Lords Sitting of 27 March 1939

Preamble
The House met at a quarter past four of the clock, The LORD CHANCELLOR on the Woolsack.
LONDON COUNTY COUNCIL (GENERAL POWERS) BILL. [H.L.]
Report from the Select Committee, That the Committee had not proceeded with the consideration of the Bill, the opposition thereto having been withdrawn; Read, and ordered to lie on the Table. The orders made on the 21st of February last and the 2nd instant discharged, and Bill committed.

BUSINESS OF THE HOUSE.
THE FIRST LORD OF THE ADMIRALTY (EARL STANHOPE): My Lords, I beg to move the Motion that stands in my name.
Moved, That Standing Order No. XXXIX be considered in order to its being suspended until the House do adjourn for the Recess at Easter.—(Earl Stanhope.)
On Question, Motion agreed to: Standing Order No. XXXIX suspended accordingly.

CANCER BILL.
Read 3a (according to Order), with the Amendment, and passed, and returned to the Commons.

CZECHO-SLOVAKIA (RESTRICTIONS ON BANKING ACCOUNTS, ETC.) BILL.
Order of the Day for the Second Reading read.
LORD TEMPLEMORE: My Lords, the circumstances which gave rise to this Bill will be familiar to your Lordships. Czecho-Slovakia had various financial obligations to this country and possessed certain financial assets in this country, and until it might be possible to make arrangements for meeting the obligations it seemed proper to His Majesty's Government that a temporary embargo should be placed on the assets. My right honourable friend the Chancellor of the Ex-

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chequer accordingly approached the Bank of England, the joint stock banks and other financial institutions, and requested them to block Czecho-Slovak accounts, gold and securities. Although the action for which the Government asked was taken promptly and efficiently, statutory authority is needed in order to validate that action and to render the position of banks and financial institutions unchallengeable. That is the purpose of this Bill—to put this restriction on a statutory basis, to validate the action taken in compliance with the Chancellor's request before the Bill passes into law, and to indemnify any person in the event of his suffering any loss or damage as the result of his compliance with the Chancellor's request or the provisions of the Act.
The Bill consists of two clauses, the only operative clause being Clause 1. The first subsection provides for the temporary blocking of banking accounts, gold and securities in this country which were owned on March 15 by the Czecho-Slovak Government or any persons ordinarily resident in Czecho-Slovakia on that date, or any body corporate incorporated under the law of Czecho-Slovakia. It will continue in force until the Treasury issues an order that it shall cease to have effect. Subsection (2) provides that where, on or after March 15, any person has refused or failed to do any act which he could not lawfully have done if the Bill had passed into law, his refusal or failure shall be deemed to have been lawful. This subsection will validate the action taken by banks in conformity with the Chancellor's request. Subsection (3) provides for the indemnification of banks and other persons for any loss or damage they may have suffered as the result of complying with the Chancellor's request or with the terms of the Bill after it is passed into law. The fourth subsection provides that any sums payable by way of indemnification shall be charged on the Consolidated Fund, and the fifth subsection enacts that a quarterly return of sums so paid shall be laid before Parliament. Your Lordships will observe that the Treasury have authority to waive the embargo in cases where it sees fit, and this authority will be so employed as to avoid the infliction of any injustice or damage to interests in this country.
There are one or two details about which I think your Lordships may wish to have a few words of further explanation.
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Part of the resources of the National Bank of Czecho-Slovakia held in London consisted of the balance of the £10,000,000 advanced to Czecho-Slovakia under the Czecho-Slovakia (Financial Assistance) Act, passed the other day. Of this sum about £6,750,000 remains undrawn. This £6,750,000 is composed, in part, of £3,250,000, being the balance of our free gift of £4,000,000 to Czecho-Slovakia, and in part of the balance of the other amount which was regarded as a loan and which the Czecho-Slovak Government had undertaken to repay. That part of the money still undrawn, which represents part of the loan, is a debt due to His Majesty's Government, and it therefore seems proper to suspend all payments from that account.
The House will also observe that the criterion for the application of the embargo is residence and not nationality. Thus, although the assets of persons ordinarily resident in Czecho-Slovakia are blocked, there is nothing to prevent a Czech resident in this country from drawing on his bank balance in the normal way, or a national who was not ordinarily resident in Czecho-Slovakia on March 15 from drawing on his bank balance in that way. Refugees who were ordinarily resident in Czecho-Slovakia on March 15 and since then have been able to come to this country do fall within the scope of the Bill; but it has already been announced that His Majesty's Government have no desire to prevent refugees in this country from operating their bank accounts, and the Treasury will consider all such cases with the utmost sympathy. I beg to move that the Bill be now read a second time.
Moved, That the Bill be now read 2a.—(Lord Templemore.)
LORD STRABOLGI: My Lords, this Bill is a very important one, as I am sure the noble Lord who has introduced it recognises, and I have been asked by my noble friends to say a few words about it. The position of course is that His Majesty's Government have not recognised the annexation of Czecho-Slovakia and we do not, amongst other measures, propose to pay out the assets held in this country on account of the Czecho-Slovak Government or other persons or corporations in Czecho-Slovakia. Now I want to make it clear at once that we as a Party supported this Bill in the other

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House and we offer no opposition to it here, but it raises certain matters of principle and also certain details that I will venture to put to the Government, and perhaps they will be good enough to give me such answer as they are in a position to give.
I am sorry that, in a way, there is loss of Parliamentary control in that the next initiative lies with the Treasury. I think it would have been better if the Treasury, having had to come to Parliament for an indemnity for those who made illegal orders—I am using the word in no obnoxious sense at all; they had to act quickly and that is appreciated—it would have been better, I repeat, if the Treasury had had to come to Parliament to repeal the Bill, if so desired later on. I do not want to make a great deal of that because the circumstances are unusual and I hope they will be unusual in the future.
The other matters I venture to raise are as follows—and they are all germane to the substance of this Bill. Under the Bill we do put an embargo on certain property and gold in this country which the heirs of the Czecho-Slovaka Government might choose to claim. The first question I would like to ask the noble Lord is this. Have we any information about the intention of the Reich Government with regard to the external loans to Czecho-Slovakia? In perfectly good faith the Czecho-Slovak Government raised loans on London and other money markets. Are these to be cancelled? Or is responsibility for them to be assumed and, if not, do we propose to take any reprisals if they are repudiated? If these loans are repudiated it will be simply a matter of one more act of robbery affecting British nationals who purchased these bonds and script in perfectly good faith; and we can, if we wish, take very serious reprisals.
As your Lordships are well aware, the economic situation of Germany is vulnerable and if we are to have more of this kind of robbery affecting our own nationals, I suggest that it is the duty of His Majesty's Government to take reprisals. In connection with this matter I am going to venture to suggest to your Lordships that a policy of pinpricks will be useless. This is not a pinprick. This is a necessity. I do not criticise the Bill.
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If we are to do this thing properly, if we are going to use economic means to bring justice to our own nationals, then I suggest it will have to be done in a complete manner. In this connection I think we ought to have, as soon as possible—I do not press for it this afternoon, but I think it is due to British business and industry—a statement from the Government, one way or the other, as to what their trade policy with regard to Germany is going to be in the future.
On that I venture to make a very few observations. There are plenty of reasons why we should continue to trade with Germany. My Party have always, as a matter of principle, advocated trade with all countries irrespective of the form of government which rules them. We pressed for years for trade with Russia and we consider that a great mistake was made in not opening the channels of trade with Russia much sooner. On the other hand, we have plenty of reasons now not to encourage British trade with Germany. The Federation of British Industries conducted a mission to Germany and made a tentative trade agreement with the corresponding body in Germany. I do not want to express any opinion about that. In certain circumstances apparently, they were going to combine with German industrialists in regard to trade in foreign markets. That may have been a good agreement or it may have been a bad agreement. It has now been held up or abandoned. A trade mission which was to have gone to Berlin, we are told, is no longer to be sent. What I suggest is that further guidance is required. Is it the policy of the British Government to encourage trade with Germany or do they propose to follow the example of the United States of America, which very promptly—just as promptly as the British Government have acted on this occasion—used their tariff powers practically to stop all trade coming into the United States from German factories?
I cannot refrain from reminding your Lordships that when the Russian Government some years ago arrested and brought to trial certain British subjects who were connected with the Vickers engineering concern, we promptly broke off all economic relations and, I think I am right in saying, diplomatic relations as well. The thing was done whole-heartedly and although I did not on that occasion agree with it, I could understand

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it. I could understand it now if we decided not to encourage any economic relations with Germany; but we ought to know the policy of His Majesty's Government, and we ought to know soon. I suggest that it is only fair to our own nationals, whose business it is to keep their workpeople in employment and encourage trade.
In this connection may I ask the noble Lord—I ventured to give notice to the Treasury that I intended to raise this matter—whether it is a fact that British firms owning banking accounts and other assets in the part of Czecho-Slovakia known as Sudetenland have so far been unable even to secure an application of the Anglo-German Payment Agreements of 1934 and 1938 to these claims? Is it true that six months after the invasion—or the occupation by agreement—of Sudetenland this property of British nationals is still blocked and held? Following on that, have the Government information of the amounts due to British merchants from firms in the rest of Czecho-Slovakia, the part just invaded? Is there to be some clearing house arrangement? I have read the report of the debate in another place and I understand that help will still be given to Czecho-Slovakian refugees—which I am very glad to know is to be given—and that original creditors will be entitled to recompense from these funds which are now blocked. Will there be some clearing house arrangement to enable British merchants who have perfectly good debts, which they cannot recover in the ordinary way, to be compensated? The next question I want to ask is what is going to happen in regard to Czecho-Slovak Governrnent bonds held outside this country? Are they going to be unloaded on to the London Stock Exchange? Is there going to be any embargo against that sort of transaction?
Reverting for a moment to the general principles which affect this Bill, I think Czecho-Slovakia now might be described as a German Colony. It has been annexed. We are picking out this annexed territory and putting an embargo on sums held in this country by firms there. Why pick out this particular territory? In logic I should have thought there was no particular reason. Why, in other words, should we encourage banking, insurance and other facilities with Germany as a whole as things are to-day? The Ger-
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mans have obviously no sort of inhibition on their side. I observe that they are anxious to trade with anyone and everyone. They trade with Russia, and they trade with Mexico. They buy oil annexed by Mexico or expropriated from British companies. I understand that weapons now arming the Republican forces in Spain came from Germany, and Germany is supplying arms to China. In fact their need for foreign currency is so great that they will trade with anyone. But is that any reason why we should encourage our bankers and insurance brokers and others to do business with Germany?
My next question is whether other countries are taking similar action. Are our good friends the French taking similar action? There may not be Czech banking accounts and deposits in Paris—I do not know—but I should like to know whether the British Dominions or India are affected in the same way. I know that there was considerable trade between the old Czecho-Slovakia and British India, so presumably there would be considerable balances held in Indian banks on behalf of Czecho-Slovak subjects. I hope, too, that if the usual devices are followed of putting Nazi Commissars in charge of Czech businesses, they will not be allowed to come along here and ask for assets held on account of the former owners to be handed over to them. If that is attempted I presume steps will be taken or suggested to prevent it.
Finally, although this is a matter only of principle, and I do not suppose is of great material importance, I should like to ask whether it is proposed to take similar action with regard to Memel. We did a very large amount of trade with Lithuania through Memel and I presume some money is held on account of that. Is it proposed to take action in regard to that money held in this country? The events in Memel, of course, have only happened in the last few days and perhaps the noble Lord may not be in a position to-day to say anything about it. If so I would not press it. But if he can give any information it would be of interest to those engaged in trade with that territory who are likely to suffer injury. Apart from those questions, which I put in a perfectly friendly way, we on this side of the House support this Bill. We are able to congratulate the Government on their prompt action and we hope

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it may be a promise of equally prompt action if other emergencies arise.
LORD TEMPLEMORE: My Lords, I am obliged to the noble Lord for his general support. He has raised a good many questions, and although I do not complain about that I think some of them were rather outside the scope of the Bill—his question, for instance, about whether we are going to trade with Germany, and I am afraid I cannot give an answer to that now. He asked me whether the German Government had assumed responsibility for the Czecho-Slovak internal debt. On that I have to tell him that my information from the Foreign Office is that we have no information on that point yet. He then asked me whether it was a fact that British firms who owned banking accounts and other assets in Czecho-Slovakia last September had been unable to get payment. When the Sudetenland became part of Germany, bank accounts and other assets became subject to the ordinary German exchange control, and therefore to that extent it is true to say that the payment has been restricted.
His next question was whether France and our Dominions had taken similar action to restrict payments out of the Czech accounts. I am informed that the French Minister of Finance has sent a circular to the French banks to ask them to block Czecho-Slovak accounts. No Bill has yet been introduced into the French Parliament and the amounts concerned are said to be very small, but legislation will be introduced if the necessity arises. As regards the Dominions and the Government of India, they have all been informed of the action taken by His Majesty's Government in the United Kingdom, but we have not yet heard whether any of them propose to take similar action.
As regards his last question concerning Memel, that happened such a short time ago that I have to say I cannot give him an answer at this moment. My noble friend the Earl of Plymouth is in his place, but I think I am right in what I say: that we do not know yet what we shall do in that case. In conclusion I may say that we can make no announcement about what we shall do to protect British interests in Czecho-Slovakia until the situation is much clearer. This Bill and the Government action refer, however, only to Czecho-Slovakia and not to our
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trade policy with Germany, which does not arise under this Bill on this occasion. I hope I have answered the points which the noble Lord raised.
LORD STRABOLGI: Before the Question is put, might I ask the noble Lord whether he overlooked the question of the Czecho-Slovak bonds and the possibility of their being unloaded on the London market?
LORD TEMPLEMORE: Yes, I had forgotten to answer that question. I have not been able to obtain an answer to it.
LORD STRABOLGI: It is engaging attention?
LORD TEMPLEMORE: Certainly it is engaging attention, but I have not been able to obtain the information.
On Question, Bill read 2a; Committee negatived.
Then, Standing Order No. XXXIX having been suspended, Bill read 3a, and passed.

CHINA (CURRENCY STABILISA TION) BILL.
Order of the Day for the Second Reading read.
LORD TEMPLEMORE: My Lords, this is another important but very short Bill of two clauses, the purpose of which is to enable the Treasury to give certain guarantees so as to enable two British banks to contribute to a Chinese Currency Stabilisation Fund. The establishment of the Stabilisation Fund is in the interests of China and in the interests of all countries who have close economic and financial relationships with China, and in particular in the interests of this country, whose investments in China have been estimated at some £300,000,000. The arrangements which are proposed in regard to the establishment of the China Currency Stabilisation Fund are explained in the White Paper. It is proposed that the two Chinese Government Banks shall contribute £5,000,000 and that a similar amount shall be put up by two British banks—namely, £3,000,000 by the Hong Kong and Shanghai Banking Corporation and £2,000,000 by the Chartered Bank of India, Australia and China. Each of the British banks will appoint one member to a Committee which is to manage the Fund, two other members will be appointed by the contributory Chinese

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Banks, and the fifth member of the Committee will be a British expert appointed by the Chinese Government in agreement with the Treasury, with the approval of the two British banks.
The Fund so constituted and managed will be used solely for exchange operations—for example, the purchase and sale of Chinese dollars with the object of evening-out fluctuations in the sterling value of the Chinese dollar. For instance, if there is a temporary demand for sterling on the part of holders of Chinese dollars which might otherwise depress the exchange value of the Chinese dollar, the Fund will be able to provide the sterling required. Conversely, if there is a demand for Chinese dollars which might otherwise cause the Chinese dollar to appreciate unduly, the Fund will be able to meet this and so replenish its holdings of sterling. This function of minimising fluctuation is, as will be evident to your Lordships, very similar to that of our own Exchange Equalisation Fund, which buys and sells sterling for gold much as the Chinese Fund will buy and sell Chinese dollars for sterling. I should make it clear that this is the only purpose for which the Fund will be available. It is not available for any other purpose whatever.
The assistance which is proposed to be given by the Treasury to the establishment and maintenance of this Fund consists in two guarantees to the two contributing British banks. First, the Treasury will guarantee to the British banks the interest on their contributions which is payable by the Chinese banks. This guarantee will only come into force if the Chinese banks are unable to make up the amount earned by the sterling portion of the Fund to the amount due to the British banks, at 2¾per cent., on their contributions; and I need not remind the House of China's high reputation for financial integrity. Secondly, the guarantee of capital will only come into force when the Fund is wound up and its assets are distributed among the participating banks in proportion to their respective contributions to the Fund. If at that time the amounts so receivable in sterling by the British banks are more than their original sterling contributions, they will pay over the excess to the Treasury. If they are less the Treasury will make good the difference to the British banks. Your Lordships will, I
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think, agree with me in hoping that with this measure of assistance it may prove possible for the Government of the sorely-tried Chinese nation to avoid undue fluctuations in the exchange value of their currency, in which a British trade, important even now, and potentially yet more important after the present hostilities have come to an end, is conducted. I beg to move that this Bill be now read a second time.
Moved, That the Bill be now read 2a.—(Lord Templemore.)
LORD SNELL: My Lords, when this Bill was being considered in another place its main principles received the support of friends of ours there. I have, on behalf of my noble friends in this House, to say that we give to the main principles of this Bill our general support and feel gratified that this gesture of help to a sorely-tried nation is at last being made. Any help that we can give to the Bill during its remaining stages we shall be glad to contribute.
On Question, Bill read 2a and committed to a Committee of the Whole House.
House adjourned during pleasure.
House resumed.

ROYAL COMMISSION.
The Royal Assent was given to the following Bills:
Defence Loans,
Mining Industry (Welfare Fund),
Bacon Industry (Amendment),
Czecho-Slovakia (Restrictions on Banking Accounts, etc.),
Kirkcaldy Corporation Order Confirmation,
Ministry of Health Provisional Order Confirmation (South Staffordshire Joint Hospital District),
Ministry of Health Provisional Order Confirmation (Blackburn),
Ministry of Health Provisional Order Confirmation (Hastings),
Ministry of Health Provisional Order Confirmation (Leyton),
Ministry of Health Provisional Order Confirmation (Luton Extension),
Maryport Harbour.
House adjourned at eighteen minutes before six o'clock.