonds. If you knew that they had been burgled, if you knew the date, if you knew how he had broken into the bank, knew the weapons used, knew how he burst the safe and took them out, what sort of a fool or knave would the manager be who cashed those bonds?

It is nonsense to treat this question with these miserable legal quibbles. First of all, you know they are stolen goods, you know that they are going to be used to your detriment, you know that the whole transaction will be reopened again when the legal claimant may have a chance of putting his case in a higher court. But all these facts were left out of the explanation of the Prime Minister. It was all "a mare's nest." The nest had been captured by the brigands, but the mare was in our stable, and from all I can understand it is still there. I have other questions to put to the Chancellor of the Exchequer, because I do not want to keep this argument merely on the level of a dispute between the Prime Minister and myself on a matter of explanation. But there it is. After what he said there is no one here who believed that £6,000,000 of Czecho-Slovakian gold had been transferred to the Reichsbank. No one would have believed that we had parted with any money—except to refugees and in payment of some small, trivial bills. That was the impression conveyed.

I agree with my hon. Friend behind me that there has been far too much of this. We had the same thing in the debate on Friday. I put a question as to whether the Government had secured the advice of the General Staff before they committed us to that extraordinary pledge to guarantee Poland and Rumania without any assurance of support from Russia. I asked a second time. No answer. I asked it of the War Minister, my right hon. Friend the Member for Epping, pressed it, and at last we were told by the Under-Secretary for Foreign Affairs that the House could rest assured that the Government are always in contact with and consulting the General Staff. I do not blame him. He was giving something which had been put into his hands. It was not true. To say that, generally, they are in contact with the General Staff is one way out; but everybody was under the impression that the General Staff had been consulted before that guarantee. It was intended to convey that impression. That impression would be a false one.

And here is another one, here is a statement which would convey the impression that there was nothing whatever in the story about the £5,000,000 or £6,000,000, and that £5,000,000 or £6,000,000 had not been passed to the Germans. The question whether the Treasury merely acquiesced or gave its consent is, I agree, an important point. They decided not to act, which means that they acquiesced. The "Daily Telegraph" statement was that they had agreed. Well, in the circumstances, there is not all that difference between the two. At any rate, there were the main facts of the story, that millions of stolen money had been taken away for ever, passed on to the robbers, and it had been done with the consent of Sir Otto Niemeyer, who, I believe, is president of the Bank. At any rate he and Mr. Norman are both directors of the Bank of England—

Mr. Ellis Smith

The friends of the German Government.

Mr. Lloyd George

I will say something about that directly. Not only that, but the Treasury, knowing it, took no action, and in so far as their conduct was concerned the transaction had gone through without any interference. It is amazing that these people should have gone there, holding their position in a great national bank—in the great national bank, the official bank of this country—and never given a single intimation to the Government of what was going on. Did the Chancellor of the Exchequer complain of it when he heard of it—when he was informed, when some gossip came along and said something about it? Did he hear nothing from the representatives of the Czecho-Slovakian Government in this country? Not a word? That is rather extraordinary. Where did it come from? We are entitled to know. Why should that fact be concealed from the House of Commons? Why are we to be the only people who are not to know what is going on, when we are representing 47,000,000 people in this country? I think we ought to know.

I am going to ask the Chancellor of the Exchequer this: The cash is here now, so I hear. I noticed that he did not contradict it when the statement was made by an hon. Member behind me, and I asked a couple of hours ago about it. I told him that I had just heard that it was still here. Is that so? The right hon. Gentleman cannot contradict it?

Sir J. Simon

I cannot contradict it because I do not know, but if the right hon. Gentleman will be good enough—

Mr. Lloyd George

This is very important. I asked about this matter more than two hours ago and I said I was going to ask the right hon. Gentleman a question. I gave notice to the right hon. Gentleman that I would ask the question, and I hope that he will have an opportunity of ascertaining whether the £6,000,000 is in the Bank of England or whether it is now in the possession of Herr Hitler for the purchase of armaments and of material for making war. If he finds out that it is here, I am asking him now whether the Government will reconsider their attitude. Let him put this point to them, because I think it has not been put: I am very hopeful that war will be avoided and I am more hopeful since the Government have decided to bring Russia in. I cannot conceive of men of the extraordinary position, shrewdness and perspicacity of Herr Hitler and the Italian Duce engaging in a war in which their chances have been so conspicuously diminished by the introduction of the greatest military power in the world—although it has been said that there is a certain madness in men, making them fling themselves into impossible enterprises. That is the incalculable thing in human nature upon which you cannot depend.

I personally am sanguine that war will be averted the moment that that agreement is signed, and if it is entered into to the extent of agreement between the general staffs and obvious preparations on the part of the three Powers to co-operate. But that is not peace. It must be followed by settlement, and the settlement will be a very long business. It was a long business when you had men on the same side discussing the thing in Paris. It took months. If you had had men with different interests who made mutual concessions, it would have taken well over a year. What will be the position then with regard to Czecho-Slovakia? If the Government are taking steps one by one to build up recognition of the German conquest, leaving nothing but the coping-stone to be put on, you will not get peace in the world on that basis; but that is what they are doing. All this talk about appointing consuls, this transference of £6,000,000 of the assets of Czechoslovakia to Germany—what is that but recognition? It is very substantial recognition. True, it is only recognition by Mr. Montagu Norman at the present moment, but the Treasury have practically acquiesced, and acquiescence is only a cowardly method of agreeing.

Those are all questions which ought to be settled as part of the general settlement. What are you going to do with Sudetan Germany, with Bohemia, with Czecho-Slovakia? You cannot give the Germans beforehand everything they want and then call them to a conference. They will say "You have already recognised our conquest of Czecho-slovakia. It belongs to us now. Here it is; you have appointed officials there, you have treated us as the de facto governors, rulers and possessors of that country." Would it not be better that, in the interest of any conference which they may have to summon or to attend, as they must if you are to have real peace in the world after these gentlemen realise that their career of aggression is to come to an end—and until you do that it is impossible to deal with them—that the Government should take steps now and say: "We cannot allow this cash to go until we have a legal decision upon it."

Whether the decision is by our courts or not, the action would have to be brought by Germany. Germany would be in the box. They would say to her, "Where did you get it; whom did you take it from; what right have you to it? You burgled the safe; is that your case? Is your claim the burglar's jemmy?" They would have to go into the box and make their claim. It is no use treating this as if it were an ordinary banking transaction. It is the result of a raid, a blunt piece of banditry perpetrated by aggressors who have already stolen one country after another. You cannot treat that as if it were an ordinary banking transaction. Bankers do not deal on those principles with men of that description. But when you meet these countries, as I hope you will, when it is quite clear to the aggressors that they cannot go any further, and they themselves begin to be anxious for a conference, let it be a conference with the knowledge that the power is behind us, and keep this cash of these poor Czecho-Slovakian peasants and protect it for the honour of England.

2.8 p.m.

Sir J. Simon

The hour is not perhaps a very convenient one for detaining hon. Members in large numbers in the House, but I think it is right that I should explain as simply as I can the very important matters which have been raised in the discussion to-day. I am not in the least disposed to regard them as unimportant, or as matters to be put on one side, and I wish the House to believe me when I say that I do not approach them in what is conveniently called some pettifogging legalistic spirit. I do not think that that is at all a fair criticism. The first thing I must deal with, and I wish to deal with it very plainly and at once, is the suggestion that the Prime Minister, on the ground of the answer which he gave to the right hon. Gentle man on Friday last, could really come under any reproach. Whoever may be blamed—

Mr. Lloyd George

He said it rested really with you.

Sir J. Simon

The Debate on that day, since it was a Friday, started early as it did to-day, and I rather think the right hon. Gentleman started it. Neither my right hon. Friend nor anyone else, as far as I know, had the least idea that this particular point, which the right hon. Gentlemen mentioned, having perhaps seen it in a newspaper as he was coming down to the House, would be raised. It related to the Czecho-Slovakia (Restriction of Banking Accounts, etc.) Act which I carried through the House and which has been the subject of close attention on my part, and I was perfectly well informed as to what was happening in con- nection with that Act. When the right hon. Gentleman made his observation, I feel sure he thought, and undoubtedly the article to which he referred implied, that what had been done had been done by the Treasury under that Act by way of release. Unquestionably that was the effect of the article, and it was plainly implied in what the right hon. Gentleman said. When he came to this, his power of drama came out, and it is the fact that, having plainly suggested that something had been done by the Treasury under the Act which it should not have done, and that this was simply a concession due to the Treasury giving its consent which the Act requires—

Mr. Lloyd George

I never mentioned the Act.

Sir J. Simon

He pointed to me and said: They are not merely robbers, for we are now going to see that they are the receivers of stolen goods with the sanction of the British Chancellor of the Exchequer, and I hope that before this Debate is over we shall have some explanation of that."—[OFFICIAL REPORT: 19th May, 1939; col. 1823; vol. 347] I daresay hon. Members who were in the House observed that, not knowing what the right hon. Gentleman had been referring to, I consulted the officials under the Gallery, and there was no one there who had come prepared for this; but a note came hastily down stating in very plain terms that it was not the case that any release had been given. The Prime Minister said it was not true that the German representative named was in this country engaged on this matter, that the gentleman in question was not in London at all, and anyhow the Treasury had not agreed to release any Czecho-Slovakian assets to the Bank for International Settlements or to anyone else. All that was perfectly true, and, if I had known at the time that some parallel reference was involved, I certainly should have informed the Prime Minister. At any rate, the Prime Minister had no knowledge of it, and I want to make that entirely clear. I am quite prepared to take any blame, but my right hon. Friend is completely without blame. He simply repeated at very short notice the note that had been given to him while the right hon. Gentleman was speaking. It did not in fact deal with this other matter at all, and apart from the use of the expression "mare's nest," he gave to the House the full information that he had. There was a feeling that the expression "mare's nest" was too strong a term. At the time I did not think so, for it was quite plain to me, and I think to most Members of the House, that what was being suggested was that, in connection with the authority which I have over the blocked Czecho-Slovakian assets, I had just released a great block of them. I had done nothing of the kind.

Equine metaphors were rather numerous in that Debate as the the right hon. Gentleman had been talking about looking a powerful gift horse in the mouth. Perhaps he would prefer me to say that I think the suggestion made was an attempt to put a particularly large cuckoo's egg into my nest, and, as I had nothing to do with it, I naturally refused it. That, I hope, will show to everyone in this House and outside that there is no sort of reproach on the Prime Minister at all. I do not think it has been appreciated by the House that this other matter to which our attention is being directed is not one that has just happened. It happened months ago. It did not happen at the moment when the newspaper article in question appeared, or at the time when we were then discussing it. It was certainly two months ago, I am informed, that this other question was first raised—[Interruption]. It was in March, and not in May.

Mr. Lloyd George

When the Bank decided on the transference to Germany?

Sir J. Simon

It was towards the end of March—I cannot give the exact date—that information, coming indirectly, reached the Treasury that the Bank for International Settlements was taking steps to transfer this gold. At the end of March a rumour of this had reached the Department. I cannot state from what source it came. What is important to appreciate is that we were not so informed by the Bank of England nor by the Czecho-Slovakian Legation. It is one of those pieces of information which do not come in such a form that I can state the source. That was the extent of our knowledge. I considered that it would be right to take the opportunity of making a statement which would show what the facts were as far as we knew them. It was not the fact in the least in the world that I had given any authority for anything at all. I had not been asked to. If I had considered that it would be within my power to refuse I would have refused. It was readily assumed that it was I who was responsible for this, and it was not so at all. Towards the end of March the Treasury heard indirectly that the Bank for International Settlements either had given, or was giving, instructions for the transfer of this gold and I thought, that being the case, that I ought to take the opportunity—and I did—of making what was really a quite full statement on the subject.

Sir A. Sinclair

When was that?

Sir J. Simon

On 23rd May.

Sir A. Sinclair

Is it not very extraordinary that if the Treasury heard of this transaction at the end of March, at a time when legislation was being proposed to stop the transfer of similar balances lying in London, the right hon. Gentleman's own officials did not disclose it to him?

Sir J. Simon

I think the right hon. Gentleman will see how that works out. I perfectly understand the concern of the House, and I ask to be allowed to state as clearly as I can my knowledge of the matter. I was going to observe on the question of the hon. Gentleman opposite whether the answer given by the Financial Secretary corresponded to what I stated the next day. That is so. The question asked was whether any transfer in respect of this deposit had recently taken place. It was in connection with that that the Financial Secretary made it clear that I had no means of knowing whether the facts were or were not as stated by the hon. Member for North Lambeth (Mr. G. Strauss). That is perfectly accurate. As, however, the Treasury had received this hint, I made the statement on 23rd May.

We must pay some attention to what is the nature of the Bank for International Settlements. It is a bank with very exceptional immunities. I have refreshed my memory as to its statutes and the Treaties signed by a number of countries, which have given it an immunity which is altogether exceptional. It is an entirely non-governmental institution. Its direc- tors consist of the Governors of Central Banks, and representatives of industry, etc. They are not appointed by the British Government at all and they are not answerable to the British Government in any sense. Disputes about the interpretation of the Statutes of the Bank have to be referred to the International Court at the Hague and, for the rest, in order to make it quite clear that the Bank should be free from any governmental intervention or interference, the Governments concerned with this agreement, including His Majesty's Government, the French and all the other Governments, gave it by Treaty and Protocol complete immunity from all forms of restriction and interference, and it is expressly stipulated that this complete immunity applies both to the property and assets of the Bank itself and property and assets which the Bank holds for the account of others.

I think it is a little rash to assume that, having entered into treaties with the other countries of Europe that that shall be the nature of this Bank, and having completely relieved it from any possibility of an embargo or restraint being put on its assets or any assets for the account of others, the Treasury here is to blame. The right hon. Gentleman entirely omitted all reference to this. It is very easy to dismiss these things as miserable legal quibbles but the fact is that the Bank has been created in that form. I must say I regard it as not without importance that we should respect its constitution. It was the very fact that this is the nature of the protection enjoyed by the Bank for International Settlements by international treaty which would have prevented us from effective interference.

Mr. Pethick-Lawrence

The right hon. Gentleman is really getting away from the point. The main point is not whether when the Bank for International Settlements made a decision we could resist it. The question is what part our representatives took in coming to that decision?

Sir J. Simon

I do not think I am departing from the point. It is a matter which has been very carefully canvassed in the House and it has a very direct bearing on the matter the right hon Gentleman now mentions. I must make this point good before I go further. It was clearly out of the question for His Majesty's Government to interfere with the transfer of assets by the Bank for International Settlements. That is the very thing which by treaty, in common with all the other States, we must not do. I might point out that it was for that reason, among others, that when we drew up our legislation we did not include this. We could not include it unless we were prepared to break the treaty obligations that we had. That was why, when the right hon. Gentleman quite plainly implied that something was happening to which I had given my consent, the answer was given, perhaps a little hotly, but at any rate quite truthfully, that that was not the case.

We have heard from my right hon. Friend who has just spoken that the British members—not the Government members, but the British members of the Bank—ought, in his view, to be in close communication with the British Government. I can only say that they most certainly are not in communication with the British Government on the affairs of this bank in Switzerland. It might be suggested, perhaps, that the present incumbent of my post is responsible for that, and that no doubt there were better arrangements made before. I have inquired into this at the Treasury, and I am told that the position has always been as it is now. I agree that this is a very special kind of bank. It was established in 1930 as a result of the activities of Lord Snowden at the Hague, under first of all, a series of articles of association, buttressed up by these protocols.

Mr. Lambert

Was it established by the Labour Government of that day?

Sir J. Simon

I do not think that that is a fair point.

Mr. Wedgwood Benn

It is not a point at all.

Sir J. Simon

We cannot in this matter claim to blow hot and cold. The object of setting up the Bank for International Settlements was to have a great central institution, which would be not in the least concerned with the politics of Europe. I have no doubt that that is one of the reasons why the directors of the Bank—certainly the British directors—have consistently taken the view that the business of the Bank is not a matter that they could discuss with the British Government, and I am assured that that has always been the position. You may say, if you like, that you do not approve of that arrangement. You may say, as the right hon. Gentleman opposite said, that you would like to see the Bank of England nationalised, but in this connection the Bank for International Settlements is not an institution in the affairs of which the British Government have a right to interfere. It was set up in such a way that it should not be affected by international politics; and its decisions are not decisions in which the British Government can interfere. That is undoubtedly the position, and if anybody thinks it should be altered they are going much further than this issue.

Mr. Gallacher

You are evading the issue. Politics are introduced when the money is taken to Germany.

Sir J. Simon

I am merely trying to make the position clear. The Bank for International Settlements is, by that very constitution, not concerned with political issues. It carries out instructions received in accordance with what it conceives to be its legal obligations, and the Bank of England, in this matter, is not speaking for the British Government. Although it is the Government's banker, it is not a Government bank. There are all sorts of things that the Bank of England do which are not matters for the Government at all. It has been asked where these assets are now held: as I said, I really have no information on that. But, be that as it may, I will certainly have it considered immediately, with the information that I can get, whether in this matter we have gone wrong. But if, as I believe, these protocols involve an absolute assurance to the Bank for International Settlements that their orders shall be obeyed I do not see how we can fail to obey them except by breaking our treaty obligations.

Mr. Lloyd George

I hope that when the Chancellor is seeking an opinion he will not put the question in that form—"Was I wrong"? I think that is very important. Will he ask whether it is within the power of the Treasury to raise the issue in any court, in order to obtain a legal opinion as to his right to suspend payment until the question of ownership is finally settled?

Sir J. Simon

I think that is quite a reasonable suggestion, and I am grateful to the old solicitor. I do not want to mislead anybody or get away cheaply, but my own view, and the view of my advisers, is that as long as these protocols exist, which bind us not to put any embargo on the claims of the Bank for International Settlements, we cannot get over that.

Lloyd George

Access to the courts.

Mr. Benn

Will the Chancellor tell us, before we rise at 4 o'clock, whether the gold is in the Bank of England? The Bank of England is only a mile and a half away. If he will not tell us, can we send the sergeant to inquire?

Mr. Boothby

Is the present Czech National Bank the same bank which originally held the deposits? I believe it is quite a different bank.

Sir J. Simon

There are quite a number of points which arise, and on a proper occasion I could deal with them. But I think the House will agree that we have to respect these protocols. At present, I do not appreciate how we could take the action suggested in view of that fact; but by all means let us have any further advice about it that we can get.

Mr. G. Strauss

While making his inquiries, will the right hon. Gentleman see that the gold does not suddenly depart by aeroplane or any other method?

Sir J. Simon

I obviously cannot undertake anything of the kind. We have not got the gold in the Treasury. Hon. Members, while keen on the hunt, should be prepared to recognise the manifest limitations under which the Government act. The Government have no more authority than anybody else in this House. We all want to do what is, in the circumstances, the proper and just thing.

Mr. Bracken

I am sorry to interrupt my right hon. Friend, but I think this is important. When he is consulting with his lawyers, will he ask whether it will make any difference that the protocols which Germany and this country signed have been torn up by the Germans, and that the Germans have actually got physical possession of the Austrian shares in the Bank and also of the Czecho-Slovak shares?

Sir J. Simon

I shall be very glad to consider that and any other suggestion that any hon. Member is good enough to make, and I am obliged to my hon. Friend.

Mr. Stokes

Cannot we have, before the House rises this afternoon, an answer to the question of whether the Bank of England could be asked whether it has got the gold or not?

Sir Stanley Reed

On a point of Order. May we not be allowed to hear this important statement from the Chancellor of the Exchequer without these continual interruptions?

Sir J. Simon

I am not aware to what extent it is really legitimate for the Government to address the Bank of England and inquire whether they have or have not gold in their cellars. [Interruption.] I wonder whether the right hon Gentleman will allow me to proceed.

Mr. Benn

I am not interrupting.

Sir J. Simon

I was saying that I am not aware to what extent the Treasury have the right to press the Bank of England to say whether they have got in their cellars gold marked so-and-so. I agree that the Bank of England in some respects is in a different position from ordinary banks.

Mr. Lloyd George

It is a great international question.

Sir J. Simon

I have done my best to make a statement about this matter for the information of the House, and I have told the facts as far as I know them.

Sir A. Sinclair

The right hon. Gentleman has probably forgotten that he promised in the earlier part of his speech to explain to the House why it was that this information, which reached the Treasury officials two months ago, some time in March, was not handed on to him, so that he could have commenced the negotiations which he has promised the House this afternoon.

Sir J. Simon

The information did reach me. What I said was that on being examined it became quite clear that, in view of the Protocol, it was not possible to take the steps now suggested. If, however, it is thought, in spite of my statement, it is possible, I will do my best to get the best advice it is possible to obtain.

There are two other points that were mentioned, and although I am occupying more of the time of the House than perhaps I ought, I would really like to make a short statement upon them. First of all, there is the question which is more of a Foreign Office question perhaps, than a Treasury question and has to do with the appointment of a consular representative in Prague. Prior to 15th March we had in Prague at our Legation our Minister as diplomatic representative. Since then the question has necessarily arisen how we are to arrange matters in view of the annexation of Czecho-slovakia to the German Reich. The diplomatic representative could not continue, because the German Government has required that after 25th May diplomatic representatives in Prague should not enjoy extra territorial rights which they had previously been allowed to enjoy. As regards the Legation, we are withdrawing our Minister, and certain other Governments, notably the U.S.S.R. and the United States, have already withdrawn their Legations under similar notice and have left for the time being consular representatives to look after their interests. To leave our own diplomatic representative, that is the Minister, in Prague after he had ceased to have diplomatic status and privileges would be an absurdity. He would merely be a private person. The Legation was closed yesterday, and, as my right hon. Friend the Prime Minister informed the House on Wednesday, the British interests in Bohemia and Moravia are now in charge of the British Vice-Consul.

Then comes the question about the presence in that area of the British Consul. The German Government, in their communication, said that Consular representatives in both provinces would cease to be recognised on and after 20th June unless, in the meantime, the Consul obtains the exequatur of authority. The House, no doubt, knows that that is the form of document which gives the consul his authority. It is under that that he is entitled to take under his wing British subjects that need protection or representations to be made. It also entitles him to send his official bag and to use a cipher and to send information to the Government. As has already been referred to, in a case like Prague a very important matter is that in connection with refugees. The question which has to be considered is, what our action should be in that situation. It would be no use leaving anybody in Prague unless he had consular authority. Where we do have consuls, they enjoy official recognition, and we want them to give all the services they can render to us and to British subjects or to refugees or whoever they may be. It is not a compliment to any Government that there is granted an exequatur. It is not necessary that this point should be decided instantly by the British Government, and I now state to this House that we shall not make that decision until the House resumes. It is not intended to make it during the recess.

It will be appreciated that there are in fact considerable British interests that we have at least to bear in mind. I was not myself aware that the Prime Minister's words on Wednesday were to be understood as contemplating any de jure recognition at all. Certainly, as far as my information goes that is not what is in contemplation at all, but no doubt it is the fact that, if our Consul gets the exequatur which he must get by 20th June, it might be called a de facto recognition of German authority. That is exactly the problem, and I am merely stating it. I might remind the House that this difficulty has arisen before. For instance, In the case of Abyssinia. The British Consul there from the very early stages of the Italian invasion received the Italian exequatur long before there was any question of de jure recognition. The same thing, I am informed, was true of Austria. Therefore, as far as precedents go, I do not think it is very surprising that it has been found possible to secure the protection of British interests in these areas without making the de jure recognition of these new powers.

Mr. Alexander

The de facto recognition of the Consul in Austria and Abyssinia followed as night follows day, as events proved, but in Manchukuo we have heard of no report of any serious damage to British interests, nor has the British Government up to the present given de facto recognition.

Sir J. Simon

The actual question now is as to our consular representative at Prague. The question is under consideration, and we are in consultation with other Governments about it. I can give the House an assurance that no relevant action will be taken about the matter until the House resumes.

The right hon. Member for Hills-borough (Mr. Alexander) has just referred to another matter, on which I have some responsibility. It is true that in that case the British Government and the then Foreign Secretary secured at the League of Nations the adoption of the principle that there should not be acknowledgment or recognition of a conquest or annexation which had taken place in breach of the Covenant or the Kellogg Pact. It was I as Foreign Secretary who proposed that at Geneva, it was I who got it carried by the League, and I received the thanks of the American Government for doing so. Therefore, I am perfectly familiar with the precedent. I am, however, bound to say that I do not think anybody would agree that the everlasting exclusion of British consular assistance in an area would be in the interests of British trade. I noticed the point of the right hon. Gentleman, which was that one must perhaps draw a distinction between some sudden, immature acknowledgment of a situation which takes a new shape, which may be an action which we repudiate and deplore and which becomes a portion of a more permanent strtucture. The case of Manchukuo is an instance, the only instance so far as I know, of almost a general decision not to recognise a changed Sovereignty which has been brought about by means contrary to the Covenant.

There remains one further matter about which we might dispute for a long time, and that is the administration of the Czech balances which are blocked by the recent act. That is a very complicated matter. No doubt it is conceivable that we might have to deal with them entirely by unilateral action. That course has some inconveniences. One inconvenience, for example, is that while you want these assets to be available for British citizens who have claims against Czecho-Slovakia, are you to take everybody's word that they have a good claim? Are you simply going to allow anybody to register by saying: "I have such and such an amount owing to me from a Bank in Czecho-Slovakia." That may be an honest statement, or there may be an overdraft, or it may be that the account is overdrawn or that it has been withdrawn. It is extremely difficult to imagine that unilateral administration is the best. If, without prejudicing the interests of those concerned, you could get a detailed schedule of the claims, arrived at by agreement, as a result of the examination of accounts on both sides, I do not think anyone would say that that is not preferable.

I think that the popular impression that we have a very large amount blocked here, will be found to be exaggerated. In the article which the right hon. Gentleman quoted a figure was given which is a much larger figure than we calculate upon. On the other hand, the claims against that figure are genuine and substantial. There is the debt which must be repaid to us, because we lent money to the old Czecho-Slovak State, and we must get it back. Then there is a considerable sum required for the refugee account. Unquestionably, we must take those amounts out. Then there are claims for British holders. Most of them may be current claims, but there may be capital claims of a different sort. It is all extremely complicated. I understand that what has been done by the Treasury, apart from examining books, is purely preliminary to seeing whether it is possible to draw up such a scheme. Whether there will be any balance at all seems to be more than doubtful from the figures that I have seen, but I must not exclude the possibility.

The question will then be, if there is a balance, whether we are entitled in the circumstances to say that we will not allow that balance to go to various institutions or persons in Czecho-Slovakia, because we have strong reasons for fearing that if it reaches them it may be taken from them. I am as fully alive to that possibility as anybody, but if some private trader in Bohemia happens to have an account here and his account is not needed for settling our undoubted claims, I find it difficult to understand, on what principle we are to say that he must go without it. I have asked the Treasury to give me a report—I have not seen it yet—and I am going to consider it, and I hope to give an account to the House of how the matter stands when we reassemble.

These are the three subjects dealt with and although I have no doubt that I have failed to answer every question, I have done my best. I hope the House feels that in this matter the Treasury has acted in a straightforward way. I have no more desire to see our institution so operated as to give assistance to the aggressor—which possibility the right hon. Gentleman so roundly denounced—than any man in this country. This is a very complex question, in regard to which it is necessary to keep one's head, and I hope that what I have said has shown that there was a good and sufficient explanation for the matters which have been so naturally raised to-day.

2.52 p.m.

Mr. Tinker

I want to turn away from these international questions, because on the Motion for the Adjournment there are other matters to discuss. Certainly, the House of Commons ought to realise that there are other things to deal with. I recognise that this is a grave problem that we have been discussing, but it is not a domestic problem although it may be disappointing for the right hon. Member for Epping (Mr. Churchill) that I have been called instead of him, I want him to realise that there are other questions—

Mr. Churchill

I should have stood for only two or three minutes between the right hon. Gentleman and the subject which the hon. Member for Leigh (Mr. Tinker) wishes to raise. There were, however, two points arising from the statement of the Chancellor of the Exchequer to which I wished to refer.

Mr. Tinker

I am prepared to give way to the right hon. Gentleman to allow him to put his point.

Mr. Speaker

If the hon. Member for Leigh (Mr. Tinker) gives way, then I have no objection.

2.53 p.m.

Mr. Churchill

I thank the hon. Member very much. I should like to say, having listened to this Debate and to the speech of the Chancellor of the Exchequer, that we must all wish to compliment him on his fairness, his good temper, and his readiness to answer questions. We recognise, as I said in an interruption, that as an old Parliamentarian he understands the conversational manner in which the business of the House is so often conducted. We are very grateful to him for the statement he has made that he is going to endeavour to prevent this £6,000,000 worth of gold being handed over to the Nazi Government. That is the point that is really at the root of all our feelings. I do not want to enter into criticism of whether he ought to have acted before, or whether the Treasury ought to have been informed by the Bank of England. Those are points that might have been urged, but they are no longer relevant once the right hon. Gentleman gives to the House his assurance that he will do his very utmost to stop this money being sent away.

That is the only point I wish to make, but it is a very vital one. Here we are going about urging our people to enlist, urging them to accept new forms of military compulsion; here we are paying taxes on a gigantic scale in order to protect ourselves. If at the same time our mechanism of government is so butter-fingered that this £6,000,000 of gold can be transferred to the Nazi Government of Germany, which only wishes to use it, and is only using it, as it does all its foreign exchange, for the purpose of increasing its armaments, if this money is to be transferred out of our hands, to come back in certain circumstances even quicker than it went, it stultifies altogether the efforts our people are making in every class and in every party to secure National Defence and rally the whole forces of the country. The Chancellor of the Exchequer has shown himself very properly forward in the matter of the Czech balances. I cannot understand even after the explanation, how it could have escaped him, but I accept his statement that he will do all he can with all the resources of his legal brain, and with all the energy he possesses, to prevent what would be a public disaster, namely, the transference of this £6,000,000 of Czech money into the hands of those who have overthrown and destroyed the Czech Republic.