TRADING WITH THE ENEMY

Dominion, Volume 11, Issue 275, 9 August 1918, Page 5

TRADING WITH THE ENEMY

GERMAN METHODS OF PENETRATION

BRITISH COMMITTEE'S

REPORT

The committee appointed to advise tho Board of Trade on matters arising under tho Trading with tho Enemy Amendment Act of 19111 recently presented a highly instructive and interesting report. Tinder tho chairmanship of Mr. Ernest Moon, K.C., it has been busily at work since February 22, 1916. During that timo it has held 139 sittings at which persons interested ■ wero heard, in lnnnv cases by counsel, and has dealt with 980 separate cases. In 507 instances orders wind up or prohibit trading businesses wero recommended, in 95 cases orders to vest enemy interests for sale to British subjects wero proposed, in 58 orders cancelling contracts wero suggested, and in 174 no order was' recommended, tho remaining cases being dealt with in various Ways. The committee came to the conclusion that in cases in which businesses formerly carried on mainly for, the benefit or under the" control of enemy subjects were useful and successful businesses, it was more in tho national interest to transform them into British businesses than to wind them up, and accordingly, after consulting the Custodian, they have on many occasions recommended that, the onomy subject interests should bo vested in him ns tho Custodian for sale. In this way a number of useful businesses are now carried on in British hands which wcro formerly largely or wholly in tho hands of enemy subjects. An Armour of Defence. The committee express strong suspicion that in many instances British nationality' has been adopted by enemy subjects purely as an armour of defence, and that it is not at all improbable that tho adoption* of it has been made a condition of financial support. But such businesses are not within tho jurisdiction of tho Board of Trade. If, however, German trado penetration is to bo fully dealt with, somo of tho cases in which it is carried on by recently naturalised Germans would, in tho committee's opinion, seem to require consideration. Tho business of Ettlinger and Co. is a case in point, in which tho committee submitted tho following memorandum 'dated February 15, 1917:- ■ "There are two partners in this firm, ' Ettlinger, a German, uaturalised in 1888, and Bernstein, a German, naturalised in 1903. Tho deed of partnership is dated July I,' 1010. The business consisted in buying and soiling ores and metals, including those used in the steel and iron industry. The firm was before tho war closely associated • with firms with German interests, particularly with. Beer, Sondheimer, and Co., of Frankfort. Following upon other agreements .with the last-named firm, an agreement . was entered into in .Tune, 1912, to last till June, 1918, and if no notice to determine was given to 1021. By Clauses i,l and 2 Ettlinger and Co. wero bound to act only'for Beer, Sondheimer and Co., in buying and selling minerals and other materials suitable for tho iron and steel industry and to carry out such business oh joint,account. Beer, Sond•heiraer and Co. were hound to cbncliido I ibusincss in those articles only for joint .account with Ettlinger and Co. Clause 7 contemplated financial operations outside the .sphere of buying and selling, to bo shared in equally. It was under this clause that tho arrangement came about ■with Sphroedor, Schmidt and Co, which for present purposes need not bo further referred to. By Clauso 0 any business could be vetoed by either of tho parties to tho agreement, which means Unit .Beer, Sondheimer and Co. had a power ' to veto the snlo by Ettlinger of any of these materials to English buyers. No comment is needed. Tho profits of the business were to bo shared equally. Tho case was brought to the'committee- for , hearing on February 15. It is a case of enemy association in which tho committee would recommend winding up without hesitation if it falls within the Act, ■ and the committee submit ..that, if it does not fall, within the Act, further legislation -would be desirable to enable them to deal with it. When the case came beforo tho committee they felt! obliged to adviso the board', that it did not fall .within Section 1 of the Act on tho ground stated in their minute."

British Aliases for Gormatu. - In 1 the course of tluT committee's Inquiries the Jierwsrtv of-the legislation for the, regfttration of names iias been i'ully demonstrated. Foreign traders havo •habitually substituted- British names for their own for the purpose of misleading their customers into the belief that they were dealing with British principals inBtead of aliens. On one duj recently four cases of this kind came noioro the committee for consideration, and they had lived under these aliases for years. ■ The free choice of titles which joint stock com-', .panies enjoyed also enabled foreign traders to conceal their .nationality and acquire whatever advantage may accrue to a nusl. ness appearing to be a British business. 1 TEo practice of adopting the word "British" or some other title or name which disguised 'the fact that- the business was German Is now well known,. But tlio extent to which German businesses were conducted through « British staff and by British -employees, is. remarkable. In case after caso the committee found thai' (tlthough the profits mainly belonged to the German proprietor of the business it ■was carried on- entirely or almost entirely by a British staff and by British employees. Iven in the case of the dye industry the staff of chemists employed' in the important service of advisins upon' the application oi the dyes to thb stuffs to be dyed were almost entirely British, avid when branches wero established in this country for the manufacture of German _ patented articles, they were, usually British manned. In many of theso cases by the -operation of Section i of the Act the British uanagers and employees are now .carrying on the businesses' on their own omunt, and the, businesses have become British businesses. How German Control is Gained. To illustrate the methods by which German influence gained its control of certain trades carried on in this country, the committee mention the following cases:— • . ,

A company was formed in 1897 to work certain important electrical natcnts taken out by a British subject whoso relatives held the chief part of the capital, the remainder being held by neutrals interested in working tho patents in' France. The samopatonts wore worked in Germany by a powerful combination. When the patents oxpirod in 1901 practically tho whole of tho capital of the English' company passed into tho hands of Ilia German company under tho stress of tho German company's competition, and a territorial agreement was .made, under which tho British company was restricted from soiling outside Great Britain, even In British colonics. The Germany company, having obtained control of the British company and sterilised f*T7 power of competition out of Great Britain, proceeded to utilise the manufactory of tho British company fcr tho purpose of undercutting a very important business of a similar kind carried on by another British company, until it was forced to accept an agreement under which it had to Tesign its foreign business, though it still held on to it? business in tho colonies.

Another illustration was that of the manufacture of an article which is extensively made use of by the War Office nnd the Admiralty. Before tho company was formed in 1910 it had been manufactured at! works in this country, and contracts with the Admiralty had been held for m?7iy years. But tho manufacturers had to meet tho competition of a powerful German combination, with tho result that prices were cut, and in 1910 a representative of tho combination threatened to undersell them if a combination was not effected. Tho manufacturers wero not financially strong enough to withstand a competition of that'kind, and the result was ihat r tho company was'formed to take over tho business, all the shares in Hie company being held, on behalf of tho German combination by Brilish trustees. By the contract of transfer tho proprietors oi tho business were to bo employed as managing directors, but one of the covenants provided that they should not manufacture for ,any other

persona than the purchasers. Half tho product of the article in question manufactured in En||liuid beforo tho war was manufactured at these The Gorman proprietors exorcised no control over tho manufacture, which was carried on under the namo of tho proprietors and managed by thum as before No dividends wore paid, but profits were used to improve tho works to tho extent of .£IO,OOO. Thoro was, in fact, no outward and visible sign 'of the German interest in tho business or that it was not a purely British concern. Dodging the Income Tax. Tho committee found that German pro. ducing houses commonly adopted means to avoid tho payment of incomo tax in this country. An agoncy or branch was established hero, frequently in tho form of a limited company with a small enpital, to which goods manufactured in Germany wcro forwarded for sale at prices which wcro arranged so as not to allow any considerable margin for profit after the payment of tho expenses of tho agency or branch, tho profit being mado by the parent house out of tin prices at which' they wero charged to tho branch. This practice, a« doubt, eay tho committee, is not confined to German houses, but the malt has been to assist the competition of German manufactures. These agencies or branches have been usually carried on under British names, an'd frequently by the employment of British salaried "agents. The important cases in which application was made to the. Board of Trade under Section 2 of the Act to determine contracts have been mainly those in which the contracts' were with enemy subjects for the delivery of metals or ores, some of them, 6uch as that of the Zinc 'Corporation, of great importance. These casts, tho committee remark, have disclosed the extent to which Germany hud obtained the control of important metal industries.