INSURANCE CONTRACTS (GERMANY) (Hansard, 21 July 1961)

§ The Parliamentary Secretary to the Board of Trade (Mr. Niall Macpherson)
I beg to move, That the Insurance Contracts (War Settlement) (Germany) Order, 1961, a draft of which was laid before this House on 6th July, be approved. The purpose of this Order is to give effect to an agreement which was made under the Insurance Contracts (War Settlement) Act, 1952, between the Government and the Government of the Federal Republic of Germany concerning contracts of insurance and contracts and treaties of reinsurance made between persons who subsequently became enemies as a result of war. The agreement itself was made at Bonn on 28th January, 1960, and was presented to Parliament in June, 1960, as Germany No. 3 (1960), Cmnd. 1041. The Act of 1952 enables Her Majesty to give effect to such agreement by Order in Council subject to the approval of both Houses.
The general effect of the Order would be to provide that on the outbreak of war in 1939 direct contracts of insurance between the insurer and insured persons are to be regarded as having remained intact while contracts and treaties of reinsurance are to be regarded as having been terminated by the outbreak of war. In accordance with the settled rule of United Kingdom law direct contracts do not cover losses due to belligerent action. This principle has been extended in the case of the Federal Republic so as to preclude policy holders whose goods were in vessels diverted before the war, 1686 on the order of their own Government in furtherance of war policy, from claiming for losses incurred after the diversion.
The reason for that provision, which has not appeared, I understand, in previous orders, is that the German Government took control of the movement of all German-owned merchant shipping on 16th August, 1939. Its effect is to modify United Kingdom law in favour of the insurers in this case. It is extremely unlikely that the rights of any United Kingdom policy holders against a German insurer will be prejudiced by this change. In any case the Institute of London Underwriters, the Liverpool Underwriters' Association and Lloyds Underwriters' Association have entered into an undertaking dated 1st May, 1961, to indemnify British policy holders in respect of any claims which would have been recoverable but for this Order, provided that documents of title and proof of loss are submitted by 31st December, 1963. It is anticipated that transactions affected by the agreement are not likely to exceed £500,000 either way.
The Federal Republic has already given effect to the agreement and the Federal law in question has already been adopted by West Berlin.
This is the last order to be made under the Act. As in the case of Finland and Italy detailed provisions dealing with contracts of insurance and contracts and treaties of reinsurance were drafted by the two insurance markets themselves. These provisions appear in the Schedule to the draft Order in Council. If Parliament agrees to the Order the necessary instruments of ratification will be signed on behalf of both Governments as soon as possible.

§ Mr. Eric Fletcher (Islington, East)
I have no doubt that the objects of this Order as explained by the hon. Gentleman to the House are meritorious. Nevertheless, I do not think this Order ought to have been brought up today, and for this reason. In the ordinary way Government Departments are very careful not to bring Orders requiring an affirmative Resolution of this House till they have been approved by the Select Committee on Statutory Instruments set up by this House to examine all Statutory 1687 Instruments and to report on them. The House will know that, according to a minute of proceedings of the Select Committee on Statutory Instruments in its last Report, the Select Committee made it quite clear that it considered that this was not a Statutory Instrument to which no objection could be taken and the Select Committee also considered and ordered that the President of the Board of Trade Should be requested to furnish the Committee with a memorandum explaining the Statutory Instrument.
Of course, in the ordinary way the Committee would consider that memorandum at its next meeting. Therefore, it seems to me very unfortunate and not particularly courteous to the Select Committee that the House should be asked to deal with this today. I hope the hon. Gentleman, having heard what I have to say about it, will accept that view and will postpone it to a later occasion.
I say that for this reason. Although I have no doubt that it may be very necessary, this Order relates to contracts of insurance about matters which arose before the war, before 1939, which is over twenty years ago. I have no doubt that very complicated matters of insurance and reinsurance have taken a long time to negotiate, and I have no doubt that the negotiations have been satisfactory to British interests and British insurers, but there are two points which I think call for consideration.
The first is this. It is not clear to me why the Order should be made before the instruments of ratification have been exchanged, which was one of the matters which particularly concerned the Select Committee. I accept what the hon. Gentleman said, that he thought it would be better for the House to consider it before the agreement was ratified. I gather that he took that course out of respect for the House, bruit there is another matter which one has not yet had an opportunity of ventilating, so I hope that the hon. Gentleman will pay attention to it.
If he will look at Article 3 of this Order, he will see that it provides that the provisions in the Schedule shall, in effect, apply to residents or companies having their principal seats either in the 1688 Federal Republic of Germany or in West Berlin. Then there is a very curious Article 5, which says, in effect, that if before the date of coming into operation of the Order the Government of the Federal Republic of Germany makes a certain declaration then the agreement will not apply to West Berlin.
I am not aware that the President of the Board of Trade or Her Majesty in Council have any power to make an order which on the face of it applies to West Berlin and then to delegate to the Government of the Federal Republic of Germany the right to say that it shall not apply to West Berlin. I do not know why that is necessary or what the consequences are. The point is that this would permit a foreign Government to exclude West Berlin from the benefit of this Order. It may, perhaps, have the effect of rendering the whole Order ultra vires and inoperative.
The Minister, in the course of commending the Order, said, it I understood him correctly, that it had been adopted by West Berlin. If it is true that it has been agreed by responsible authorities in West Berlin that the Order shall apply to West Berlin, I imagine that Article 5 of the Order is unnecessary. If it is unnecessary, I would suggest to the Minister with the greatest respect that the Order should be withdrawn and that Article 5 should be deleted. If, on the other hand, I did not understand the Minister correctly and there is still a possibility that the Order would not apply to West Berlin, it is important that we should know that and ascertain the facts before the Order is passed by the House.
If there is any likelihood that the German Federal Government wants to make a declaration under which the Order will not apply to West Berlin, I see no reason why they should not say so now and make the declaration and exclude West Berlin from its operation. lit must be right to take one or other of those two courses, but if neither is taken we are in the unfortunate position that we make an Order which on the face of it applies to West Berlin but which by the terms of it would give the Federal Government the right to say that it shall not apply to West Berlin. I do not know 1689 what the machinery will be to advise the House whether or not it applies to West Berlin.
It may be said that some of these matters are academic. I do not know that they are. There are certainly a good many problems arising in West Berlin which are not academic. I do not raise these points to add to the Government's difficulties, but merely in the interest of orderly legislation by Statutory Instrument, I hope that the Minister will bear in mind what I have said.

§ Mr. N. Macpherson
First, the hon. Member for Islington, East (Mr. E. Fletcher) dealt with the position vis-à-vis the Statutory Instruments Committee. I regret that this Order has had to be taken before it has been before that Committee, but the hon. Member will bear in mind that it will come to the Committee and then has to go to another place. Therefore, there will be an opportunity for considering any points that are made by the Select Committee.
On ratification, as I mentioned to the hon. Member, this was done in deference to the House. It was thought better on this occasion that the Order should be approved by the House before the instruments of ratification were actually signed. I agree that the position on West Berlin is complicated, but the answer is that because of the terms of the inter-governmental agreement of January, 1960, it is necessary that the Order in Council, under Article 5, should leave open to the Federal German Government the possibility of excluding West Berlin from the agreement, because we are bound to implement the terms of the agreement itself. But, as I said, the West Berlin authorities have already adopted the Federal German law, as they are entitled to do within a limited period of three months. In fact, they adopted it in June of this year and the Federal German law was passed in March this year.
One may fairly say that between now and the very short time after approval of the Order by both Houses, if it is given, before the instruments of ratification are actually signed, there is no likelihood whatever of the Federal German Government invoking Article 5. It is 1690 included purely because it was part of the agreement that was reached in 1960.
On the general subject of the time taken, the hon. Member was good enough not to stress the matter very much. I think he appreciates from the remarks that I have made how complicated this matter was and how difficult it was to obtain agreement, particularly on the question that I mentioned of the decision taken by the German Government in August, 1939, to control all merchant shipping at that time. That and other matters have rendered the course of the negotiations particularly difficult. They took four years, but since then there has been no appreciable delay. West Berlin adopted the law of the Federal Republic in June and here today we are introducing the Order to the House. I think that we have got on with it with commendable speed.