BRITISH ASSETS, ARGENTINA (COMPENSATION) (Hansard, 19 October 1949)

§ Mr. William Teeling
I am taking the opportunity at this late hour to discuss the question of compensation for British shareholders in the confiscated Argentine companies. As those members of the House who are interested will remember, I have frequently brought forward questions on this subject and obtained as good and detailed answers as one could possibly get at Question time. It will be remembered that in one case—I am not going to mention all the utility companies—the Buenos Aires Transport Corporation, the hon. Gentleman who is to reply tonight and the right hon. Gentleman the Minister of State, assured me and the House that there had been very definite promises—I think I can go so far as to say that—to the Ambassador from the Argentine Government that the very next matter to be brought up and discussed by the Argentine Government would be that of clearing up the subject of compensation for the British shareholders in that Corporation.
On numerous occasions since, I have reminded the hon. Gentleman of statements from the Argentine, and he has always agreed that the Ambassador was doing his level best to try to get this matter decided. The main object, perhaps, was that the company should be allowed to get into direct touch with the Argentine Government and negotiate and discuss the question of compensation due at the final liquidation of the companies, but there have been so many other vital problems discussed with regard to the Argentine—both in this country and, no doubt, in the Argentine too with regard to ourselves—in the last few 717 months that this problem may have been overlooked, or partially overlooked.
It affects the whole transport system of the largest Latin city in the world—a city with a population of over 3 million—and covers the whole of their transport system, buses, trams and underground. All this was built up by British capital and investment in the past. In 40 years the Argentine Government have allowed no increase in fares and consequently one can today travel all round this huge city for the sum of ahalfpenny—something which one cannot do in any other civilised capital in the world. It will be realised that as a result millions of people have had a very good time in the Argentine. Everyone can travel very cheaply. The reply will be made: "That is all very fine, but the system is extremely inefficient; the buses and trams are rather falling to pieces." That is unfortunately true at the present moment. Something like £20 million was invested in this transport system, and in those days a tremendous amount of trouble was taken to see that it was efficient and as up-to-date as possible. Considering that the people who planned and built it came to England and studied the transport system of London, I think it would be safe to say that if the companies had had a fair deal and some compensation for the money expended, especially in the last few years, they would have been able to provide once again as up-to-date a system as we have at the present moment in London.
It is therefore wrong to say that these things are falling to pieces due to the company's inability to put the situation right. It is due to the history of what is more or less a political situation; to what has gone on in the Argentine. I think Argentinians themselves should really realise that and that what is actually happening is that some 15,000 to 20,000 people in this country who are debenture-holders of that organisation are left without any form of interest whatsoever on the money expended and are suffering very considerably. Some of them are my constituents. They are not rich people: they are not holders of large shares in this company. They are, most of them, holders of small amounts and they have been landed in this extremely unpleasant and very difficult position.
718 It will be remembered that the Corporation was formed in 1939 and it was to take over the transportation undertakings which had originally cost something like £20 million to produce. In return the British companies were to receive shares in the Corporation to the value then of something like 220 million pesos. The Corporation was set up according to Argentine law Number 12311 and with the offer of a guarantee of a fair return on invested capital. Since then not a penny of interest has been paid to these people. There was a provision made for an increase in the prices of travel; but that, again, was not allowed for national reasons which may be well understood. I am not disputing that with the Argentine Government for one moment; if they genuinely feel that the prices cannot be raised, well and good. But they should not have promised to the people who paid the money in and to the people who have made a perfectly legal contract that they would pay a reasonable dividend and that, in taking over this, they would give some return to these shareholders in this country, and would provide some compensation.
The wages and the working costs have undoubtedly risen in the Argentine very considerably, which made it absolutely impossible for the Corporation to carry on at anything like a profit unless these fares were raised, and everything has been done to try and get the Government to do this. The net result is that the Corporation has reached a state of bankruptcy. Immense amounts have been borrowed from the State banks to try and keep the concern going, but it has now reached such a stage, so far as we know, that the amount owed by the Corporation is greater than the actual issued capital.
It will be remembered about two years ago, Senor Miranda, then Foreign Secretary, agreed to and offered a sum of no less than £11,250,000 for the British shareholders to pay them for their debenture holdings. That agreement was wrecked, before it could be put through, by the blocking by us of convertibility into dollars—it was our Government's fault that that happened. It was then that the Argentine turned nasty and decided to liquidate the whole concern, put the whole thing into the hands of Congress, and passed the Liquidation Bill into an Act. That was where the Foreign Office 719 first came into the picture. Since then it has become impossible for the directors of the company in London to contact the Argentine Government at all. The Argentine Government said the matter was finished, liquidated, and as a result the only contact at all possible has been through the Foreign Office, who have done a very good job, especially the Ambassador, in trying as hard as possible to persuade the Argentine Government to discuss the possible compensation for British shareholders.
I will make an appeal to the British Government. No doubt they will want to ask me what I suggest could be done. We had the trade agreement last summer. As I understand it, the Company asked the British Government at that time to include their claims and demands in any negotiations for a trade agreement, but at that time the Foreign Office was unwilling to do so. As the hon. Member knows, I wrote to the Foreign Office about it. They said they could not bring it within the trade agreement, but that they would definitely keep the matter in mind. Now we have had devaluation, and that has brought the whole of the trade agreement up again. As I understand it, at the present moment the Treasury and the Bank of England are quite keen that this matter should be included in any fresh negotiations, but, equally, I understand, the Foreign Office are not. Their view is, "What can we do until the Argentine Government have announced what their liquidation terms are?"
That seems to me to be an impossible situation, because the Argentine Government, perhaps wisely, have announced that they are not now to liquidate for a further year. They have postponed it for another 12 months, which pushes the whole thing back again and leaves the debenture-holders without any form of recompense whatsoever and also leaves the Company in a position to incur even more debt during the year, leading to an even more insolvent position. As the Foreign Office know too well, there will not be a penny left when the time for liquidation comes, so the liquidation really has practically nothing to do with it.
The argument of the British Government should have been that this Company has gone bankrupt through absolutely no 720 fault of its own and, that being so, the British shareholders—and they are the only people in whom the Foreign Office can be interested—find themselves in the position, again through no fault of their own, of being mulcted of something like £11½ million. When the Chancellor of the Exchequer is looking everywhere for money which can be of assistance to this country, especially money abroad, surely £11½ million is a sum not to be sneezed at. That is a sum which could be used in the negotiations which will be going on in the immediate future.
The British Government should, therefore, put forward to the Argentine Government the suggestion that something should be done now for the British shareholders. It does not matter two pence what happens in regard to liquidation because there never will be a penny of money. It is a question of whether we consider the shareholders somewhere in the negotiations. There is no earthly reason why they should not be considered now they should not have to wait for final liquidation, which may be a year from now or goodness knows when. I do not know whether it is necessary that an Amendment should be made to the liquidation law in the Argentine or, simply, that legal procedure should be taken in the Parliament there. I suggest that the British Government should press for whatever is necessary to happen and that they might so press in the trade negotiations which will be going on as a result of the devaluation problem of the last few weeks.
Turning for a moment to the Argentine Government, I would appeal to them from the point of view of the olden days when we really did do a lot—both Governments—to develop the Argentine. There was a great friendship between the two Governments and a feeling of dignity and respect. In these days, surely they will see that it is only wretched people over here, who are not by any means well off, who are footing the bill for the extremely cheap transport rates in Buenos Aires, whilst the impression is given all the time that such cheap travel is all due to the action of the Argentine Government.
I would point out that in the old days we were always being asked to save money to invest abroad to help international trade, which was more than useful during the war, and as one result of 721 this we were able to "eat" the Argentine railways following the arrangements made two years ago. We are now being asked to do everything to export, and people are beginning to wonder what will be the position when in the years to come this will be no longer necessary. Will the Government then back up the people who have made sacrifices to help the country out in its export drive? What is to happen to these people, these debenture-holders, who have made sacrifices by putting up their money to help in development when they were asked to do so? Can we be told exactly what is the position now? Is anything to be done to let the directors go out and open negotiations? Are the Foreign Office going to plead for compensation? How far will they go, and will they be prepared to be firm? Will they be willing to include this problem—I have a suspicion that they will not—in the negotiations which are to come, remembering that this sum might be up to £20 million and could be of the greatest use?

§ The Under-Secretary of State for Foreign Affairs (Mr. Mayhew)
I have followed with great attentiveness the speech of the hon. Member for Brighton (Mr. Teeling), but I am not clear what course he is pressing us to adopt. We agree with his basic premise that the shareholders deserve compensation. As he said, we and our Ambassador in Buenos Aires have pressed the claims of British shareholders most vigorously on the Argentine Government. I am not clear precisely in what direction the hon. Member was hoping for progress to be made in this matter.

§ Mr. Teeling
By including it in any agreements that are about to be made with the Argentine Government as a result of devaluation.

§ Mr. Mayhew
Devaluation has, of course, brought again into negotiation questions connected with the trade agreement, but the negotiations will now be about the implementation of the trade agreement and will refer to the changes which devaluation will have made in the implementation of the agreement. The question of compensation to shareholders, and indeed the whole problem of the British Argentine Transport Corporation, forms no part of the trade 722 agreement, and it will not, therefore, be possible to include this matter in the coming negotiations. The hon. Member is, I think, wrong in saying that this matter was not mentioned previously in negotiations for a trade agreement. It was mentioned, as I shall show later in what I have to say. It would be inappropriate to raise it in the context of the kind of discussions that are to take place on the implementation of the Trade Agreement.
The hon. Member seems to think that the Treasury wants us to do so. Perhaps he has better contact with the Chancellor of the Exchequer than I have, but I think I speak for the Government on this matter when I say that we do not see anyway out in that direction. What other sanctions are there? What other methods does the hon. Member suggest? I was glad that he paid a tribute to our Ambassador in Buenos Aires. I think the hon. Member will agree with me that our Ambassador has most energetically pursued this question with the weapons at his disposal, and that he has played his cards as best they could be played.
It is, of course, a sorry story. The hon. Member's facts were, as far as I could see, mainly correct. This Corporation was formed in 1936, incorporating four passenger transport companies in the city. In 1939, all the assets of those four companies were transferred to the holding Corporation, and compensation in the form of shares was paid to the previous shareholders. The British shareholders received 250 million pesos, which was less than 50 per cent. of the shares of the Corporation. We had an agreement which would allow the company to earn profits of 7 per cent. on the issued share capital; in 1942 there was an agreement by which the percentage was reduced to 5 per cent; but the necessary fare increases to cover the increased cost, to which the hon. Member referred, were not authorised by the Argentine Government, and the Corporation has, in fact, made heavy losses.
One of the four companies concerned began a law suit—I think soon after the end of the war—but before that suit had been heard, the Argentine Government announced proposed legislation for the liquidation of the Corporation within 180 days. We felt that the Anglo-Argentine 723 Tramways Corporation had a strong case. We therefore put in our first claim to obtain restitution of capital to British investors which, we say, they put up in good faith and for which they are entitled to be compensated. On 5th October last year, we put in a first note in which we said we hoped that the Argentine Government would effect restitution and guarantee complete compensation to British investors.
No information about the plans for liquidation has been forthcoming. Therefore, in March of this year we again sent a note to the Argentine Minister for Foreign Affairs asking for a settlement out of court between the companies, on the one hand, and the Argentine Government on the other. We have sent various reminders on that matter without success. In the course of these trade negotiations to which the hon. Member referred, we obtained an assurance from the Minister of Industry and Commerce and from the Ministry of Transport that they agreed in principle to make arrangements for these direct discussions with the companies. That was in the course of these trade negotiations. Unfortunately, however, these direct negotiations have not taken place, in spite of the fact that since 5th October, when we sent the first note, His Majesty's Ambassador has taken up this and related matters with the Argentine Government on 25 separate occasions.
It is an unsatisfactory position and a sorry story, but I regret to say that, for the reasons I have given, we cannot adopt the line of policy to which the hon. Member referred. The terms of the liquidation 724 are not yet known. The hon. Member made some reference to the fact that the liquidation would leave the shareholders with nothing. That may or may not be the case; but when he says that we should, therefore, urge some different liquidation procedure upon the Argentine Government, he will, I think, appreciate that it is difficult for us to do that before we have seen the terms of the liquidation. In any case, I am not sure that the methods he suggested are, in fact, practicable. I am sorry to tell a discouraging story to the House, but I can assure the House that in the past we have energetically championed the rights of the British shareholders, and we shall continue so to do; the record shows that we have not been indifferent to the claims of British subjects in this matter. The boards of the companies concerned, with whom we have always been in close and direct contact, have fully appreciated the handling of this matter by the Government and by our mission in Buenos Aires.

Mr. Teeing
Before the hon. Gentleman sits down, will he assure the House that the Government will link up the demands of the shareholders to the coming negotiations, at least as much as they were linked to the last negotiations?

§ Mr. Mayhew
We shall take all suitable opportunities of pressing these claims on the Argentine Government, but I cannot go farther than give that assurance.