HC Deb 09 December 1946 vol 431 cc779-96
The Chairman (Major Milner)

I think it might be for the convenience of the Committee if we took the first two Amendments to this Clause together.

Mr. Stanley

I agree that it would be convenient that we should consider them together, although I take it that the questions will be put separately.

The Chairman


Lieut.-Commander Gurney Braithwaite (Holderness)

I beg to move, in page 21, line 30, to leave out paragraph (a).

As has been suggested, I should like to discuss at the same time the following Amendment on the Order Paper—in line 33, to leave out from "requirements," to the end of line 36.

One would like to spend a good deal of time on these Amendments but we on this side of the Committee feel it desirable that at as early a stage as possible in our proceedings today, we should hear the promised statement by the Chancellor of the Exchequer on Clause 31. I shall therefore endeavour to deal with these Amendments as briefly as possible. My hon. Friends and I feel that Subsection (1) is a particularly tall order, even for this Bill. It places really extraordinary obligations upon such persons as are thought by the Treasury to be in the position indicated by the Clause. They are required to obtain and influence information on the activities of various companies situated abroad. In paragraph (a) which is the subject of the first of these two Amendments, a person can be called upon to cause a foreign company to comply with certain requirements—I propose to refer to them later—which is extremely difficult in any case. Under paragraph (c) a person can be called upon, in the words of the Bill, to render it in any respect more probable that the foreign company will comply with any of the requirements. We feel that this is putting an almost intolerable onus upon the individuals indicated. The requirements are set out in this Clause, and there are five of them. They begin at the bottom of page 21 and continue overleaf, and I think the hon. and learned Gentleman the Solicitor-General will agree that some of them will be extremely difficult to enforce. The first requires that the Treasury shall be furnished with such particulars as to the company's assets and business as may be mentioned in the notice. I imagine that information with regard to the assets might be obtained without much difficulty, but "particulars as to business" is an extraordinarily wide term. It may be almost anything. The next requirement is: sell or procure the sale to an authorised dealer of any gold or specified currency mentioned in the notice, being gold or specified currency which it is entitled to sell or of which it is entitled to procure the sale. I admit that the latter words do cover the principal objection, but we must consider the very strong possibility, to put it mildly, of other countries enacting exchange control legislation of an extremely stringent character. I imagine that they will be "the blue-eyed boys" of the Chancellor of the Exchequer. At any rate, they should be people after his own heart.

Let us suppose that they are situated in Ruritania—always a convenient place for the purpose of these arguments. The Government of Ruritania being well-informed, and as fond as meddling with the delicate machinery of exchange as His Majesty's Government, pass an Act of this kind. It would not be possible for one of their businessmen to take such action as this Clause asks. There is, it seems to me, another difficulty. Without trespassing upon the domain—it is almost a prerogative—of those who intervene in Debates upon foreign affairs, perhaps I might remind the Committee that there are certain countries in Europe at the moment under a form of government which is hardly distinguishable from the totalitarian. How does the Solicitor-General imagine that persons covered by the Clause will be able to obtain the information set out in the Clause in those cases? One might, of course, enlarge upon that subject considerably but, in the interests of progress in the Committee, I will not do so. I invite the Solicitor-General to give a brief explanation of how he expects this machinery to work. To hon. Members on this side of the Committee the proposal looks almost impossible

Mr. Nigel Birch (Flint)

I wish to say a few words upon the second Amendment which we are now considering—in page 21, line 33, to leave out from "requirements," to the end of line 36. The Clause deals with foreign companies. As defined in the Second Schedule, these are companies in which residents of this country have substantial interest but not necessarily voting control. That is the important point. The effect of the Subsection is to render a person liable to prosecution if he does or refrains from doing any act to render it in any respect more probable that the foreign company will comply with any of the requirements. The foreign company referred to is not necessarily controlled from this country. It is very hard to stop the committing of a positive sin, but I think that any hon. Member, if he examines his conscience, will rind that every day he may be guilty of refraining from doing certain acts which might render it, in any respect, more probable that someone else will do his duty. If one interfered with other people to that extent, one would be an intolerable nuisance. As I see it, the Clause may lead to some very curious situations.

What sort of acts might make it more probable that a foreign company would comply with these requirements? One of the typical things would be to give a diamond necklace to the wife of one of the foreign directors. If one failed to do so, one would render oneself liable to gaol, because one could have done it. and it might have made all the difference. If one gives up the diamond necklace, one might also go to gaol for transferring property abroad for a valuable consideration. That is one of the dilemmas of the Bill. The illustration shows how profoundly intolerable and ridiculous the paragraph is. I hope that the Solicitor-General will withdraw it. It is legislating very much "in the blue," and is liable to produce an intolerable and ridiculous situation.

Mr. David Eccles (Chippenham)

I support the second of these Amendments. This Clause seeks to give the Treasury power to direct a British businessman to try to persuade a foreign company to follow the policy of His Majesty's Government. That is a very serious thing to do. I would remind the Chancellor of the Exchequer that one of the reasons why sterling has again become popular with other countries is that much business is transacted in the City which does not touch our shores. The foreigner is afraid of the State Department using the New York financial system for purposes of American foreign policy. Many foreigners say: "We will continue to finance our business through the City of London because we do not think that your Foreign Office interferes with the lending of money in the same way as does the State Department." This Clause will make the foreigner think that our Government's policy is to be pushed down their throats by every British businessman associated with a foreign company. The first thing to happen will be that no foreign company will ask any British businessman to sit upon its board because it may be inviting to take part in its counsels someone who is under an obligation to divulge the secrets of the business. I think we should be very much on our guard against inviting British citizens to join in that work. We are a great trading nation. We must be careful about designing machinery to tighten up exchange control which will then be copied by other countries. In the 19th century we exported textile machinery, which did Lancashire no good. We are now to export extremely up-to-date machinery for restricting foreign trade, and it might well be used against us.

If the Chancellor of the Exchequer really wants to force British businessmen to bring influence to bear upon foreign companies with which they are associated, and if, as a result, they get into difficulties, they should be compensated for carrying out such tasks at the request of the Treasury. It is not right to ask people, under a Bill of this kind, to take a course which might cause damage to themselves, and not make provision to compensate them. I very much hope that Subsection (1, c) will disappear from the Clause.

The Solicitor-General

I will deal first with the points raised by the hon. Member for Chippenham (Mr. Eccles). He failed to notice that the Clause applies only to companies which are substantially controlled in this country. They are defined in the Second Schedule. If hon. Members look at that Schedule, they will see that it is limited to companies which are more than 50 per cent. virtually British companies. They are foreign companies which are controlled here.

Colonel Crosthwaite-Eyre (New Forest and Christchurch)

How, under the Second Schedule (d, ii), can any British resident possibly influence such a company?

4.30 p.m.

The Solicitor-General

If dividends are the sole test—they may not always be so but in 99 cases out of 100 they will be—voting may not always be in accordance with dividend distribution. In some cases we may find that that does not apply. The scheme is designed to apply primarily to companies which are controlled, or at any rate, owned, by British people. Either the ownership or the control, or both, must be exercised by British people. It is designed only to apply to those companies. The second thing hon. Gentlemen opposite must remember is that it applies only to companies in respect of which a direction is given. That is to say, this is not a Clause like the other Clauses of the Bill in which we have a general control and then exceptions embodied in the general system. This Clause applies only where the Treasury have thought fit to say, in respect of any company, being a company which complies with the requisites of the Second Schedule, that a direction shall apply. It applies only to specific companies which they pick out and therefore, the notice has to go from the Treasury, and the reverse is not the case. The Treasury do not have to make an exemption: they have to apply the Clause. Therefore they will exercise their discretion wisely with that in mind.

I want to deal with the argument adduced by the hon. and gallant Member for Holderness (Lieut.-Commander Braithwaite). He examined the various paragraphs and said, "How can anybody do this, or that or the other?" He said we might have the case of a foreign country imposing its own exchange control system, and making it impossible, or very difficult for the person on whom the direction was put, to do what was required; or we might have the case of a totalitarian State imposing some obstacle. The answer is that the only requirement is that the person shall do what he can. May I invite the hon. and gallant Gentleman's attention to the actual wording of the Clause? The Clause operates Where there is served on any person resident in the United Kingdom a notice in writing … stating certain things. If the hon. and gallant Gentleman will look at line 28, he will see that the second prerequisite is that a person: … can, by doing or refraining from doing any act … In other words, he is to be able to do what he is asked to do. If it is in his power, he has to comply with the requirements. All that is required is that he shall either do or refrain from doing some act. He has to do that which he is capable of doing. That appears from line 39. If the hon. and gallant Gentleman will bear in mind lines 28 and 39, he will see that no impossible burden is being placed on anybody. All the Treasury takes power to do is to say to a person with regard to a particular specified company, which for one reason or another it has singled out for the purpose of a direction, We think you can do this. If you can do this, you are to do it." It does not, ex hypothesi, impose on him the necessity for doing it, if it is not in his power. If he cannot do it, the direction is invalid. He does not, therefore, commit an offence. If there were a prosecution against him, it would be a perfect defence for him to say, "I was not able to do it." This is made perfectly clear by line 28. The argument adduced by the hon. and gallant Member for Holderness would be a cogent argument if it were not for that safeguard, but that safeguard completely destroys the validity of the argument.

Lieut.-Commander Braithwaite

I had read those words, and the Solicitor-General may remember that I said there were words which might be of assistance. But what is going to satisfy the Treasury that a person has, in fact, made a sufficient effort for their purpose? It may well be that the Treasury request will cause a certain amount of correspondence which will be against the best interests of the country.

The Solicitor-General

If one does not attribute a certain amount of common sense to the administration of a system, one cannot bring into force any system at all. If the person to whom the direction is addressed writes back and says, "I cannot do it and these are my reasons," and if the Treasury should be pig-headed enough to say to him that he can do it, and take him to court, the answer is that he would win his case—[HON. MEMBERS: "Why?"]—unless one assumes that the court also acts in a pig-headed way. In this country there are judges on whose discretion one can rely. In fact, there are none on whose judgment we cannot rely—

Mr. Stanley

This is an important point, and the Solicitor-General has thrown a new light on it. I understood that the duty was imperative on a man, and that if he could do it, he should do it. I now understand that it would be a good defence for him to say, "I could have done it, but I thought it was unwise to do it," and if the court takes that view, and exercises that wise discretion to which the Solicitor-General has referred, that would be a good defence.

The Solicitor-General

I did not say that at all. In the event of a dispute between the Treasury and the individual on whom a direction is served, it is a question of fact, whether he could or could not have carried it out. I do not mean to make the right hon. Gentleman impatient about this. If I am right in saying that nobody is asked to do anything which he cannot in fact do—

Mr. Stanley

I am sorry, but the point to which the Solicitor-General was replying when he made the statement about the court was a different one. The point is, What will happen if it is within the power of the man to do it, but he believes that to do it, would be injurious to the company?

The Solicitor-General

In that case he has got to comply, and there is every reason why he should. If he is told to do it, and it is in the direction, he has to comply. But the argument is undoubtedly based on the proposition that it is unfair to seek to make him do something which he cannot do. It was for that reason that the hon. and gallant Member for Holderness said, "Supposing he cannot do it," and referred to the exchange control system of other countries and the method of totalitarian countries. I ask the Committee to say that this provision is not in the least oppressive but that it simply vests in the Treasury a power, in selected cases to give a direction to a person to do something which he must be able to do. If he cannot do it, he cannot be compelled by the direction.

Mr. H. Strauss

I am grateful to the Solicitor-General for his reply, and on a few of his points I find myself in agreement. I particularly welcome the fact that the people on whom will be imposed the obligation to do or refrain from doing something will have received some sort of notice, which is a contrast to Clause 24 against which we protested earlier. Nevertheless the point put by previous speakers is not by any means wholly answered by what the Solicitor-General has just said. It is true that the companies affected may be described as companies that are in some way predominantly British, but the individuals who come within the mischief of this Clause need not be British subjects at all. They may be foreigners resident here and may have a notice served upon them saying that the Treasury wish them to do something. The Solicitor-General says that their legal duty under this Bill is to do it. But what if their own government wishes them to do something different? Surely that might be morally a defence, but it would not be a defence under this Clause. There may be a foreign company which is hesitating between two different sorts of action. The Chancellor of the Exchequer may desire, quite rightly from the point of view of British interests, that that company shall act in a particular way. A foreign government may desire that it should act in a different way. Is it really suggested that a person resident here should make himself criminally liable for refusing to do something that his own government may say that they do not wish him to do and that his own government may even go so far, if they have parallel legislation, as to make it a criminal offence for him to do?

I submit to the hon. and learned Gentlemen that those matters deserve serious consideration. It is possible that they have not yet occurred to the Minister as they should have occurred, and I do not press for an immediate answer, but I suggest in all seriousness that they deserve to be looked into. If it is to be made a criminal offence for a gentleman of another nation not to comply with a Treasury direction simply based on Treasury wishes, it is certainly worth considering whether, for the sake of the comity of nations, there should not be added for the defence of the foreigner "provided it is not against the wishes of his own Government" or something of that kind. I hope, therefore, that the hon. and learned Gentleman and the right hon. Gentleman will consider those matters at some stage of the Bill.

Mr. Harold Roberts (Birmingham, Handsworth)

I suppose the Chancellor aims at controlling exchanges and yet, as far as may be, keeping them a free market for the City of London. What troubles me is that the Solicitor-General, in order to justify these rather strong powers, put it to the Committee that, substantially, these are British, or British controlled, companies. However, on referring to the Second Schedule, I do not find his argument in that respect borne out. May I refer to paragraphs (a), (b) and (c)? These various conditions are set out there and on reference to them I find that one is that more than half of the interest paid on loans or in dividends on preference shares shall be receivable in this country. It is notorious that preference shares frequently have no voting rights or, at any rate, very limited voting rights, and therefore it would follow that if one had a company with debentures, preference or ordinary share capital—the preference shares having no voting rights—if more than one-half of those preference shares happened to be held here, still that company would be within the ambit of the Clause in spite of the preference shares having no voting rights. I agree with the argument of the Solicitor-General that in that case, one could say, "I have no power over the company," but I think that if it is intended that this Clause should apply to British controlled companies, apt words should be found; if not, I take the view that so ill-defined a Clause as this is not likely, in the long run, to be good for the City of London.

Colonel Crosthwaite-Eyre

I must admit that the remarks of the learned Solicitor-General have made me even more apprehensive about the powers of this Clause than I was before. We have had a serious discussion this afternoon about what might happen in Ruritania. Shall we for a moment take the case of the Ruritanian gas works? In this example, the preference shareholding is held by people in this country, whereas the ordinary share capital is held by the nominees of the local Minister of Fuel and Power, who has given them out as a bribe to his friends and relations. The Treasury can come down at any moment and insist that, because the preference shareholding is in England, the holders of those preference shares are responsible for whatever action the local Minister of Fuel and Power may take in satisfying his nephews and nieces. One can go a stage further and assume for the moment that the Ruritanian gas works is liable to nationalisation. It may well be that the terms of nationalisation are not very satisfactory to the shareholders, as has happened from time to time in this country. Down comes the Treasury and says to the unfortunate individual that he is to tackle the whole of the Ruritanian Cabinet, if any. The terms are not satisfactory to the Treasury, simply because he is a preference shareholder. He has nothing to do with the control of the company and it is merely because in paragraph (d, ii) of the Second Schedule the Treasury, in their wisdom, have specified the condition that more than one-half of the dividends payable on its preference share capital, if any, shall be receivable in this country.

Let me take the Ruritanian gas works example a bit further. Under Clause 30 (1, c) these words appear, "in any respect." It is not so long ago since the Chancellor of the Exchequer was referred to as the Edgar Wallace of the House of Commons, because of the number of books he had written and the number of languages into which his books had been translated. I feel now that he is trying to carry the characterisation even further. An hon. Member has talked about a diamond necklace, but far more sinister interpretations are perfectly possible under this Clause. For instance, those locked cellars in Limehouse, so beloved of Mr. Wallace, can now become a fact It is perfectly reasonable to say, as this Clause is drafted, that just because the English holder of preference shares is not willing to hold a Ruritanian Minister of Fuel and Power to ransom in a rat-infested cellar in Limehouse, the learned Solicitor-General will come down on him for the full penalities of the law.

I know the learned Solicitor-General will advance the argument that this Clause will be administered with due deference to every conceivable consideration by a Socialist Government, but that is not the point. The point is that these powers are being put permanently on the Statute Book and, although the Chancellor is like Edgar Wallace in the sense that the fantasies he imagines are not carried further than the printed page, yet, at any stage, this most honourable Chancellor may be replaced by somebody with far less honourable intentions. Then what will happen if somebody who succeeds to his legacy is entitled to do all the things which are possible under this Clause? A Ruritanian gas works may be a small thing, as far as value to this country is concerned, but the woe it can bring to those people who, by their energy, have invested in it and have tried to earn currency for this country, is unlimited. The successors of the hon. and learned Gentleman and the Chancellor on that bench, those who now smile when people on this side of the Committee speak, may threaten them—as has happened in other places—with "That is the last speech you will make," and those powers, which they say they will use for the benefit of the nation, will, in their hands, undoubtedly redound to the general disturbance of the individual.

Mr. John Lewis (Bolton)

Perhaps the hon. and gallant Gentleman can say in which respect these powers would be detrimental to the nation? What is this tale of woe he talks about?

Colonel Crosthwaite-Eyre

the tale of woe is very simple. It is that any unfortunate shareholder in the Ruritanian gas works, through no fault of his own, can suffer the full rigours of this Bill.

Mr. Stanley

I take a serious view of this Clause, a view which has not been relieved by the discussion we have had so far. I hope it will be possible to give some further consideration to a complicated provision of this kind. The two paragraphs stand on rather different grounds, and I want to say a word on each. The first two, (a) and (b), really refer to the case which the learned Solicitor-General would have us believe is the only case covered by the Clause, the case in which, for all practical purposes, control of the company is in this country. Therefore, in paragraphs (a) and (b) a man who is able to get something done in a company abroad is ordered to do it. I can see that there may be certain grounds for provisions of that kind, but I can also see that they may lead to a great deal of trouble and, possibly, a great deal of friction with people outside this realm. It is all very well to say that a man controls a foreign company because he holds the majority of the shares. It may be that Mr. So-and-So in the City of London has 51 per cent. of the shares, and so controls the company, but the other 49 per cent. are held by perfectly good, honest, innocent citizens of Ruritania—or whatever other country we are discussing. The Treasury proposes to issue an instruction to the man in this country, who through that small majority shareholding controls the company, to do something which may be against the interests of the minority shareholders in the foreign country which he is supposed to represent. I cannot imagine anything more likely to embroil us with a foreign country than a direction given by the Treasury that a certain dividend has to be declared in Ruritania, not for the benefit of the Ruritanian shareholders, but because it happens to fit in with the policy of the British Treasury.

In regard to paragraphs (a) and (b) I ask that some consideration should be given to the point about preventing a notice being served, which would be clearly against the individual's duty in this country, if he controls the company as a trustee for the interests of the shareholders. Paragraph (c) is obviously only put in because there are cases, as distinct from those which the Solicitor-General told us were covered by this Clause, or covered by the Second Schedule, where in fact the man in this country cannot be sure of getting his instructions carried out. I ask the Committee to consider the ridiculous position in which we are placed by paragraph (c), remembering that it is not just a pious expression of hope as to what people will do, but that it creates a new criminal offence, something for which a man, on indictment, can be sentenced to two years' imprisonment. This is what he can be sentenced for doing—refraining from doing something which presumably in the opinion of the Treasury would in some respect make it more probable that the foreign company will comply with any of the requirements. Has there ever been a criminal charge framed on conditions so vague? How can anybody lay down, with the certainty that a criminal charge demands, whether a particular man would make it more, or less, probable that somebody abroad will take some action which the Treasury has dictated? For instance, are the Treasury to dictate the letter which the man in this country is to write to the controller of a foreign company? Are we to have an argument as to whether it is more probable that they will be induced to do something which the Treasury want, by the language the Treasury will employ, or by the language business people will employ? I can foresee an argument going on because the Treasury said, "We think it would have great effect with your foreign correspondents if you wrote and told them that the Chancellor of the Exchequer particularly desires this to be done." And I can see the man here, knowing better the feelings of his correspondents, saying, "That is exactly the thing which will prevent them doing it." Are we really going to ask a court of law, a court of criminal justice, to decide whether the view of the man who gets the direction, or the view of the Treasury, was more probable to have a particular effect on a number of people, who will not be, and cannot be, brought before the court?

I ask in regard to paragraphs (a) and (b) that some consideration should be given to the position of the minority shareholder. I ask whether there is any need for paragraph (c) The Solicitor-General advanced no argument in its favour, and gave no example of how it could be used The whole of his argument was on (a) and (b). At present we are without a scintilla of argument to support what seems to me one of the loosest and most unnecessary Clauses on which it has ever been hoped to found a criminal charge.

The Chancellor of the Exchequer (Mr. Dalton)

I think it would be for the convenience of the Committee if we moved forward a little. I understand there is interest in Clause 31, on which I hope to make a statement, in due course, and there are things coming on later which if we do not make better progress might drift far into the night. I suggest that we might speed our steps a little. I am quite prepared, in the light of the discussion, to look at this Clause again. I have listened to the arguments with attention. While giving that undertaking, I would point out that there is nothing in this, which is more stringent than what has been embodied in Defence Regulation 5C and it has been worked without entailing any of the rather fanciful miseries pictured from the other side of the Committee. I shall not elaborate the argument, but as I say I will look at the Clause again although I think many of the situations depicted are unlikely to arise, are indeed incredible and such as we cannot take into account in consideration of this Bill, if we are to admit at all that this type of Measure should be passed into law. Wide powers should be vested in the Treasury and such powers are, theoretically capable of gross misuse. That is the basis on which the whole Bill has been drafted. Nonetheless, if the Committee are prepared to move forward, I undertake to have all these arguments studied before the Report stage.

Lieut.-Commander Braithwaite

In view of the Chancellor's undertaking, which if it had been given earlier would have obviated our pressing this matter, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. Eccles

I beg to move, in page 22, line 23, to leave out Subsection (3).

This is a Subsection which I feel sure the Chancellor will also agree to examine again. He will know that the banks acceptance houses regard this, and another Amendment on Clause 37, as of particular importance. If these words remain in the Bill, then, except with the permission of the Treasury, no one can lend any money to any company registered in the scheduled territories, which is by any means controlled, whether directly or indirectly, by persons resident outside the scheduled territories. It must be clear to the Committee that a bank cannot tell when a borrower comes along, whether in fact 51 per cent. of the shares are, or are not, held by foreigners. This would make it impossible to lend money to a large number of companies of great repute and standing, and old customers of discount houses and our banks. I ask the Chancellor to look at this again. If he leaves it in the Bill, he will find that a number of perfectly sound and sensible business deals will simply not be done.

5.0 p.m.

The Solicitor-General

I ask the Committee to reject this Amendment. The object of the Clause is, I think, fairly clear. It is designed to ensure that, when non-residents are establishing subsidiaries in the scheduled territories, or desire to extend the scope of an existing subsidiary, they should, as it is thought desirable in the national interest they should, provide a substantial proportion of the capital for this purpose by remittance, and not by borrowing sterling. By so doing they acquire a stake in the undertaking and they augment our central reserves of exchange.

The objection to the Subsection is founded mainly on the difficulty which might arise in certain circumstances. I ask the Committee to say that that difficulty is not really as great as is pictured. Ordinarily, a banker, when considering whether money should be lent, would be able, by comparatively simple steps, to find out for whom the money is to be borrowed and the object of the loan. I should have thought that it would be part of the ordinary practice of banks so to do. When they require answers to their ordinary loan questionnaire, in whatever form they submit it, they would, or at any rate could, quite easily find out such information as would be necessary to enable them to comply with the Subsection. I ask the Committee to say that the difficulty is one which really does not exist to the extent which has been stated. Again, here, by actual administrative arrangements, the necessary exceptions can be made to get over any particular difficulty. Permission can be given, and, as in all these Clauses, it is always subject to the obtaining of permission from the Treasury. If there is a difficulty in a particular case, the question can always be resolved by reference to the Bank of England. Otherwise, I should have thought that a bank should ordinarily have no difficulty, in the course of its routine for deciding whether to make a loan, in discovering the identity of the person applying for the loan. For those reasons. I ask the Committee to reject the Amendment.

Mr. Assheton (City of London)

I am not quite sure that the Solicitor-General really appreciates the practical difficulty in which the bank concerned is in in a matter of this sort. Moneys are advanced by branches of banks, and by people who do not, in the ordinary course of their business, think it necessary to make this, sort of inquiry. This Subsection will impose an additional burden on the ordinary bank which seems to me quite intolerable. It is not always possible to discover the facts. Shares may be held in the names of nominees. It may be that when the Cohen Report is implemented, and legislation is introduced, that practice may cease, but it has not ceased at present. I beg the Chancellor to look at this matter again before the Report stage. He has been good enough to say that he will look at earlier parts of the Clause. I suggest that the banking community will find it extremely difficult to carry on this part of their business unless some attention is pair? to the case which we are now putting.

Lieut.-Commander Braithwaite

I hope that the Chancellor will be able to accede to this request. After all, an earlier part of the Clause is to be re-examined, and I think he might as well make a complete job of it while he is about it. We are just as anxious as hon. Members opposite to make progress, but I feel that the Solicitor-General rather missed the point of the argument which has been put forward from this side, when he told us just now that a bank would have no difficulty in coming to a decision in this matter. I submit, with respect, that what a bank decides is whether it is dealing with a creditworthy borrower—whether the borrower is one to whom credit can reasonably be extended, bearing in mind that the first duty of the bank is to look after its customers' money. The case we are trying to put is that that is one thing, but that for the bank to discover whether such a company is or is not indirectly controlled from sources outside the scheduled territories is extremely difficult.

For instance, in Egypt, which is a cosmopolitan country, there are a number of business concerns, and to comply with the terms of the Subsection would be extremely difficult for a bank in the City of London, or anywhere else, in the case of such companies. They may say "We know that the assets of this company are so and so, and we feel justified in lending the £50,000 or whatever sum it may be but we do not know who, in fact, control this company in Egypt." It may be Greek-controlled, Italian-controlled, or it may be a native of Cairo or Alexandria who is behind it. It is a point which the Government would be well advised to re-examine. We are up against the old problem of the language in the Bill not quite squaring with what, I have no doubt, is the intention of the hon. and learned Gentleman, and we should be most grateful if the Chancellor would go into this matter again.

Mr. Dalton

I would not wish to mislead the Committee by endeavouring to bring a discussion to a conclusion, by saying in a free and easy way that I will look at the matter again. That would be dishonest on my part, and not helpful to the Committee. Nevertheless, Clause 30 might be regarded as a whole, and I have given an undertaking to look at an earlier part. I am not desirous of putting off the Committee by saying that I will do the same in regard to this matter. Seriously, I do not think that the difficulties here are anything like as great in practice, as seems to be imagined by some of those who have spoken. The Bank of England will be in a position to resolve many cases of doubt which may arise—the sort of suspicion which the hon. Gentleman mentioned—supposing that a bank here was not quite sure and did not know the background—

Lieut-Commander Braithwaite


Mr. Dalton

Yes, nominees, and so forth. In that case I am quite sure they would inquire of the Bank of England and see if they could resolve any doubt. We are, of course, in touch with the Bank on the whole contents of this Bill, and with the banks on matters of particular concern to them. I know that some of the banks have been a little concerned about this Subsection, and we are seeking to remove their apprehensions. I hope we shall succeed. Without setting any precedent for this formula, which might seem too tedious and unsatisfactory to the Committee if too often repeated, I promise that we will look at Clause 30 again before the Report stage.

Mr. H. Roberts

I take the liberty of making a practical suggestion to the Chancellor. What troubles me is the absolute character of the prohibition. If one takes the simple case of a company domiciled here, applying in the ordinary way for a bank overdraft, it may be difficult to find out, by way of a questionnaire, as the Solicitor-General has suggested, whether or not it is controlled from abroad. If it is controlled from abroad, the absence of metis rea on the part of the bank would be no defence. It occurs to me that if we put before the word "lend" the word "knowingly," that might meet the case.

Mr. Dalton

I will note that suggestion.

Mr. Eccles

In view of what the Chancellor has said, I shall ask leave to withdraw the Amendment. But I would first say that the Acceptance House Committee takes a completely different view from that put forward by the Solicitor-General I think the Chancellor had better take the advice of the Acceptance House Committee rather than that of the Law Officer, who showed that he did not realise that this is a matter of short term loans, and not only a matter of new capital for subsidiaries of foreign companies. I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Colonel Crosthwaite-Eyre

I wish to put one question to the Chancellor in reference to Subsection (4). Would he have a look at the word "override" in line 34?

Mr. Dalton


Colonel Crosthwaite-Eyre

The word seems to be capable of quite a lot of different interpretations. If between now and the Report stage the right hon. Gentleman would see whether a more definite verb could be used, I think it would be of advantage.

Question put, and agreed to.

Clause ordered to stand part of the Bill.