HL Deb 27 January 1916 vol 20 cc1092-9

LORD SYDENHAM rose to ask the Under-Secretary of State for India whether effective steps have been taken to put a stop to enemy trading in India. The noble Lord said: My Lords, I have ventured to bring this question before your Lordships' House because I fear that there has been in India as here a great deal of laxity in the matter of enemy trading. One case has recently been brought to my notice which is very remarkable and somewhat disturbing. I have mentioned it to the noble Lord the Under-Secretary, so that he will be in a position to give an answer. In Bombay there is a firm—Schroeder and Schmidt—who are large exporters of manganese ore. In peace time this firm supplied practically all the manganese ore that the German steel works required for their manufactures. When war broke out this firm was ordered at once to close. After that it apparently received permission to go on trading pending liquidation, and in that happy state it remained for something like fifteen months. At length the Chamber of Commerce of Upper India began to get restive, and again this firm was ordered to close. But again the firm was fortunate. A Mr. Kann, who hails from Frankfort, was permitted to go out to India to superintend the transfer of the firm of Schroeder and Schmidt to the Hindu manager on the spot. Manganese was made contraband of war I believe in March, but subsequently to that this firm, though under another name after the transfer, proceeded to trade in manganese under, I suppose, a special licence. Last week the following telegram was received in London— Schroeder Schmidt's successor negotiating 20,000 tons Dadabhoy Ramtek January June market rising considerably That telegram shows that this firm was continuing its dealings in manganese, and also that its dealings were tending to raise the price of this ore as against the British and Allied buyers.

But this is not the whole story. When I was in Bombay I thought that Schroeder and Schmidt were a German firm stationed there, but it now appears that they were only agents for Etlinger and Company, who trade in London, and Etlinger and Company are financed by Beer Sondheim and Company of Frankfort. This completes a very convenient chain of trade from Bombay through London to Frankfort. I understand that the Munitions Department buys a great deal of manganese ore from Etlinger and Company. It is said that their ore is better than that of other firms, but it is impossible to understand that, as this ore is bought in the open market in Bombay, and other firms can, of course, purchase the same quality. It seems possible that some trade in manganese ore with Germany went on from Bombay after the outbreak of war. It would not have been very difficult to arrange such trade from Bombay, at all events until such time as Italy became belligerent. A line of special steamers had been started to run from Bombay to Gothenburg in Sweden, and that would have been a means of getting this ore into Germany where it was very much wanted. But in any case it seems certain that this firm of Etlinger and the firm which financed it—Beer Sondheim, of Frankfort—must have made large sums of money out of this war, and included among those sums must be considerable payments made by our Government through the Munitions Department. I may add that Schroeder and Schmidt are agents not only for this manganese firm in London but also for the Continental Tyre Company, which fact suggests another field of speculation with regard to their dealings.

There is another firm in India Which deals in manganese. It is called the Sandur Mining Company, and the whole of its capital is held by three German firms. Sandur is a small State near Mysore, and all the ore they collect goes out through Goa, so it must be a simple matter to supervise the exports. I have no information on the proceedings of this firm since the war broke out, but no doubt the noble Lord the Under-Secretary will say that steps will be taken to see if anything has been done in that direction.

My Lords, I believe I have stated the facts correctly. The proceedings to which I have called attention would seem almost incredible were it not that we have almost ceased to wonder at anything in the handling of such matters. But after nearly eighteen months of war, we are to have at last an Enemy Trading Act which will be most efficient. But one cannot help thinking that that measure ought to have been drafted before war broke out and put in force on the day war was declared, just as the German Regulations were ready to be rigidly put in force against us from that moment. But if the Board of Trade makes use of the powers this new Bill will give it, I am certain that enemy trading will cease here. I hope equally efficient measures will be taken in India.

THE UNDER-SECRETARY OF STATE FOR INDIA (LORD ISLINGTON)

My Lords, I fully realise the importance of the subject which has been raised by my noble friend in connection with enemy trading in India. Perhaps before I specifically answer the question in regard to the particular firms he has mentioned it might be of interest to the House if I briefly state the position in India as to the Ordinances and Orders that have been issued in regard to enemy trading. They are, as probably my noble friend is aware, contained in a volume dealing with all Ordinances and Orders that have been passed since the outbreak of war. I will not attempt to go into any detail in regard to the various Orders, but if my noble friend would like to see this volume so as to become closer acquainted with its provisions I shall be pleased to give him a copy.

I will state in outline the endeavours that have been made in these Orders to deal with this question. They lay down, broadly, that all hostile foreigners or firms shall cease to trade unless licensed by the Government of India. The definition of a hostile firm is in this regard a very comprehensive one. The term includes any company, firm, association, or body of individuals incorporated or not, of which any member or officer is a hostile foreigner—any firm in which a hostile foreigner existed prior to August 3, 1914, the day before the war broke out. These hostile firms engaged in trade in India are dealt with under various categories. There are, first of all, those who come under what is called general licences; those are licences which permit the firm to carry on its work as previously without any restrictions and which apply to companies that have not more than one-third of issued capital belonging to hostile enemies. Although technically these firms may be termed hostile, they are in practice and in essence really British firms; therefore they are allowed to trade without restriction. Secondly, there is the category under special licences. There are three kinds of these licences. There is, first of all, the licence which permits a company to trade for the purpose only of liquidating its assets and paying its debts in India, and upon the termination of that process the company is to be closed down. I will deal in a moment with the specific case that my noble friend brought out which comes under that category. I may say that the whole business of liquidation is carried out under the supervision of a controller. The second licence permits the company to trade under supervision by an officer nominated by the Government who has complete authority to inspect all the books, orders, and commercial transactions of the firm. Then there is the third licence, which allows the company to conduct its business without restrictions, but at the same time subject to the Orders which are in force and which are contained in the Royal Proclamations or in Government of India notifications regarding trading with enemy firms. The latest information that we have in the India Office in regard to these various categories of firms is that 50 firms are allowed to trade without restriction; 79 are trading under control; and 114 are in process of liquidation with a view to being wound up and closed down. I may say that the Governor-General in Council, under the Hostile Foreigners Trading Order, may at any time revoke any licence that has been granted or alter or add to the restrictions or supervision connected with those licences.

I think this brief outline of the administrative conditions of the Enemy Trading Acts in India will show your Lordships that the scope of the Indian Codes is as wide as, if not wider even than, the Bill that has been recently before your Lordships, though, of course, on different lines to meet the different conditions in India. In regard to the putting into effect of these Codes, that must, of course, depend on the spirit and energy with which the powers are exercised by the authorities. This has been left—I think your Lordships will agree properly left—to the Government of India and those who work under their direction, who are, after all, better competent to deal with the various conditions and complications that surround these firms. Of course, wherever any leakage or anything in the nature of abuse is brought to our attention on this side we immediately investigate it and communicate with the Government of India.

The Government of India's instruction, in regard to the operations of these Foreign Trading Orders, to Local Governments is that licences should only be granted for special reasons. By that I mean that only those firms whose discontinuance is likely to be prejudicial to British and Indian interests are recommended for a licence; and, inversely, those firms in whose case damage would be done to British or Indian interests to a disproportionate extent to the advantage are not recommended for a licence. Your Lordships will understand that there are many firms that must come under the former category, and it must be left to the Government of India to decide, on balance, whether or not it is an advantage to British trade interests and to the general interests as a whole to grant a licence. This same policy has been adopted in cases of firms which have been placed under liquidation. It has here suited the Government in some cases, in the interests of British commerce, to allow the process of this partial form of liquidation to be gradual. Your Lordships will understand that any sudden realisation of stocks or collection of debts on a large scale might have a disturbing and unsettling effect on the whole trade interests of India, and, indeed, of the Empire. In all these cases full discretion, as I have already said, is left to the Government of India. We have not asked to be informed of the progress of this liquidation, but we have no reason to suppose that the Government of India have been showing undue tenderness towards such firms.

My noble friend alluded specifically to the case of Schroeder and Schmidt. Our latest information, in reply to a telegram sent to the Government of India, is dated December 18 regarding this firm, and that information is to the effect that the business has been closed except that the firm is permitted to dispose of indent goods already obtained, and to sue, if necessary, for recovery of debts subject to the supervision of a controller. Your Lordships will understand that that is a practical means of winding up this firm, because in the case of disposing of indent goods it enables first those who have under contract to purchase the goods to discharge their contract, and it also enables other firms that have contracted for the goods in India to receive in due course those goods upon which they probably are dependent for the even carriage of their business. It is true that the process of liquidation in the case of the particular firm in question has been protracted in character, but this is one of the cases where it has suited British interests and the Government to allow the method of liquidation to be protracted. As my noble friend has told the House, this firm deals largely in manganese ore. It possessed a very large stock of that commodity which is and will continue to be greatly needed by the Government, and it was found that the acquisition of that ore by the Government could be attained more rapidly and with greater precision by getting it through the instrumentality of this firm than in any other way. But let me point out that every possible precaution has been taken, both in India and through the various Departments in this country, to see that the whole of the manganese ore coming from this particular firm has come direct and solely to this country. I think I can say with complete accuracy that not an ounce can possibly have found its way, under the vigilant attention of the Admiralty and the Public Departments, into enemy territory.

Lord Sydenham said it is very unfair that this firm should be making large profits; but let me point out that the process of liquidation was going on during the time that this manganese ore was being discharged from this firm, and under the Orders all payments during that process are deposited in the Government treasury to the credit of the Government pending the conclusion of peace, and pending, of course, whatever policy may then be adopted by His Majesty's Government in regard to these firms that have been in liquidation. So that when my noble friend says that they have been making vast profits during the war, I think my explanation will show that this is not the case. The money is being strictly controlled under Government supervision, and will be subject hereafter to whatever course may be taken in regard to all these firms throughout the Empire. As regards the firm of Etlinger, I am given to understand that this gentleman has really no connection with this particular firm in India, and his business has certainly nothing to do with the Department for which I am answering at the present time. And as regards the case of Mr. Kann, I can only state that there, again, the India Office is not the Department which grants the passports But I can say this, that when he started from this country and during the months he was in India he was under the vigilant attention of the authorities. I hope that this explanation will satisfy my noble friend, and that he will not now regard the particular case that he brought forward as quite so serious as he appeared to consider it. In regard to the other firm that he mentioned—the Sandur Mining Company—I am afraid I am not in a position to answer hint specifically upon that, but I will make all possible inquiries and shall be glad to communicate with him on the subject.

Let me say in conclusion that if these cases and others to which my noble friend incidentally alluded have been apparently leniently dealt with as regards the period in which they have been allowed to carry out their liquidation there is this fair and general answer to that contention, that the whole public attitude on this question, whether in India or here or in any other part of the Empire, has undergone a very great change since a year ago. Opinion on this subject has stiffened and hardened, and I think is stiffening and hardening all the way round. Everybody to-day is prepared to deal far more severely and far more drastically in all these cases than at the outbreak of the war. A year ago the idea that it might be desirable to destroy German commercial interests had not taken anything like the root in the public mind that it has to-day. The Trading with the Enemy Bill which has been recently under discussion in this House and will shortly be placed upon the Statute Book may, I think, be considered as a fair reflection of this development of the public mind and the determination in the future to prosecute a sterner and more vigorous line of action throughout the country and the Empire. This feeling is daily developing, and I think that the determination has become strong in this country and throughout all parts of the Empire that wherever possible these enemy firms shall no longer continue permanently to exist in our midst. The machinery will soon be available to deal effectively in this direction in this country. Its adoption, I may say, is under serious consideration in other parts of the Empire. But I am given to understand by those competent to give an opinion in the India Office that the machinery is already available, in existing Orders and Notifications, in India, and it may confidently be anticipated that the Government of India will actively co-operate in effecting the same purpose in India as will be laid down here and elsewhere throughout the Empire.

LORD SYDENHAM

I thank my noble friend for his very full answer to my Question. He has shown that the Government of India possess very large powers. The only question is whether the energy to enforce those powers has been as much in evidence in the past as we hope, after the speech we have just heard, it will be in the future. The only point which my noble friend did not make quite clear to my mind is this. Is this firm, which is said to have been liquidated, carrying on its business or not? Apparently only last week it was negotiating for the purchase in India of 20,000 tons more of manganese.

LORD ISLINGTON

I can only repeat the answer that I gave to my noble friend just now, that this firm is allowed to continue to discharge indent goods and is allowed to sue for the recovery of its debts, but with the exception of that the business is closed down.