HL Deb 13 March 1918 vol 29 cc423-7

LORD SYDENHAM had the following Question on the Paper—

To ask His Majesty's Government—

  1. 1. Whether the American branch of Messrs. Beer, Sondheimer and Company, of Frankfort, was blacklisted and subsequently released; and
  2. 2. What conditions were imposed when this branch of the German firm was permitted to act for a time as agents of Minerals Separation American Syndicate.
The noble Lord said: My Lords, the other day, when drawing attention to the amazing ramifications of the great Frankfort agencies in the metal trades of this country, I made certain allegations as regards a corporation called the Minerals Separation North American Corporation. My information was based on statements in four Canadian newspapers which seemed to me at the time to be explicit and circumstantial. I believed that corporation to be a purely American concern, and that it had, like many other businesses in America, become entangled in the German net. I now find that those statements in the Canadian papers were incorrect, and that I was misled. The corporation was established in the State of Maryland in December, 1916, fifteen months ago. It has never had any connection with Beer, Sondheimer and Company, of Frankfort, and I believe is quite incapable of any proceedings which could in the least degree favour the interests of the enemy. I wish, therefore, to withdraw the allegations which I then made, and I am very sorry I was thus misinformed.

The cause of the misunderstanding, I believe, was this, that there was a predecessor of the Minerals Separation North American Corporation, which was entitled the Minerals Separation American Syndicate, and that that syndicate did in 1913 enter into a contract for ten years with Beer, Sondheimer and Company's American branch in New York. That contract gave the German firm the sole agency of the syndicate for, as I have said, a period of ten years. I believe that contract was afterwards broken or modified under instructions from the Board of Trade after the outbreak of war. Therefore I have put this Question in order to elicit the views of the Board of Trade as to the status of the American branch of Beer, Sondheimer and Company, and as to the conditions laid down by them for the general guidance of the Minerals Separation American Syndicate.

It is extraordinarily difficult to get at any facts whatever with regard to the underground activities of these great Frankfort conspirators. I am now convinced that they had more than merely commercial designs. I believe their aim was to involve as many companies and persons in other countries as possible in German activities, in order to prepare a kind of barrage which could be set up when war, which I believe they knew to be impending, actually broke out; and at the present time I am sure they are busily engaged in fomenting a revolution of the Russian type in this country. I believe that if it were possible to get behind that barrage, much which is now quite dark would become clear.

LORD HYLTON

My Lords, to the Question put on the Paper by the noble Lord, I will give what answer I can. The first part of my answer will be a short one, and the second rather long. In the first place the noble Lord asks whether the American branch of Messrs. Beer, Sondheimer and Company, of Frankfort, was blacklisted and subsequently released. The information which His Majesty's Government have is to this effect, that Messrs. Beer, Sondheimer and Company, of New York, were included in the Statutory List—generally called, I think, the Black List—for the United States in July, 1916, and remained on that list until it was withdrawn on the entry of the United States into the war. That is the short answer to the first part of the Question.

As to the second part of the Question, the noble Lord is perfectly correct in saying that the Minerals Separation American Syndicate (1913). Limited, which is a British-registered company, entered into an agreement in the month of September, 1913, with Beer, Sondheimer and Company, of Frankfort-on-Main and New York, under which the firm were appointed the sole agents of the syndicate for the transaction of all commercial affairs of the syndicate in the United States of America, Canada, Mexico, Cuba, and the Philippine Islands. Beer, Sondheimer and Company have their principal office at Frankfort, and have a branch in America carried on by Messrs. Benno Elkan and Otto Frohnknecht, who were resident and domiciled in New York City. In October, 1914, the syndicate applied to the Committee on Trading with the Enemy for leave to enter into an agreement with Benno Elkan and Otto Frohnknecht under which the syndicate appointed them as the American branch of Beer, Sondheimer and Company, their sole and exclusive agents for the transaction of the commercial affairs of the syndicate in the places already mentioned, and Elkan and Frohnknecht undertook not to pay or to cause to be paid, directly or indirectly, any money, etc., arising from or in connection with their trading relationships with the syndicate to Beer, Sondheimer and Company of Frankfort, or any person resident in Germany or Austria, or to any one for the use of such person during the war, and to defer until after the war any commission or remuneration payable to them. At that time Beer, Sondheimer and Company, of New York, were not blacklisted, and no authority was required by the syndicate to enable them to enter into the proposed contract. They were informed by the Committee that there was no objection to their doing so.

In June, 1916, the syndicate approached the Treasury again. In view of their difficulties in America they had been advised to form an American corporation to acquire from the syndicate the United States patents and the patents for Canada, Mexico, &c., and all their assets and other rights, but they were prejudiced by the agency agreement entered into with Benno Elkan and Otto Frohnknecht, the American corporation which was proposed being unwilling to submit to the obligation to deal with them. The syndicate, therefore, proposed to invite Elkan and Frohnknecht to cancel the agreement, in return for a certain number of fully-paid shares in the company, and an option to subscribe at par for further shares. The shares in question were ultimately to be converted into shares in the American corporation, and no benefit was to accrue in respect of them for five years. The substitution of a moderate share-holding interest in the company—£17,500 out of £200,000—appeared to be preferable to the control resulting from the exclusive agency under the agreement of 1914, and, after reference to the Board of Trade, the syndicate's proposal was sanctioned, subject of course to the approval of the Capital Issues Committee of the issue of shares, if a new issue was involved.

Meanwhile, the syndicate received from America the agreement entered into there for the formation of an American corporation for the acquisition of their undertaking and assets, as finally settled. This agreement necessitated a modification of the proposed agreement with Elkan and Frohnknecht, putting an end to their exclusive agency. The shares which they were to receive as consideration for cancellation were to be placed at their disposal at the end of the war instead of at the end of five years, and Elkan and Frohnknecht were to be the general agents in the countries which I have mentioned, although not the exclusive agents, of the American company. On the other hand, they released to the British company the money to which they were entitled in respect of commission, which was stated to amount to from £16,000 to £20,000. The company stated that it was absolutely essential to continue this provision as to the agency, Elkan and Frohnknecht absolutely refusing to assent to its cancellation, and they pointed out that a leading American counsel had advised in America that the American branch of Beer, Sondheimer and Company had no authority to enter into the new agreement or give the guarantee as to no enemy benefit, and that the original agency agreement of 1913 was still in existence and could be enforced against the syndicate in the American Courts. Meanwhile the name of Beer, Sondheimer and Company, of New York, had been added to the Statutory List, as I think I mentioned in answer to the first part of the noble Lord's Question.

In all the circumstances the Treasury came to the conclusion that it was advisable in the national interest to authorise the company to enter into the agreement of August 4, 1916, with Elkan and Frohnknecht—this agreement is on the company's file, and is public property—even though their right to be appointed agents remained, rather than to leave the company under their liability of the 1913 and 1914 agreements to employ them as sole and exclusive agents; and sanction was accordingly given, so far as the Acts and Proclamations relating to trading with the enemy were concerned. The Capital Issues Committee subsequently recommended the issue of fresh shares, out of which, inter alia, the shares to which Elkan and Frohnknecht were entitled were allotted to them. That is all the information that we have at present with regard to these people. If there is anything else that I can ascertain on the point, I shall be pleased to communicate it to the noble Lord.

LORD SYDENHAM

I beg to thank the noble Lord for his very full explanation.