HL Deb 29 July 1920 vol 41 cc627-40

Order of the Day for the Second Reading read.


My Lords, in ordinary circumstances I should not have thought it necessary to trouble you with any remarks in introducing this measure, which is very simple and self-explanatory; but, in view of the fact that it has given rise to a certain amount of misunderstanding, I think it might be as well for me to say a few words by way of explanation. Owing to a strange misconception, fears have arisen that some of the provisions of the agreement which this Bill is intended to confirm might be in conflict with the Covenant of the League of Nations. Accordingly words were introduced in Clause 1 of the Bill, during its passage through the House of Commons, which certainly exclude any such danger, if it ever existed. In my opinion it never did exist. The idea arose from a confusion of mind, very natural in those not familiar with the genesis and details of Article 22 of the Covenant of the League of Nations — the article dealing with Mandates— but which a more intimate acquaintance with the facts might have obviated.

One error into which critics have fallen is the idea that because the terms of the Mandate for this little island have not yet been finally settled—as indeed no Mandates relating to any of the ex-German colonies have yet been finally settled—the Mandatory Power has, as yet, no right to deal with the territory in any way. Indeed, some have gone even so far as to imagine that no Mandate for any of the ex-German colonies had yet been conferred, because the matter had not yet come before the League of Nations. That is, of course, a complete misconception. The League has nothing whatever to do with the conferring of Mandates. The ex-German colonies were ceded by Germany under the Peace Treaty to the principal Allied and Associated Powers. The principal Allied and Associated Powers alone could dispose of them, and they have, in fact, allotted them to various States, Members of the League, as Mandatories. This was done more than a year ago, and Nauru was then allotted to the British Empire.

At the same time, or shortly afterwards, a Commission consisting of representatives of the principal Allied and Associated Powers was appointed to draw up the terms of the Mandates, or, in ether words, to fix the conditions under which the various Mandatories should exercise their authority over the territories allotted to them. That Commission, of which I happen to have been Chairman, and which sat at the London Office of the League of Nations and had an officer of the. League as its Secretary, did in fact settle the Mandates, drawing up Mandates applicable to all the ex-German colonies, including Nauru, in accordance with the provisions of Clause 22 of the Covenant. Those Mandates are in existence; they have to my certain knowledge been expressly approved by some of the principal authors of the Covenant of the League of Nations; and it is simply due to a series of accidental delays, owing to the great congestion of work and the innumerable points of detail which have had to be settled in carrying out the various Peace Treaties, that they have not yet been finally passed by the Supreme Council, representing the principal Allied and Associated Powers, and communicated to the Council of the League of Nations, whose duty it will be to watch over the observance of their provisions.

But in the meantime the mandated territories could not be left derelict. The various Mandatory Powers had no option but to do that which, as a matter of fact, all of them have done—namely, to carry on the administration of the mandated territories on the assumption that the Mandates, as drafted by the Mandates' Commission, did correctly define the conditions of their trust, and would in due course be formally ratified. Innumerable acts have been performed by all the Mandatory Powers on that assumption, and the Agreement which the Bill purports to confirm is simply one of those arts That assumption, inevitable in any case, was in reality not at all hazardous, because the Draft Mandates are in all essentials not capable of being called in question, for they are nothing more than an elaboration, a setting out with the necessary details and in proper legal form, of the provisions contained in the various paragraphs of Article 22 of the Covenant of the League of Nations. They follow closely the lines of that Article, and neither the Supreme Council nor the Council of the League, nor any other authority, could materially alter them without upsetting the Covenant itself.

As I have said, the Agreement about Nauru is only one of a number of steps which have been taken, and are constantly being taken, by one or other of the Mandatory Powers, in dealing with their several mandated territories, on the assumption that the conditions on which they are to administer these territories, when finally ratified, will conform to the terms of Article 22 of the Covenant of the League. It is a complete mistake to suppose—and this is the second error into which critics of this Bill have fallen—that the Agreement itself needs to be submitted to the Council of the League. If no Mandatory Power could take any action with regard to a Mandated territory without first obtaining the counsel of the League of Nations, the Mandatory system would be totally unworkable, and the whole thing would break down. To suggest such an idea is really to make the League ridiculous. I do not for a moment contend that it would not be competent for the Council of the League to object to any action taken by a Mandatory Power on the ground that it was inconsistent with the terms of its Mandate, or, pending the ratification of such Mandate, in accordance with the provisions of Article 22. On the contrary, I regard it as the duty of the Council to see that the terms of Mandates and the provisions of Article 22 are duly observed, and for that reason a clause has been inserted in all the Draft Mandates that the Mandatory Power is to make an annual Report to the League of the way in which it administers the Mandated territory. The Council of the League is thus placed in a position to take cognisance of anything improperly done.

But it is one thing to say that the Council of the League has this duty of supervision and this right of intervention in case anything is done amiss, and quite another to say that nothing can be done without its previous approval. The latter contention really is untenable and absurd. It can only have been advanced thoughtlessly. He would be the worst enemy of the League of Nations who would impose upon the Council of the League such an impossible task as that which these incessant references would involve. Therefore, so far as the League of Nations is concerned, we may make our minds quite easy about this Agreement, unless some question is raised about it in the Council. My own belief is that no objection is ever likely to be raised against it before that Council, and I am quite certain that if such an objection were raised it could not be sustained.

It has been contended—and this is the third mistake into which some of the critics of the Bill have fallen—that the Agreement is not consistent with that sentence of Article 22 of the Covenant which provides that the Mandatory must be responsible for the administration of a territory under conditions which will secure equal opportunities for the trade and commerce of other Members of the League. The answer to that is twofold. In the first place, I say that there is nothing inconsistent with this principle in what has been done about the Nauru phosphates. A private company was owner of the phosphates, and it was free to make any arrangement it liked for the disposal of them. It was free to sell them to anybody it pleased. It has sold them to the Governments of Great Britain, Australia and New Zealand, who have acquired them with the primary object of supplying phosphates to their agriculturists at cost price. Any private syndicate might have bought these phosphates from the company, and disposed of them for its own purposes, without infringing in any way the provision about equal opportunities to the trade and commerce of the members of the League. In what way is the principle affected by the fact that the purchaser is not a private syndicate, but a Government?

But in the next place I say—and this is really quite conclusive—that the particular provision of Article 22 of the Covenant which I have quoted applies to some mandated territories but does not apply to others, and that among those territories to which it clearly does not apply is the Island of Nauru. To attempt so to apply it would be to run counter to the provisions of the Covenant and to upset that portion of the Peace Treaty, as it would also be to fly in the face of the distinct understanding which Article 22 was expressly provided to implement. Without that understanding there are a number of signatories of the Covenant who would never have agreed to sign it. I think this is all that it is necessary for me to say on this occasion. The object for which the Agreement has been framed— to assure an adequate supply of a necessary fertiliser to the agriculturists of the countries concerned at cost price, thus eliminating the element of private profit by which that price might be greatly enhanced—is an object in itself so laudable that I do not think your Lordships will wish me to expatiate upon it, nor has it, as far as I know, been seriously called in question anywhere. I beg to move.

Moved, That the Bill be now read 2a.— (Viscount Milner.)


My Lords, the state of the House does not precisely invite extended debate either on this or on any other subject, but as this matter aroused no little interest in another place, and as the noble Viscount has thought it right to make a careful and full defence of the Government's action on one side of the question, it is right that a few comments should proceed from this bench. There are, of course, two quite distinct questions with which this Bill is concerned. His Majesty's Government has entered into an arrangement, in concert with Australia and New Zealand, for the purchase of certain rights and interests of a private company, and the first question, therefore, is whether the bargain, from a financial and from a national and Imperial point of view, is a good one in itself. The second, and quite distinct, question to which the noble Viscount devoted, I think, practically the whole of his speech, is whether this purchase, or the terms of the Schedule to this Bill, infringe, either in letter or in spirit, the Covenant of the. League Of Nations.

I should like to say a word, first, about the bargain itself, altogether apart from the League of Nations. What happens is that the sum of £3,500,000 sterling is paid to buy out this company, which has been working the phosphates on this Pacific island of Nauru, on the terms that of the future product 42 per cent. shall be sent to this country, 42 percent. will go to Australia, and the balance of 16 per cent. to New Zealand. It is expected that from 400 to 500 tons of phosphate will be produced, and it is to go at cost price to each Government. That is to say, the c.i.f. price will be ascertained at British ports, and the only condition made is that all the product which is purchased in this country, and in the other countries, shall be used there and not employed for reexport; but supposing there to be more than any of the three countries require for their own use, the surplus may be sold to other countries, not at cost price but at, the world price for this particularly high-class and expensive guano.

There is one point on which I should be glad to have some information from the noble Viscount. It is evident that this phosphate, which is of a high class, will be in great request in this country, but it would arrive here in the form of phosphate rock, which is not, as we all know, used by agriculturists in its crude form. It will be, I take it, sold to a chemical manufacturer who will treat it with sulphuric acid in the well-known way of Sir John Lawes's great discovery, and will turn it into superphosphate which will be bought by agriculturists. It will be sold at cost price to the chemical manure merchant. He, therefore, will presumably get it more cheaply than he would get phosphate of a similar grade from other parts of the world. Even thus, in view of the distance it has to come, it may not be quite so cheap as a lower-grade phosphate received from North Africa or from Florida, whence considerable consignments of phosphate rock reach this country; but it would be sold more cheaply to the chemical manufacturer than phosphate of a similar grade on which profit had to be earned by some company.

What I want to know is this. There can be only one price in the country for superphosphate according to its grade; and how will the farmer profit if the chemical manufacturer takes, as he would apparently be entitled to take, the difference of price to him in view of its being Government rock and not rock imported by a trading company? I hope the noble Viscount sees my point; because, unless the price is controlled until the manure reaches the agriculturists, the advantage (whatever it may be) owing to the fact that the Government make no profit, must surely be intercepted by the middleman, and, therefore, the agriculturist, as I am at present advised, will not obtain the advantage which has been held out as an attraction for him. I am assuming, of course, that the phosphate rock reaches this country at a price at which it can compete with other phosphate rock and also with other phosphatic manures.

It is sure to be in great request, because the other main phosphatic manure which is used by agriculturists in this country is basic slag. Basic slag has fallen into a certain disrepute of late years, because, owing to changes in the process of steel manufacture, the slag which is now sold has a much lower phosphatic content than slag had in the old days when the Bessemer process was more widely used than it is now. Therefore superphosphate is, and will continue to be, in more and more request. But, as I have pointed out, I am not quite sure how this arrangement will enure to the benefit of the farmer unless the step is taken which, in itself, will not be favourably received by the agricultural community—namely, that of keeping on a controlled price for this manure until the time when the bags containing it arrive at the farm of the man who is going to apply it to his land.

One word on the other side of the question—that is to say, of the infringement, as I stated, of the spirit or letter of the Covenant of the League of Nations. Article 22, as the noble Viscountpointed out, contains a sentence (which he read) that equal opportunities will be secured for the trade and commerce of other Members of the League; but the noble Viscount said that this Article is not applicable to all Mandates, and was not applicable to this particular one relating to the Island of Nauru. If that be so, I confess that I do not see much purpose in applying a Mandate to this particular conquest at all. How do the circumstances of Nauru, as it is, differ from what they would have been before the League of Nations or Mandates were invented, when we should have captured Nauru as spoil of war, kept it, and used it in any way we pleased? What is the use of bringing in the League of Nations at all for a transaction of this kind? It might be said that it would operate for the protection of the natives of the Island—an admirable race of people, but small in numbers. No one believes that under the British flag they are likely to be driven into slavery, or anything of that kind; and it appears to me that unless this proposition of the open door is to be applied to the commerce of this particular Island the introduction of the League of Nations into the business at all becomes somewhat nugatory.

I think it may be assumed as regards the statesmen, or some of them, who were responsible for this particular transaction, that, so far as Mr. Hughes is concerned, his principal object was to secure the supply of a sufficient proportion of this guano for Australia. He was also, I am sure, keen that what Australia did not want should be available for Great Britain. But I have little doubt that one of the paramount considerations in his mind was that in no circumstances should any of this stuff go to Germany. That being so, the arrangement, as carried out, practically makes it impossible that any should. It is equally impossible that any should go to France, or to our other Allies, which perhaps is in itself a misfortune, even if the noble Viscount is right in his argument that Article 22 of the Covenant is not technically infringed by this arrangement, the example set by capturing and retaining the whole of a product of this kind of a remote part of the world is one which is liable to be used against us when the whole operations of the League of Nations come to be considered by other Powers, who may, be, in some senses, our rivals.

I cannot help thinking that if, for instance, a great deposit of some valuable mineral, or gold were discovered in German East Africa, or such a soda lake as was discovered in British East Africa, we should not look well if we insisted upon a monopoly of such a product for our own purposes, or even if we joined up with South Africa in taking charge of it. Perhaps the noble Viscount will tell me that those cases are not on all fours, because, as a matter of fact, no private company already exists, and therefore we should be starting ab initio, instead of taking over the concern of a private company. But still the Nauru company did in former days sell its wares to other countries besides ourselves, and we are, as a matter of fact, creating a monopoly out of what was not, so far as I can understand, in any sense a monopoly before. For these reasons I cannot help regretting the action of His Majesty's Government in this matter, and even the closely reasoned defence of the noble Viscount does not, I confess, make me consider that the transaction is itself altogether a wise one.


My Lords, I am not enamoured of unnecessary schemes of Government control and management, even of phosphates in Pacific islands, and I see no reason for supposing that three Governments will manage a business enterprise any better than one. Article 13 in the Schedule is rather curious. It says- There shall be no interference by any of the three Governments with the direction, management, or control of the business of working, shipping, or selling the phosphates, and each of the three Governments binds itself not to do or to permit any act or thing contrary to or inconsistent with the terms and purposes of this Agreement. If a business is to be nationalised I really prefer the plan set up by Article 13 to any plan which would leave this business under the immediate control of a Minister who is dependent upon Parliament. This particular proposal is, I suppose, founded on Australian experience of the evils of nationalised business which is dependent on a Minister responsible to Parliament.

But, in connection with this Article, there arises this question of the manufacturers here, which was dealt with by my noble friend, Lord Crewe. Supposing there is an advantage in purchasing these phosphates to make into super-phosphate and supposing the super-phosphate can be produced from these phosphates at a lower price than it can be produced from the raw material imported from other countries, who is going to get the benefit, and how are the manufacturers to be selected who are to have the phosphates sent to them? Whenever you have Government business, particularly in controlled articles at prices which are below the regular market price, there is always this difficulty in determining who is to benefit. I should like to know very much what the Government intend to do. Are the Government going to sell the rock phosphates here by auction, so that everybody may have the same chance, or are they going to sell to particular manufacturers who are going to benefit by them? I shall be glad, when the noble Viscount replies, if he will answer that question.

These, however, are details, and I want to deal with the essential point of whether or not this Agreement is really in accordance with the letter and spirit of Article 22 of the Covenant of the League of Nations. The noble Viscount pointed out that it was not only not improper to deal with Nauru, but it was necessary to deal with it under the Mandate already given. But that does not decide the question of whether the method of dealing with it is really in accordance with what was meant by Article 22 of the Covenant of the League of Nations. I would venture, with the greatest possible respect, to say to the noble Viscount that his analogy of a private firm really has no force in it. No private firm is a party to the League of Nations. This is a question of three Governments, who are parties to the League of Nations, buying from a particular firm, and their position, I think, is altogether different from that of a private firm.

With regard to the actual substance of the matter, the noble Viscount argued that the words in paragraph 5 of Article 22 are not applicable to this island in the Pacific. There is another paragraph, dealing with territories such as South-West Africa and certain of the Pacific Islands, which I will read— There are territories, such as South-West Africa and certain South Pacific Islands, which, owing to the sparseness of the population, or their small size, or their remoteness from the centres of civilisation, or their geographical Contiguity to the territory of the Mandatory, and other circumstances, can be best administered under the laws of the Mandatory as integral portions of its territory, subject to the safeguards above mentioned in the interests of the indigenous population. The question I want to put to the noble Viscount is, What are the safeguards above mentioned? As a mere layman, with no pretence to any legal knowledge or to having an opinion which is worth anything upon any legal question, I should have thought that those safeguards are the safeguards at the end of paragraph 4, one of which he read—"Will also secure equal opportunities for the trade and commerce of other Members of the League."

This Bill is a precedent, I believe, in one way; that is, I do not think that ever before the products of a part of the Empire have been allotted on preferential terms to certain parts of the Empire to the exclusion of the rest. Why are Canada and South Africa and India, all producers of wheat, debarred from this? That seems to me to be a new and most undesirable development in our policy. And on the broader question of the treatment of other Members of the League of Nations, I venture to say, although I know the noble Viscount will not agree with me here, that it is against public policy that we, who alone kept the open door in the past in Colonial trade, and, as I think, greatly profited by doing so, should now, before the League of Nations have settled the lines on which they are likely to interpret these Mandates, give a lead in shutting out not only most of our own Empire but all foreign countries from participation in the produce of Nauru Island. In spite of what the noble Viscount said, it is hardly fair to the League of Nations to carry a law, of which this Agreement is part, on questions on which, I think, they ought first to have adjudicated.

As my noble friend opposite said, it is a most unwise precedent to France, Italy, Portugal, Holland and Japan, in regard to old and new colonies of theirs. It must enhance the feeling, far too widely prevalent, that we mean to make what we can out of this war to compensate for the vast expenditure and losses incurred. That is a feeling with which I am sure it is unjust to charge the people of this country as a whole. But instances like this make it perfectly impossible to argue with a foreigner, in a way which will convince him, that we are not guilty of doing all that is possible to make what we can against the losses which we have incurred in this war. It destroys the system of the open door on which, for over half a century, we have conducted our Colonial system. I venture, with the greatest possible respect, to say that it seems to me to be a retrograde step, and, although I am sorry to have detained your Lordships these few minutes, I felt bound to raise my voice against it.


I do not wish to detain your Lordships for more than a minute, but there are one or two points made by previous speakers, to which I think it would be almost discourteous of me not to say a word in reply. There was the very interesting point raised by the noble Marquess opposite, with reference to the question of the advantage which would result to our agriculturists from this Agreement. He expressed a doubt whether, as a matter of fact, the agriculturists would benefit though the manufacturer of super-phosphates might, in consequence of the arrangements here made, get his raw material at a lower price. I cannot help thinking that, even without any special action being taken by the Government in the matter as between the manufacturer and the agriculturist, the mere fact of obtaining a large quantity of raw phosphate rock in this country at a lower price than it otherwise would be obtained, could not but tend to a reduction in the cost of the finished article. Surely there is competition among the manufacturers of super-phosphates, and, in view of the fact that a considerable portion, at any rate, of the raw material used would be obtainable by them at a lower price, it seems to me to be inevitable that the competition amongst the manufacturers themselves would tend to force down the price of the manufactured article. Nevertheless, I think it is possible that special provisions may have to be made in order to ensure that the actual user of super-phosphates should get the full benefit of what the Government has done to cheapen the cost of the raw material. I believe there is already some communication with the Ministry of Agriculture with regard to the question of the steps which ought to be taken to give the agriculturist the maximum benefit which he can derive from the fact that there will be this supply of raw material at a regulated price.

The other point which the noble Marquess raised, which was enforced by a speech of the noble Lord, Lord Emmott, was the old point and, in my opinion, certainly the most important one, as to whether this Agreement is contrary to the terms or the spirit of the League of Nations. The noble Marquess argued that it might possibly not be contrary to the actual terms of Article 22 of the Covenant, and that my defence on that point was a technicality. I beg most strongly to say on that point that it was not a technicality. Nor would the noble Marquess for one moment. have assumed that it was a technicality if he had been as familiar as I am with the reasons why Article 22 was drafted as it was drafted. The fact is that when it came to the question of the 'disposal of the ex-German colonies, there was very strong opposition on the part of Australia, New Zealand, and South Africa to these territories which were going in their immediate neighbourhood, contiguous to them, which they had looked forward to 'obtaining, being mandated territories at all. They showed very good reasons indeed why these territories should be simply incorporated with the contiguous British colonies. Practically everybody would have agreed to that, I believe, had it not been that the Allied Powers had repeatedly insisted on the fact that they were justified in taking these territories away from Germany because of the manner in which, under German colonial administration, the natives were treated. To that the representatives of the Colonies of South Africa, Australia and New Zealand replied: "Well, if that is all you mean, if your only anxiety in the matter is that the treatment of the natives should be according to the highest civilised standard, then we are quite willing to accept a Mandate for that purpose, the terms and conditions of which should be limited to the protection of the natives." There is no technicality in it.

These Pacific Islands and South West Africa were deliberately handed over to their Mandatories with the provisions of the Article drawn in such a way as to make it clear that they would have no limitations on their soverignty except the particular limitation of the protection of the natives. The question would never have arisen at all under this Agreement if it had not been for the fact that among the territories which were to be handed over, under the simplest form of Mandate with the fewest binding conditions, there happened to be one small island about which there was a difference between Australia and New Zealand as to which of the two should be the Mandatory. Out of that, and mainly in order to act as a mediator between Australia and New Zealand, Great Britain came into the matter as a third party, and the Mandate, nominally given to the British Empire, was really intended from the first to be a Mandate to these three Powers, which happened to be those portions of the British Empire which alone can be said to be contiguous to this small island, and which almost exclusively at present—nobody can say what may arise in the future—are interested in this trade. These three British States were partners in this particular Mandate, and in that respect it is singular and stands alone among all the Mandates conferred by the principal Allied and Associated Powers. They are partners in it; but they are partners under the conditions laid down, and deliberately laid down, not as a technicality but as expressing the well-considered intentions of the Peace Conference with regard to all the ex-German colonies in the Pacific and South West Africa.

On Question, Bill read 2a, and committed to a Committee of the Whole House.