HL Deb 30 March 1938 vol 108 cc533-40

LORD NEWTON asked if his Majesty's Government propose to take any action in connection with the reported decision of the Mexican Government to expropriate British oil properties. The noble Lord said: My Lords, in putting this Question I am of course aware that it has been put in another place, but I think it possible that my noble friend may welcome an opportunity to make a fuller statement on the point. Although it is customary to make abject apologies for speaking at such an hour, I do not think it would be out of place if in a few words I explained what the situation is. Anybody knows that for many years past there has been serious labour trouble in the Mexican oilfields, although the workers are paid 50 per cent. more than the workers in any other industry. These disputes reached a crisis last year, and the result was that it was agreed to appoint what was termed, I think, a Labour Control Commission which was to issue an award. The award was delivered, I think, last December, and I cannot characterise it as other than a purely fantastic one.

The amount was not calculated upon the statements of the companies but it represented what this Committee thought the companies were able to pay, and the sum they arrived at was so stupendous that the companies would have had no profits at all had they paid it and would have become bankrupt. I should also add that the concessions which were forced upon them in favour of the employees were much greater than those that exist in the most highly developed industrial States. I would like to draw special attention to this, that these onerous conditions were not imposed upon any Government undertaking. Government undertakings were exempt from anything of the kind. The companies naturally being staggered with this demand, applied to the Supreme Court for an injunction, but, surprising to say, the Supreme Court refused the injunction, stating that matters of profit and loss were of no concern to them at all, although the whole dispute related to profits. That being so, the companies rejected the award, and on the 18th March the properties worth £80,000,000, divided between the English and American companies, became the property of the Mexican Government. I should like also to point out that there was no question of labourism or humanity in connection with this movement, because it has been explained by the Mexican Government that the workers in future will be much worse off than they were before and that in all probability their wages will be lowered.

There is only one thing that surprises me in connection with this matter and that is the statement made by the American Minister, Mr. Daniel, that the action of the Mexican Government came so to speak as a bombshell, that nobody had expected anything of the kind. I do not profess to be more farseeing or perspicacious than anyone else, but when I was in Mexico a year ago, I had not been there twenty-four hours before I resolved to sacrifice my holdings, which, fortunately, were of a modest description, at once, and I congratulate myself that I did so. I do not think that people here have ever grasped the real facts with regard to Mexico. Mexico is now a semi-Bolshevist State, although, curiously enough, it is on very bad terms with the Moscow Government, and I do not think either State is diplomatically represented in the other. But their practices are very much the same, and there has been an increasing disposition in Mexico, which cannot be ignored, to confiscate private property during the last few years. In fact, the country is passing through a sort of social revolution which is no doubt a reaction from the autocratic government of President Porfirio Diaz, who left the country, I think, in 1911. Ever since then the legislation has become more and more advanced, and continuous statements have been made by public men; one was recently made by the Under-Secretary for Foreign Affairs that he looked forward to the day when all foreign capital would be eliminated from the country.

It would be a great mistake to suppose that this action of confiscating the property of the oil companies is an isolated transaction. It is nothing of the kind; it is all part of the system which I have endeavoured to describe, which consists in apparently legally appropriating private property. Perhaps if you are going to be robbed it is more pleasant to be robbed in a legal way than that it should be done at the muzzle of a gun or the point of a bayonet, but the results are exactly the same in the long run, and if the Mexican Government continue their present policy private property will practically disappear. I would also point out that the statement which I observe was made by the Minister who replied for the Government in another place is of a somewhat misleading character. He said he desired to draw particular attention to the fact that this act of expropriation applied only to oil and was not going to be applied to anything else. That is a statement made by President Cardenas. I do not wish to asperse President Cardenas or anyone else. I believe him to be a genuine philanthropist of a somewhat unpractical nature, but his statements vary considerably, because a short time ago he was informing his countrymen that foreign capital was a great benefit to them and that it would be a great mistake to get rid of it.

One may well ask oneself why the oil companies should be attacked at all. They have been an enormous benefit to the country; they have created a great portion of the wealth of the country, and the people they employ are better treated than anybody else. I suppose that the mere facts that they are rich and that they are also foreign constitute an irresistible reason for attacking them. But, as I said before, it is a great mistake to suppose that confiscation is going to stop at oil. Every Government is entitled to produce what legislation it likes, and the foundation of much of the trouble at the present day is a law which was passed in 1936 under which the Government is authorised to expropriate private property whenever it is done for the purpose of the better distribution of wealth. That covers everything. It does not apply to oil only but to everything you can think of. For that reason I think the statement made in another place rather of a misleading nature.

The question is, what are we going to do about it? I am afraid that the chances of successful action upon our part are somewhat doubtful, but what I do feel very strongly is that if we are going to make any stand at all we ought to make it in conjunction with the Americans who are affected in precisely the same way and who are in a much better position to put pressure on the Mexican Government than we are. Unfortunately, in spite of the effusive protestations of love and friendship which are given vent to at Pilgrims' dinners and similar gatherings, the American Government have never shown particular zeal to work in conjunction with the British Government for a good many years past. I hope this particular case may be an exception, and I go so far as to say that I should be inclined to think that unless we can secure co-operation with the Americans, or unless we follow their example, whether they are acting with us or not, the chance of our doing any good is very remote.

Every country is entitled to its own legislation and nobody has the right to interfere so long as that legislation, injurious as it may be, is only applied to the subjects of that country. But when it comes to a question of foreign subjects being unfairly treated or being discriminated against, then it is the duty of their Government to stand by them and do what they can for them. I say again, that now is an occasion upon which something has got to be done. I hope the noble Earl will reassure me upon this point, and when he is answering me perhaps at the same time he will tell me what is being done in connection with the employees of the two companies, who must be in a very distressed state at the present moment.


My Lords, I am very glad that the noble Lord has asked this Question, and I hope that the reply of the noble Earl will be that the Government are going to take a very strong line, because the Mexican position is having a very bad effect upon oilfields in neighbouring countries, in Venezuela and in Trinidad. If it should get about that the British Government are weak and are not going to stand by the rights of their investors in overseas industries it will encourage the natives to take action. I may say that whereas in Trinidad we had hoped to co-operate and carry out the recommendations of the recent Commission, the natives have already delayed action and are conferring with a view to taking strike action, to seize the oilfields and follow what has happened in Mexico. Therefore I hope we shall take a strong line. We draw from Mexico 176,000,000 gallons of oil a year, which represents 6 per cent. of our requirements in this country. If by unfortunate weakness we lose that supply, where are we going to get that oil from? Over and over again I have tried to emphasize in your Lordships' House that it is one thing for us to put our whole trust for the defence of the country in imported oil and another thing to be quite sure of those supplies. So I hope that the noble Earl will say that we are going to take a strong line.


My Lords, I rise only to support in as few words as possible what has fallen from my noble friend and from the noble Duke opposite. It is in my estimation quite impossible to exaggerate the seriousness of the situation so eloquently described by my noble friend and the noble Duke opposite or the implications arising therefrom. It seems to me that it is an illustration of the obvious fact that financial control and physical control are two completely different propositions. What guarantee have we, after what has just happened in Mexico, that the same thing is not going to happen in other parts of the world? One wonders, a little grimly perhaps, whether this Mexican incident may administer a slight jolt to the Government's apparent complacency regarding the security of our oil supplies in war time. I will not detain your Lordships by attempting to develop this argument any further. Any further development can be left to the debate next week in your Lordships' House on oil supplies and the findings of the Falmouth Committee. I only wish now to associate myself wholeheartedly with what has been said by my noble friend and by the noble Duke opposite.


My Lords, I need hardly assure your Lordships that His Majesty's Government are fully alive to the seriousness of the position which has arisen in regard to this matter. In answering the noble Lord who put this Question, I think it might be helpful if I were to explain in somewhat greater detail the circumstances which have led up to the present position. The British oil properties affected by the Expropriation Decree of the 18th March of the Mexican Government are those of the Mexican Eagle Oil Company, a Mexican registered company of which the capital is almost entirely in British hands. This company has operated a number of concessions covering in recent years some 65 per cent. of the oil production of Mexico; together with various American owned companies whose interests covered approximately 30 per cent. of Mexico's oil production, it involved a foreign investment in the Mexican oil industry representing many millions of pounds.

The decision of the Mexican Government to expropriate these properties has occurred in the following circumstances: Following prolonged discussions between the oil companies and the Workers Syndicate regarding a standard collective contract put forward in November, 1936, by the Syndicate, a strike took place in the oilfields on May 17, 1937. In the following month the Syndicate filed an economic suit, which included some claims, which can only be described—as the noble Lord has already described them—as fantastic, against the companies before the Federal Board of Conciliation and Arbitration, who appointed three experts to examine the workers' claims. In their report, which was completed on August 3, the experts alleged that the companies had misrepresented their profits. They declared that the financial situation of the companies justified their acceding to the demands of the workers for increased wages and other benefits up to an annual total of 26,000,000 pesos. The findings of the experts also included a number of proposals for changes in the administration of the oilfields, which the companies claimed would make it virtually impossible for them to control the running of the industry. These proposals included the replacement of all foreign technical staff within three years.

On August 19 the hearing of the economic suit opened before Section 7 of the Federal Board of Conciliation and Arbitration whose verdict, published on December 18, proved to be even more unacceptable to the companies than the findings of the experts, which it substantially endorsed. The Board ordered an additional annual amount to be distributed to the Syndicate, which it had estimated, like the experts, at 26,000,000 pesos a year, but which the companies claimed would in practice amount to over 40,000,000 pesos on the basis of the detailed recommendations contained in the verdict. The Board also imposed retroactive payments, which the companies estimated would increase their liabilities in 1938 by an amount exceeding 65,000,000 pesos, or about equal to the whole of their profits in the past three years. The companies consequently appealed to the Mexican Supreme Court on December 28 for a stay of execution. At the same time they proceeded to conduct negotiations with the Syndicate and the Labour Board with the object of arriving at a solution by amicable discussion. These endeavours failed, and on March 1 the Supreme Court, who had declined to examine the financial capacity of the industry, rejected the appeal of the companies and ordered them to comply with the award. There followed a brief period during which it at times appeared possible that an eleventh-hour compromise might be achieved. Indeed, as late as March 17 the Labour Board announced that the execution of the Supreme Court's verdict would be postponed for a further five days. This announcement was subsequently withdrawn, and a decree of expropriation was published on March 18.

Throughout the various phases of the dispute His Majesty's Government, who refrained from intervening with the Mexican Government so long as the case was sub judice, have maintained the closest contact with the management of the Mexican Eagle Company, whilst His Majesty's Minister in Mexico City has been in constant touch with the companies' local managers. Following upon the announcement of the Supreme Court's verdict, His Majesty's Minister at Mexico City officially drew the attention of the Mexican Government to the profound anxiety of His Majesty's Government at its probable consequences to the interests alike of the British shareholders and of all the company's employees. He also expressed the hope that means would still be found to reach a settlement both satisfactory to the Mexican Government and equitable to all the interests concerned. He also personally interviewed the Mexican President on the subject. It is highly regrettable that these representations should have proved of no avail and that, notwithstanding the untiring efforts of the companies to find a compromise solution, the Mexican Government should have chosen the course of expropriation. Following upon the publication of the expropriation decree, His Majesty's Government informed the Mexican Government that they formally reserved their rights. The resulting situation is being carefully examined with a view to deciding what steps can most appropriately be taken to safeguard the interests of the British shareholders involved.

In addition, His Majesty's Government have been in contact with the United States Government on the matter. I am afraid, however, that at the moment I am not able to say anything more. Your Lordships will no doubt have seen a report which is published in this evening's newspapers to the effect that the United States Government have sent a stern note to the Mexican Government in connection with this matter. I am, as a matter of fact, unable to confirm that officially, but I assure your Lordships that, as I say, His Majesty's Government have been in contact with the United States Government in connection with the matter. The noble Lord asked me whether I could give him any information as to the fate of the employees of this company. I am in a position to tell him that they and their families have been evacuated and that the company involved is looking after their interests and, indeed, making provision for them for the time being. I am afraid that I am unable to say more than that at the moment, but I can assure your Lordships that His Majesty's Government will take careful note of the views that have been expressed here this evening and that they intend to follow up the matter as closely as possible.

House adjourned at a quarter past seven o'clock.