HL Deb 26 February 1918 vol 29 cc99-108

LORD SYDENHAM had the following Question on the Paper

To ask His Majesty's Government—(1) Whether the firm of Ettlinger and Company, which was precluded from trading in India in 1916, has obtained through the medium of the Baluchistan Mining Company a monopoly of the supply of Indian chrome ore for Europe, excluding the United Kingdom; (2) Whether this firm is permitted to hold a large consignment of chrome ore at Calcutta; (3) Whether this firm of naturalised Germans, having obtained a decree severing its connection with Beer. Sondheimer and Company, of Frankfort, in October last, is now free to trade as a British firm.

The noble Lord said: My Lords, I have twice drawn attention to the operations of Messrs. Ettlinger and Company in connection with manganese in India. On the first occasion my noble friend the Under-Secretary of State for India said that he was informed that this firm had no connection with the firm of Schroeder and Schmidt, which was about to he closed: but six months later in July, 1916—he stated that it had been discovered that "the manganese business of Schroeder and Schmidt had been largely financed by Ettlinger and Company." My noble friend also said— Recent investigations regarding the character of Ettlinger and Company had brought out the fact that before the war close relations existed between this firm and Beer. Sondheimer and Company, of Frankfort... Accordingly, after consultation with the Government of India, it was decided to issue orders terminating their [that is, Ettlinger's] business in India. The noble Lord further said that the Government of India were issuing two Ordinances which would give them all the powers required in cases where "a firm's business was being carried on before the war for the benefit of enemy interests, and is likely to be resumed on similar lines after the war."

The winding-up of the business Of Schroeder and Schmidt took a long time; and what apparently happened is that Ettlinger and Company took over the manganese from Schroeder and Schmidt and sold it to the Carlton Iron Company, who sold it to munition factories, but, as the noble Lord said, not to the Ministry of Munitions. As the very close connection of Ettlinger with Schroeder and Schmidt and also with Beer, Sondheimer and Company had been established, and as the Government of India had ample powers, it is difficult to understand how Ettlinger was able to obtain what is really a monopoly of the chrome of India for the European market. Chrome is a very important ore. It is found, I believe, only in India, in Rhodesia, in New Caledonia, and, I think, quite recently in Canada. After the war there will he a great demand for chrome, and, if my information is correct, Ettlinger and Company will be the source of supplies for our European Allies as well as for Germany. Quite a short time ago there was a consignment of 1,600 tons of ore from the Singbhum Chromite Company, stored at the Kidderpur Docks, Calcutta, which was the property of Ettlinger and Company; and I am told that Ettlinger refused the vendor's offer to buy it back. In theory, of course, the Ettlinger business in India had been closed; but it was held there that, as the contract of sale was made in London, this ore did not come under the control of the Indian authorities.

Now, surely this is a very instructive and illuminating case. We have a German firm, "A," which was trading in manganese and in other commodities in India. It was ordered to close, but the liquidation took a very long time and was not really accomplished until the Chamber of Commerce of Upper India had made some very strong remonstrances. It was then discovered—as I pointed out in your Lordship's House in January, 1916—that firm "A" was being financed by another German firm, "B," in London, and that this firm "B," was also in close partnership with another German firm, "C," in Frankfort. Nevertheless, firm "B" seems to have been permitted to carry on its operations in India and to have obtained a privileged position as regards dealing with Indian chrome ore. More than that, firm "B" seems to have been allowed to purchase a large amount of Indian chrome because the contract was made in London and not in India. That clearly shows the protean-like character of German activities. If checked in one case and in one form, they immediately reappear in some other place and form.

I turn to my third question. In October last, more than three years after the outbreak of war, an undefended action was brought in the King's Bench Division by Messrs. Ettlinger to dissolve a contract between them and Beer. Sondheimer and Company, of Frankfort. The contract was made in the German language; it was to be construed under German law, and the place of jurisdiction was to be Frankfort. The Court dissolved that contract as from August 4, 1914, and I suppose it could have taken no other course, because it would be evidently impossible for funds to pass from Ettlinger to Beer, Sondheimer, or vice versa, during the period of the war. But what would happen when peace comes? The contract may then come before the German Courts, and it is by no means certain that the German Courts will recognise the release given by the British Court. I understand that Ettlinger and Company have large contracts for the delivery of manganese ore after the war, and that these contracts, which were entered into in 1914, contain it proviso that they shall not be vitiated by the outbreak of war, but merely be suspended. I hope the Board of Trade will be able to say that these contracts have by this time been cancelled. More than this, in 1914 Schroeder and Schmidt, Ettlinger, and Beer, Sondheimer—the firms I have called "A," "B," and "C"—were all partners in the Nord-Deutscher Hütte Gesellschaft, of Bremen, and I hope the Board of Trade will be able to say that this partnership has also been cancelled.

In these cases we seem to have had a little light thrown upon the proceedings of the great Frankfort combine, which had before the war obtained a deadly grip upon the metal market of the world. Professor Liefmann, of Freiburg, in an article written before the war, explained part of the modus operandi of this combine, but, of course, he did not tell the whole story. The aim was to obtain control of firms, and of prices, which is, of course, most important, and to obtain that control with no more participation of German capital than was necessary for that purpose. As Professor Liefmann very artlessly pointed out, "if such a participation takes the form of a control of the foreign undertakings, the financial and economic management is guaranteed by the home [that is, the German] firm, in spite of the apparent independence of the foreign firm." The "apparent independence" of the foreign firm seems to have misled our authorities in this and some other cases. Professor Liefmann explained the complex system of banks and interlocking directorships by which this huge machine was directed from central sources, and he gave the names of the principal firms involved. The most important of them are the two Merton firms, of which the London Merton was acting as Metal Broker to His Majesty's Government even after the outbreak of war. The next in importance, he tells us, were Beer, Sondheimer and Company, and Aaron Hirsch and Company. Now Beer, Sondheimer and Company have been blacklisted in America, Ina they have an alter ego there in the Minerals Separation North America Corporation, of New York, which is now trying to hamper the mining industry at Cobalt, in Canada, by raising claims for infringement of very doubtful patent rights. In London Beer, Sondheimer and Company were represented by Ettlinger and Company, who seem to have been at least very useful tentacles of the German octopus; and my Question is whether this firm now ranks as a British concern, and whether it can fortify its position and restore its German connections after the war.

Trade with Germany must be resumed in due time, and I believe it will have to be resumed, but this kind of peaceful penetration, which we were told by the noble Viscount, Lord Haldane, was for the benefit, of mankind, must be finally stopped. It was directed to obtain economic control of British resources for the benefit of Germany, and was most carefully designed to hamper us in war, and it has so hampered us. If it had gone on for another twenty years, I think most of our great industries would have fallen under German domination. I feel that we must make certain that this dangerous influence shall cease in the future, and I am sure the Board of Trade is doing all it can in that direction; but I am not certain that it is a match for the extraordinary artfulness of the Germans. We have heard much of the "Hidden Hand" during this war. There is not one Hidden Hand, but there are many, and I believe they belong chiefly to persons who are deriving advantage from this system of peaceful penetration, and who are very much afraid that the advantages which they now possess may cease when the war ends. I hope that your Lordships will pardon me for detaining the House so long, but I venture to think that the public importance of these matters is some justification. I beg to put my Question.


MY Lords, before I attempt to answer the Question on the Paper, I should like to express the thanks of the House to the noble Lord for having once more directed our attention to what he very justly describes as the protean character of German, semi-German, and naturalised German activities in this country, and perhaps your Lordships will agree with me that the speech of the noble Lord is one that fully justifies the passage into law of the Non-ferrous Metals Act, which has taken place during the last few weeks.

The particular company to whose activities the noble Lord has directed attention this afternoon belongs to two individuals—a Mr. Ettlinger and a Mr. Bernstein, both of German origin, but both naturalised British subjects. One was naturalised on February 3, 1888, and the other on July 23, 1903. This firm has carried on business for some years at Finsbury Court, in the City of London, as merchants; and it had branch offices, as the noble Lord has pointed out, in Bombay and other places in India, where it had a German as manager. With regard to its business in India, the India Office is better informed than the Board of Trade can be, and I think the noble Lord the Under-Secretary of State for India dealt on a previous occasion with the affairs of Ettlinger and Company as far as India is concerned.

In Finsbury Court the firm of Ettlinger employs a staff—not a very numerous one; I am told not exceeding ten in number—but it is perhaps a rather surprising fact that one of the number is a German subject, and I am told of military age, but he has not been interned because of ill-health. Another member of the staff is a Swiss subject. Your Lordships will remember that the Trading with the Enemy (Amendment) Act, 1916, received the Royal Assent in January, I believe, of that year. Very soon after the passing of that Act—I think as early as February, 1916—the business of Ettlinger was investigated by officials of the Board of Trade, but no circumstance was disclosed which gave the Board of Trade power at that time, and no circumstance has been since disclosed which would give the Board of Trade power at any time, to wind up the business under that Act on the ground that it was "carried on wholly or mainly for the benefit of enemy subjects." Those of your Lordships who are acquainted with the provisions of the Trading with the Enemy (Amendment) Act, 1916, will know that that is the only ground on which the business could be wound up. Accordingly, the business continues under supervision, and I am informed that one of the Board of Trade inspectors visits the offices of Messrs. Ettlinger very frequently. It is the fact, as my noble friend Lord Sydenham quite correctly stated just now, that before the war this firm of Ettlinger had very intimate relations with a firm at Frankfort named Beer, Sondheimer and Company with regard to minerals connected with the iron and steel industries, and on June 6, 1912, Messrs. Ettlinger signed an agreement with Beer, Sondheimer and Company for carrying on a portion of the London business and I think possibly the Indian business, though I am not quite sure of that, but at all events as regards 35 per cent. of the London business—on joint account with Beer, Sondheimer and Company. But this agreement was terminated ipso facto by the outbreak of war, for such is the legal effect of the war on a contract of that kind.

The answers to the specific Questions put by my noble friend are as follows. In his first question the noble Lord asks "whether the firm of Ettlinger and Company, which was precluded from trading in India in 1916, has obtained through the medium of the Baluchistan Mining Company a monopoly of the supply of Indian chrome ore for Europe, excluding the United Kingdom." The answer is that the firm of Ettlinger and Company have not obtained through the medium of the Baluchistan Mining Company a monopoly of the supply of Indian chrome ore for Europe, excluding the United Kingdom. Early in the year 1916, before this firm was precluded from trading in India, they bought certain Indian chrome ore in the London market through London brokers, but no purchase of Indian chrome ore has been made by the firm since they were precluded from trading in India. The firm have an agreement for the sole agency for the sale of certain Rhodesian chrome ore in France and Switzerland, and I believe the noble Lord is perfectly accurate in stating that this chrome ore is exceedingly valuable material, especially in time of war, because it is used for hardening armour plates. As I say, they have an agreement for the sole agency for the sale of certain Rhodesian chrome ore in France and Switzerland, but owing to the supplies having been requisitioned by the Government the firm are not now supplying ore in France and Switzerland under the agreement.

The noble Lord asks, in the second place, "whether this firm is permitted to hold a large consignment of chrome ore at Calcutta." The firm do not now hold any consignment of chrome ore at Calcutta. Part of the chrome ore purchased in 1916 on the London market was retained at Calcutta owing to the difficulty of obtaining freight, but this was sold to a London firm, an English firm, on January 30 of this year, and it awaits shipment at the direction of the purchasers. Messrs. Ettlinger and Company have no further control over this ore.

As regards the third Question—"whether this firm of naturalised Germans, having obtained a decree severing its connection with Beer, Sondheimer and Company, of Frankfort, in October last, is now free to trade as a British firm"—it is a fact, as the noble Lord stated, that Messrs. Ettlinger and Company applied to the High Court one day in October last for a declaration that the agreement with Beer, Sondheimer and Company, which has already been referred to, had been terminated by the outbreak of war, and such declaration was made by the High Court. This order was merely declaratory of the effect of the war on the agreement with Beer, Sondheimer and Company, which was terminated by the outbreak of the war and not by the order of the Court.

I think that in the course of his speech the noble Lord referred to some doubt in his mind as to whether there was in existence in the year 1914 between Messrs. Ettlinger and Company and some German firms any contract as to the delivery of manganese ore, with a suspensory clause in the event of war. The Board of Trade is not aware that any such contract was in existence at that period or at any other period. I have endeavoured as well as I can to answer the Questions placed on the Paper by the noble Lord.


My Lords, I think the House is indebted to my noble friend below the gangway for raising this question, which is obviously one of real importance; and it is useful to draw a distinction between the class of case into which inquiries of this kind ought to be not merely made but continued, and the general idea of stopping for ever all German trade, with which some minds are impregnated. My noble friend said that the time would come when trade would have to be resumed with Germany. I entirely agree. That undoubtedly is so. But there is all the more reason for keeping careful watch, both now and in time to come after the war, on trade in certain specific articles which, as the noble Lord opposite has said, have in the past been made subjects of special attack by those who have attempted to promote the German system of penetration. Chrome ore is undoubtedly one of these subjects, manganese is another, and the great steel-hardening product, nickel, is a third; these are the three main steel-hardening products, apart from the rare metals which are used in small quantities for hardening special qualities of steel. I confess that it has always been something of a puzzle to me how Germany, in the absence certainly of two of those articles——a complete absence of manganese and chrome, and a great diminution in the supply of nickel, of which some is, no doubt, obtained from Scandinavia—has been able to maintain the great output of steel for guns and for defensive purposes throughout these three years of war. There must have been enormous stocks of these materials laid down in Germany in anticipation of war, in order to enable that vast output of steel to go on, as it has, throughout all these years. It is only one more instance of the careful preparations for war which Germany had indulged in for years past. On the whole I consider—and I think my noble friend will consider—that the replies made by the noble Lord who represents the Treasury are not unsatisfactory, but this is evidently a case in which continued watchfulness with regard to the supply of chrome from India will be necessary, not only now, but for many years to come. There is only one observation which was made by the noble Lord with which I venture, respectfully, to differ. He instanced this as an example of the valuable operation of the Nonferrous Metals Act which we passed through the House the other day.


I am sorry to interrupt the noble Marquess, but I did not say that, because that Act has not come into operation. I only ventured to suggest that the speech of the noble Lord (Lord Sydenham) bringing out the protean activities of the Germans in these trades was, in my humble opinion, a justification for the passage of that Act.


I hope I did not misrepresent my noble friend in any way. Of course, it is not true that any of these proceedings were a result of that Act. The point on which I wish to lay emphasis is this, that it is, I think, an exemplification of what I ventured to say when that Bill was under discussion—as to what it is important to do in order to check these illicit proceedings namely, to keep a tight hold on the sources of supply rather than on the particular operations of the metal market in London, which was all that the Non-ferrous Metal Bill, as it then was, contemplated. This is one of those cases where, though not a monopoly, yet a very large part of the sources of supply, are within the British Empire, largely in India, to some extent in Rhodesia, and to some extent in Canada. That ought to give us in the future all the requisite control over the supply of this supremely important, article, and I am glad that my noble friend below the gangway has raised this question, if only to give us an opportunity of expressing that view.


I beg to thank the noble Lord for his very full reply. I hope I have understood exactly what he said. I gather from him that this firm has continued its operations, but under supervision, and that it is possible that it may be developed in some further direction, still under the close supervision of the Board of Trade.


I do not know whether it can be developed or not.


The instance I gave seemed to show that a developing process was going on. The noble Lord spoke of the contract of 1913 as having been automatically terminated. I am not quite clear whether that automatic termination will not mean that it will be automatically revived when the war ends.


I think that may be so.


I am not quite clear, if that contract was terminated automatically, whether it was necessary to bring the case into the King's Bench Division. I think the noble Lord has made it quite clear that Ettlinger's have not obtained a monopoly over the supply of Indian chrome, but they seem to have obtained a monopoly over the chrome of Rhodesia.


I think they have a monopoly of agency in Rhodesia; but, as I pointed out, or endeavoured to point out, whatever monopoly they had was quite inoperative because the Government had requisitioned chrome ore.


It is undesirable that a monopoly of Rhodesian ore, which, after all, is British, should pass to this distinctly German firm. I understand that the consignment at Calcutta, which Ettlinger held for some months, has now passed out of his hands. I do not think the noble Lord made it quite clear why he was allowed to purchase such a large amount, and why his business in India had not been finally put an end to. I take it, therefore, we may assume that no more chrome or manganese can be purchased by this firm.


My Lords, on this subject it might well be worth while making further inquiries as to the manner in which we can best defeat the peaceful penetration of Germany. The only nation, since 1886, that has been able successfully to defeat the peaceful penetration of Germany is Japan, and it may be worth while investigating minutely the manner in which she has frustrated German peaceful penetration.