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ORGANISING COMMITTEE OF THE CENTRAL INTERNATIONAL CORPORATION AND NATIONAL CORPORATIONS. 'Report 111mit of 1Lon6on Conference, FEBRUARY 21st to 25th, 1922. PRINTED B -WA7 BILLOW & SONS LIMITED LONDON WALL. LON DON. 1922. The Conference of International Delegates assembled in London resolved to use their best endeavours to procure the establishment of National Corporations in various countries affiliated together and with a Central International Corporation to be formed in London. The main object of the Corporations will be to examine the opportuni- ties for undertaking work in connection with European reconstruction and to assist in the financing of such undertakings. The policy of the Corporations will be to co-operate where possible with other agencies and undertakings and not to attempt to create any monopoly. It is recognised that exchange difficulties prevent the formation of one single consolidated Corporation and necessitate the establishment of various National Corporations. It is, however, intended that the National Corporations should, as far as possible, work together as one entity under the control of The Central International Corporation, in which all the National Corporations will hold shares, and on whose Board they will all be represented. To obtain this result an Agreement will be made between all the Corporations on the lines of the draft Agreement approved by the Conference and signed by the Chairman. The Memorandum and Articles of Association of the proposed British National Corporation, as approved by the Conference and signed by the Chairman, will be the basis for the formation of the various National Corporations, subject to any adjustments necessary to conform to the laws of each country. The aggregate capital of the National Corporations in the first instance will be fixed at the equivalent of £20,000,000, of which 25 per cent. is to be immediately called up. Government guarantees will be requested where necessary to enable this capital to be raised. The initial capital of The Central International Corporation will be fixed at £2,000,000, and will be provided by subscriptions by the National Corporations of approximately 10 per cent. of their original capital. The Central International Corporation to be exempted from British taxes. The following countries were invited to subscribe respectively 20 per cent. of the total £20,000,000 proposed to be raised, viz. :-Great Britain, France, Germany, Italy, Belgium. It was agreed that the following countries should be invited also to participate if they so desire, viz. :-United States of America, Japan, Denmark, Holland, Switzerland, Czecko-Slovakia. Capital allocated to these countries will be applied proportionately in reduction of the 20 per cent. which the five countries first mentioned have been invited to subscribe, or, if necessary, as the Board of The Central International Corporation, when formed, may decide. The Board of Directors of The Central International Corporation will have power to allow other countries to participate if they so desire, and, if necessary, will increase the capital for that purpose. As soon as three countries are in a position to form their National Corporations and raise their capital, the National Corporations in those countries and The Central International Corporation are to be formed. The Governments interested are urged to obtain legislative authority to give any necessary guarantees to their National Corporations as soon as possible, so as to enable the Corporations to be established and commence operations at the earliest moment. The Delegates in Conference are unanimously of opinion that the Corporations should not do business with or in any country which does not :Recognise all public debts and obligations undertaken in the past or to be undertaken by the State as well as the obligation (A) to restore, or in default of restoration to compensate all foreign interests for loss or damage caused to them when property has been confiscated or withheld ; (B) Establish a legal system which sanctions or enforces trade and other contracts with impartiality ; (c) Give security for Trade. Annexed to this Report are copies of :(A) The Minutes of the Meetings of the Conference held in London on February 21st, 22nd, 23rd, 24th and 25th, 1922. (B) The draft Memorandum and Articles of Association of the proposed Central International Corporation. (c) The draft Memorandum and Articles of Association of the proposed British National Corporation forming the agreed basis for the establishment of all National Corporations. The draft Contract to be made between The Central International Corporation and all the National Corporations (D) collectively. INVERFORTH JOHN FERGUSON C. SERGENT GUIDO JUNG ... GUIDO SAGROMOSO FELICIEN CATTIER ROBERT BETTE T. OKUBO J. GRANT FORBES Great Britain BERGMANN France KEMPNER Italy E. R. GLUCKSTADT . Belgium Japan Unofficially representing U.S. A . Delegates. Private and Confidential. ORGANISING COMMITTEE OF THE CENTRAL INTERNATIONAL CORPORATION AND NATIONAL CORPORATIONS. 116inutcs of Adon8on Conference, FEBRUARY 21st to 25th, 1922. PRINTED NT -WATZRLOW & SONG LIMITBD, LONDON WALL, LONDON.1922. ORGANISING COMMITTEE OF THE CENTRAL INTERNATIONAL CORPORATION AND NATIONAL CORPORATIONS. Minutez of 1Lonbon Conference. First Meeting held at 16 Charles Street, Haymarket, London, on Tuesday, February 21s1, 1922. PRESENT : LORD INVERFORTH SIR JOHN FERGUSON, K.B.E. M. EUGENE SCHNEIDER M. CHARLES SERGENT SIGNOR GUIDO JUNG ... SIGNOR GUIDO SAGRAMOSO M. FELICIEN CATTIER M. ROBERT BETTE MR. T. OKUBO MR. L. P. SHELDON MR. J. GRANT FORBES ...} Great Britain. France. .}Italy. Belgium. ... Japan. ---) Unofficially representing U.S.A. IN ATTENDANCE : M. PAUL MASSIOT, Secretary of French Delegates. M. WITMEUR, Secretary of Belgian Delegates. MR. B. H. BINDER, Secretary of British Delegates and of the Conference. MR. J. R. CAHILL, of the British Embassy, Paris, Interpreter. CHAIRMAN. SECRETARY. Upon the motion of M. Schneider, Lord Inverforth was unanimously invited to take the chair. Mr. Binder, the Secretary of the British Delegates, was asked to act as Secretary of the Conference. Lord Inverforth extended to all the Delegates a very warm welcome to London and expressed the hope that the Delegates would satisfactorily and quickly complete the work before them. 2 CENTRAL INTERNATIONAL CORPORATION AND NATIONAL CORPORATIONS AND THEIR RELATIONSHIP. He stated that as it had already been decided that, on account of exchange difficulties, separate National Corporations should be formed in various countries, affiliated with a Central Corporation in London, it would be necessary to agree upon the relationship between the National Corporations and the Central Corporation. In order to facilitate this task, the Memorandum and Articles of Association of the proposed Central International Corporation and of the British National Corporation had been prepared, together with draft of an agreement to be made between the National Corporation and the Central Corporation, and prints of these documents were distributed among the Delegates. The Chairman hoped that these documents would form a basis for the formation of the Corporations and the relationship between them. He added that time would be given for their perusal and to enable them to be fully discussed. CAPITAL OF THE NATIONAL CORPORATIONS. After a cursory inspection of the documents the French Delegates stated that the Memorandum and Articles of Association were evidently drawn to give the Corporations very wide powers, but that, as regards the French National Corporation, if the public were asked to subscribe capital it would be necessary to indicate more specifically the work contemplated to be done by the Corporation. The Chairman explained that the work to be carried out would be decided by the Board of the Central Corporation, and that generally the functions of the Corporations were defined at a previous Conference as follows :" To examine the opportunities for undertaking work in con" nection with European reconstruction, and to assist in the finance " of such undertakings." After further discussion as to the method of raising the required tal, it was explained that the British National Corporation would ive from the British Government a guarantee as to principal. The French and Belgian Delegates stated that they had not discussed their Governments the question of a guarantee, and that if that d be obtained it would facilitate the subscription of capital in their ective countries. They asked for particulars of the terms of the osed British guarantee in order that they might advise their ernments. A memorandum containing the following outline agreed upon with British Treasury was handed to each Delegate :- " The original capital of £4,000,000 of the British National " Corporation will be guaranteed by the British Government as to http://fraser.stlouisfed.org/ " principal. Federal Reserve Bank of St. Louis 3 a " The guarantee will be amortised out of profits by the creation " by the British Corporation of a Special Reserve Fund by the " transfer thereto of 20 per cent. of the surplus profits in each year " in excess of the amount required to pay a dividend of 6 per cent. " on the amount of capital issued and guaranteed. When this " Special Reserve Fund reaches a total of £1,000,000 the capital " guaranteed is to be reduced by such amount, and by each subsequent " £1,000,000 of the Special Reserve Fund until the guarantee has " been extinguished." The Italian Delegates stated that discussions had already taken place with their Government in regard to a guarantee in respect of the capital of their proposed National Corporation and that they believed that the suggestion was receiving the Italian Government's sympathetic consideration. The French and Belgian Delegates considered that it would be impossible for them to decide definitely the question of the capital of their National Corporations until they had arranged definitely with their respective Governments in regard to the question of a guarantee. The Chairman proposed that the question as to the method of raising the capital should be reserved, as that was a matter to be dealt with by each country respectively, and that, subject to this point, the other items on the Agenda might be considered. After discussion it was decided that the total capital of the National Corporations to be formed in the first instance should be the equivalent of £20,000,000, and that 10 per cent. thereof should be subscribed to the capital of The Central International Corporation. After discussion it was decided that the following countries should each be invited to subscribe 20 per cent. of the proposed total capital of £20,000,000, viz. :-Great Britain, France, Germany, Italy and Belgium. PARTICIPATION OF OTHER COUNTRIES. It was decided that when the main principles of the scheme had been agreed, the following countries, in addition to the United States, should be invited to participate, namely, Denmark, Holland, Switzerland, Czecho-Slovakia, on the understanding that any amounts which might be allocated to such countries, should be applied proportionately in reduction of the 20 per cent. to be taken by the first five countries already mentioned, or if necessary as the Board of the Central Corporation might decide. It was further agreed that the Board of the Central Corporation should have power to allow other countries to participate and, if necessary, to increase the capital for that purpose. 4 The suggestion that Delegates from Germany and Denmark should be invited to the Conference was agreed to in principle, but it was decided to defer issuing these invitations until the Conference had had an opportunity of discussing the Memorandum and Articles of Association and the Agreement between the National Corporations and the International Corporation. As the other items on the Agenda were connected with the consideration of these documents it was decided to adjourn the Meeting until 3 o'clock on Wednesday, February 22nd, in order that. the Delegates might have an opportunity of studying them. (Signed) IN VERFORTH. ID Minutes of London Conference. Second Meeting held at 16 Charles Street, Haymarket, London, on Wednesday, February 22nd, 1922.. PRESENT : LORD INVERFORTH SIR JOHN FERGUSON, K.B.E. } M. CHARLES SERGENT SIGNOR GUIDO JUNG Italy. SIGNOR GUIDO SAGRAMOSO M. FELICIEN CATTIER M. ROBERT BETTE MR. T. OKUBO MR. J. GRANT FORBES Great Britain. France. Belgium. . Japan. Unofficially representing U.S.A. N ATTENDANCE : M. PAUL MASSIOT, Secretary of French Delegates. M. WITMEUR, Secretary of Belgian Delegates. MR. B. H. BINDER, Secretary of British Delegates and of the Conference. MR. HAROLD G. BROWN, Solicitor. MR. J. P. CAHILL, Interpreter. The Minutes of the Meeting held on February 21st were read and MINUTES. gned as correct. A letter to Lord Inverforth from Mr. T. Okubo, the Japanese JAPAN. elegate, dated February 21st, was read as follows :- " I beg to confirm my conversation with you this morning, " when I communicated to you the message I had received from " Japan to the effect that as the circumstances of Japan with " regard to the organisation of the International Corporation are " somewhat different from those of the European countries, she is " not in a position, at present, to take an actual participating part in " the scheme. 6 " As I explained, however, Japan is very desirous to see the " reconstruction and prosperity of Europe achieved, and anxious " to do all in her power to help the International Corporation to " successfully attain its end. " It will give me great pleasure, therefore, to attend the meet" ings of the Organising Committee in this sense, and with this " intention, if the other members are agreeable." NATIONAL CORPORATION MEMORANDUM AND ARTICLES OF ASSOCIATION. M. Cattier stated that he presumed the idea to be followed would be that although various National Corporations would be formed, owing to difficulties in exchange preventing the formation of one consolidated Corporation, the relations between the National Corporations and the Central Corporation should be such that in effect it would be as though they were one Corporation. This was unanimously accepted. The Chairman stated that the Memorandum and Articles of Association and the draft Contract to be examined by the Committee had been drawn up on these lines. The Memorandum and Articles of Association of The British National Corporation were discussed and several modifications were made therein. As modified the Memorandum and Articles of Association were generally agreed as a basis for the formation of the various National Corporations, subject to any further adjustments necessary to conform to the laws of each country. CENTRAL INTERNATIONAL CORPORATION MEMORANDUM AND ARTICLES OF ASSOCIATION. These were discussed and various modifications agreed upon. It was decided that each Delegate should consider various further modifications suggested therein with the object of coming to an agreement thereon at the next Meeting. It was unanimously decided that Delegates from Germany be invited to attend the Meeting to be held to-morrow, Thursday, February 23rd, at 3 p.m., to which day and time it was decided to adjourn the Meeting. (Signed) IN VERFORTH. RBES N ... ibinutes of 1.,onbon Conference. Third Meeting held at 16 Charles Street, Haymarket, London, on Thursday, February 23rd, 1922. PRESENT : ' } Great Britain. LORD INVERFORTH SIR JOHN FERGUSON, K.B.E. ... France. "} Italy. M. CHARLES SERCENT SIGNOR GUIDO JUNG "i. Belgium. 1 SIGNOR GUIDO SAGROMOSO M. FELICIEN CATTIER M. ROBERT BETTE MR. Japan. T. OKUBO Unofficially representing Germany. U.S.A. OT, Secretary of French Delegates. ecretary of Belgian Delegates. ER, Secretary oi British Delegates, and of the BROWN, Solicitor. L, Interpreter. Meeting held on February 22nd were read MINUTES. nsidered and discussed, and several modifica- lete from the Articles of Association the man should be of British nationality, but it was at a British subject should always be chosen al Corporation. nd Articles of Association of the Central were approved. S AGREEMENT The draft Agreement was considered and discussed. BETWEEN CENTRAL CORPORATION It was decided that the form should be altered so that the Agreement AND NATIONAL CORPORATIONS. would be made between the Central Corporation and all the National Corporations collectively who would become Shareholders of the Central Corporation. Various modifications in the wording of the Agreement were proposed and discussed and it was decided to re-draft certain clauses for consideration at the next meeting. It was decided to adjourn the Meeting to Friday, February 24th, at 3 p.m. (Signed) INV ERFORTH 9 11 P VISION FOR PMLIMINARY EXPENSES. The Secretary reported that he had received £10,000 as a contribution towards Preliminary Expenses, etc., from the following Governments £2,000 Great Britain France Italy ... 2,000 2,000 2,000 2,000 Belgium Japan Total ... £10,000 Herr Bergmann stated that he expected the German Government would also contribute £2,000. The Chairman DATE OFFOR- stated that having agreed the general basis for the MATION OF of The Central International Corporation and various National formation le THE CENTRAL Corporations and their main relationship, it remained to be decided when INTERNATIONAL the various Corporations should be formed. He was of opinion that this CORPORATION as soon as possible. He pointed out that the first to be made must be those for raising capital for the pro- should be AND NATIONALdone CORPORATIONS. arrangements posed National Corporations, of which 25 per cent. should be immediately called up. It was the opinion of the Conference that in most, if not all, cases a Government guarantee would be necessary to enable this to be done. Although the British Government had promised to promote legislation to authorise a guarantee of the capital of the proposed British National Corporation other Governments had not yet given a decision on this point. It would remain for the Nationals of each country concerned to make the necessary representations to their respective Governments to obtain the required decisions. He suggested that the Delegates from France, Germany, Italy and Belgium should use their best endeavours to obtain a favourable decision from their Governments by Saturday, March 11th, with a promise to pass any necessary legislation as speedily as possible so that the required Government guarantees could be effectively available and enable the Corporations to be formed and their capital raised at an early date. This suggestion was agreed to by the Delegates from France, Germany, Italy and Belgium, but certain reservations were made by M. Sergent, who read the following Memorandum :" J'ai participe de grand coeur aux travaux du Comite d'Organisation de la Societe Internationale et je constate avec plaisir les excellents 12 resultats qui ont ete obtenus. La bonne volonte des Delegues, le souci de l'interet general des peuples qui n'a cesse de les animer ont permis d'ecarter de nombreuses difficultes. " Je suis oblige neanmoins d'exprimer des reserves. " En premier lieu, je tiens a rappeler que les observations que j'ai pu faire sur les differents textes discutes ont ete presentees sous la reserve de toutes autres qu'un examen moins rapide et plus approfondi, notamment au point de vue juridique, pourra provoquer. " D'autre part, j'aurais desire que fussent reproduites, tout au moins dans un document annexe, les conditions fondamentales formuldes auparavant pour la possibilite d'une restauration economique de l'Europe. A mon avis, la constitution et le fonctionnement de Societes dont le but principal, it faut le dire, est la reconstitution de la Russie, devraient 'etre subordonnes, dans les circonstances actuelles, non seulement a la reconnaissance formelle mais a la realisation de ces conditions. " Enfin je ne puis donner l'assurance qu'il sera possible, en fait et en droit, de fonder en France, oh les besoins de capitaux pour la restauration des pays devastes sont bien loin d'etre satisfaits, une Societe dont le premier acte sera la souscription obligatoire d'actions de la Societe Internationale, c.h.d. une exportation de capitaux, et qui s'engage moralement a financer de nombreuses et importantes affaires au dehors." It was decided that the Corporations should not do business with or in any country which does not :- Recognise all public debts and obligations undertaken in the past or to be undertaken by the State as well as the obligation (A) to restore or in default of restoration to compensate all foreign interests for loss or damage caused to them when property has been confiscated or withheld. (B) Establish a legal system which sanctions or enforces trade and other contracts with impartiality (c) Give security for Trade. M. Cattier pointed out that the provisional acceptance by the Belgian Delegates of the legal documents submitted would not preclude the suggestion of further minor modifications, and also that their general acceptance of the proposals discussed must not imply an obligation on Belgium to proceed with the formation of the Belgian National Corporation, this being dependent on financial decisions to be taken by the Belgian Government and by the Banks in Belgium. 13 Signor Jung stated that these general reservations were applicable 14 and to assist in the financing of such undertakings. The policy of the Corporations will be to co-operate where possible with other agencies and undertakings and not to attempt to create any monopoly. It is recognised that exchange difficulties prevent the formation of one single consolidated Corporation and necessitate the establishment of various National Corporations. It is, however, intended that the National Corporations should, as far as possible, work together as one entity under the control of The Central International Corporation, in which all the National Corporations will hold shares, and on whose Board they will all be represented. To obtain this result an Agreement will be made between all the Corporations on the lines of the draft Agreement approved by the Conference and signed by the Chairman. The Memorandum and Articles of Association of the proposed British National Corporation, as approved by the Conference and signed by the Chairman, will be the basis for the formation of the various National Corporations, subject to any adjustments necessary to conform to the laws of each country. The aggregate capital of the National Corporations in the first instance will be fixed at the equivalent of £20,000,000, of which 25 per cent. is to be immediately called up. Government guarantees will be requested where necessary to enable this capital to be raised. The initial capital of The Central International Corporation will be fixed at £2,000,000, and will be provided by subscriptions by the National Corporations of approximately 10 per cent. of their original capital. The Central International Corporation to be exempted from British taxes. The following countries were invited to subscribe respectively 20 per cent. of the total £20,000,000 proposed to be raised, viz. :-Great Britain, France, Germany, Italy, Belgium. It was agreed that the following countries should be invited also to participate if they so desire, viz. :-United States of America, Japan, Denmark, Holland, Switzerland, Czecko-Slovakia. Capital allocated to these countries will be applied proportionately in reduction of the 20 per cent. which the five countries first mentioned have been invited to subscribe, or, if necessary, as the Board of The Central International Corporation, when formed, may decide. The Board of Directors of The Central International Corporation will have power to allow other countries to participate if they so desire, and, if necessary, will increase the capital for that purpose. 15 As soon as three countries are in a position to form their National Corporations and raise their capital, the National Corporations in those countries and The Central International Corporation are to be formed. The Governments interested are urged to obtain legislative authority to give any necessary guarantees to their National Corporations as soon as possible, so as to enable the Corporations to be established and commence operations at the earliest moment. The Delegates in Conference are unanimously of opinion that the Corporations should not do business with or in any country which does not :Recognise all public debts and obligations undertaken in the past or to be undertaken by the State as well as the obligation to restore, or in default of restoration to compensate all foreign interests for loss or damage caused to them when property has been (A) confiscated or withheld ; (B) Establish a legal system which sanctions or enforces trade and other contracts with impartiality ; (c) Give security for Trade. Annexed to this Report are copies of :(A) The Minutes of the Meetings of the Conference held in London on February 21st, 22nd, 23rd, 24th and 25th, 1922. (B) The draft Memorandum and Articles of Association of the proposed Central International Corporation. (c) The draft Memorandum and Articles of Association of the proposed British National Corporation forming the agreed basis for the establishment of all National Corporations. The draft Contract to be made between The Central International Corporation and all the National Corporations (D) collectively. INVERFORTH Great Britain JOHN FERGUSON CHARLES SERGENT GUIDO JUNG ... France Italy GUIDO SAGROMOSO FELICIEN CATTIER ROBERT BETTE Belgium Unofficially representing U.S.A. BERGMANN KEMPNER E. R. GLUCKSTADT Delegates. Japan T. OKUBO J. GRANT FORBES I Germany Denmark B. z BINDER, Secretary. 16 CHAIRMAN'S THANKS TO DELEGATES. VOTE OF THANKS TO CHAIRMAN. The Chairman thanked the Delegates for their attendance and for the diligence and despatch with which they had dealt with the various questions submitted to them. He added that the best wish he could express towards the proposed International and National Corporations was that the Directors nominated thereto would work together in the same spirit of friendly co-operation and goodwill which had been manifested by all throughout the Conference. M. Sergent said that Lord Inverforth's tact and ability in presiding had contributed much to the harmony of the Conference and its successful results. He proposed a hearty vote of thanks to the Chairman, which was cordially and unanimously carried. VOTE OF THANKS TO SECRETARY. The Delegates desired to place on record their appreciation of the services of Mr. B. H. Binder, as Secretary, and unanimously accorded to him a vote of thanks. The Conference then terminated. (Signed) INVERFORTH. Proof 27/2/22. THE COMPANIES ACTS, 1905 TO :1917. COMPANY LIMITED BY SHARES. Atineratthunt AND Artirits IIf AfiSoriatign OF The Central International Corporation LIMITED. LINKLATERS & PAINES, 2, Bond Court, Walbrook, London, E.C.4. THE COMPANIES ACTS, 1908 TO 1917. COMPANY LIMITED BY SHARES ilitmoraubum AND Artirits of Assariatton OF The Central International Corporation LIMITED. LINKLATERS & PAINES, 2, Bond Court, Walbrook, London, E.C.4. Buitsttrr, MATmIBON ct SPRAGUE, LTD., 31, Throgmorton Street, E.C.2. To lophono No. 4420 Hop (4 lines). THE COMPANIES ACTS, 1908 TO 1917. COMPANY LIMITED BY SHARES. Armaranbunt Assoriation The Central International Corporation LIMITED. 1. The name of the Company INTERNATIONAL CORPORATION LIMITED." is " TELE CENTRAL The registered Office of the Company will be situate in England. 2. 3. The objects for which the Company is established are :(i) To provide a central Organization for the fostering and facilitating the resumption of trade between the countries of the world, to overcome difficulties due to fluctuations in exchange and to investigate openings for the employment of capital and the provision of productive employment of labour, and to assist generally in the reconstruction of those countries which have been prejudicially affected by the late war. (ii) To construct, execute, carry out, equip, and work, develop, administer, manage or control, or be interested in all kinds of works and conveniences, public or private, and in particular (but without limiting the generality of the foregoing), railways, tramways, docks, hotels, ships, harbours, piers, wharves, canals, reservoirs, embankments, irrigations, telegraphs, telephones and reclamations, sewage, drainage, sanitary, water, gas, electric, C 180 2 hydraulic and shipbuilding works, but as regards telegraphs and telephones not within the United Kingdom. (iii) To lend money on the security of, acquire, hold, issue, negotiate, place, guarantee subscription of, underwrite and deal in stocks, shares, debentures, debenture stock, bonds, mortgages, obligations and securities of all kinds, issued, created, granted, guaranteed or made by any Government, sovereign, ruler or other authority, national, local, municipal or of any other description, or of any corporation, company, firm or person, and to give any guarantee for payment of money or the carrying out of any contract or obligation, and in particular to guarantee the principal or capital and interest or dividends of any shares, stocks, debentures, loans, obligations or securities. (iv) To carry on the business of banking in all or any of its branches and departments and for that purpose to establish, manage, carry on and register offices, branches or agencies in any part of the world, and to promote and further in all respects within its powers, financial and commercial relations between all or any countries of the world. (v) To lend or advance money, securities and property, to discount, buy, sell and deal in bills of exchange, promissory notes, coupons, drafts, bills of lading, warrants and other insti'uments and securities, whether transferable or negotiable or not, to give acceptances and guarantees and generally to promote financial facilities for any purposes, to negotiate loans and advances, to issue warrants for goods and raw materials under its control, to collect and transmit money and securities and generally to transact all kinds of agency and other business commonly transacted by bankers. (vi) To seek for and secure openings for and promote the employment of capital for any purposes which may be considered calculated to promote employment or to improve existing economical or industrial expedient or be able to arrange, and whether with or without stipulating for or reserving to itself any commission, share of profits, or other benefit or interest), the carrying on, undertaking and doing of the same by others, and in particular by all or any of the different corporations being Members of the Company, and generally to act as a central body for considering applications or suggestions for and promoting undertakings, transactions and operations of any description which are or may be considered calculated to promote employment or improve existing conditions in any part of the world, and carrying out approved undertakings, transactions and operations or allocating, securing or procuring the carrying out of the same (in such manner and on such terms as may be arranged) by or through the medium of the said corporations being Members of the Company, or others. (xiii) To manufacture and deal in all kinds of articles and things required for the purposes of any such business as aforesaid or commonly dealt in by persons engaged in any such business. (xiv) To purchase or otherwise acquire for any estate or interest any property, real or personal, or rights of any kind which may appear to be necessary or convenient for any business of the Company (whether in the United Kingdom or elsewhere) and to develop and turn to account and deal with the same in such manner as may be thought expedient. (xv) To borrow and raise money and to secure or discharge any debt or obligation of or binding on the Company in such manner as may be thought fit and in particular by mortgages and charges upon the under- taking and all or any of the real and personal property (present and future) and the uncalled capital of the Company, or by the creation and issue on such terms as may be thought expedient of bonds, debentures, debenture securities of any description. stock or other S resolution of the Board of Directors of the Company passed by a special vote as aforesaid be offered for sale to the other shareholders in proportion to the shares in the Company held by them respectively as provided by the Articles of Association registered herewith. (E) No warrants to bearer shall be issued in respect of any shares or stock of the Company. WE, the several persons whose names and addresses are subscribed, are desirous of being formed into a Company, in pursuance of this Memorandum of Association, and we respectively agree to take the number of Shares in the capital of the Company set opposite to our respective names. NAMES, ADDRESSES AND DESCRIPTIONS OP SUBSCRIBERS. No. of Shares taken by each Subscriber. Total Shares taken Dated the day of 1922. WITNESS to the above Signatures- C 180 n..1 THE COMPANIES ACTS, 1908 TO 1917. COMPANY LIMITED BY SHARES dirks of Assoriation OF The Central International Corporation LIMITED. PRELIMINARY. 1. The regulations in Table "A" in the First Schedule to the Companies (Consolidation) Act, 1908, shall not apply to the Company. In these presents, if not inconsistent with the subject or context, the words standing in the first column of the table next hereinafter contained shall bear the meanings set opposite to them respectively in the second column thereof. 2. WORDS. The Statutes. MEANINGS. The Companies Acts 1908 to 1917, and every other Act for the time being in force concerning joint stock companies and affecting the Company. The Act. The Companies (Consolidation) Act, 1908. These presents. These Articles of Association, as originally framed, or as from time to time altered by Special Resolution. A Resolution passed at a meeting of the Directors of the Company duly summoned .by not less than 10 days' notice against which not more than one-fourth of the total votes of all the Directors have been cast and in favour Special vote of the Board of Directors. of which a majority of the votes of those Directors present in person or by proxy or by alternate shall have been cast. 12 WORDS. MEANINGS. Office. The Registered Office of the Company. Secretary. The Secretary for the time being of the Com- pany or any person from time to time appointed by the Directors to perform the duties of the Secretary. Seal. The Common Seal of the Company. Month. Calendar month. Year. Year from the 1st January to the 31st December inclusive. In writing. Written, or produced by any substitute for writing, or partly one and partly another. And words importing the singular number only shall include the plural, and vice versa, and words importing persons shall include corporations, and the expressions " debenture " and " debenture holder " shall include " debenture stock " and " debenture stockholder." Save as aforesaid any words or expressions defined in the Statutes shall, if not inconsistent with the subject or context, bear the same meaning in these presents. The number of the Members of the Company shall be limited to fifty. 4. No invitation shall be made to the public to subscribe for any shares or debentures of the Company. 5. Sui.ject to the provisions of Section 87 of the Act the business of the Company may be commenced as soon after the incorporation of the Company as the Directors think fit. 6. Any branch or kind of business which the Company is either expressly or by implication authorised to undertake, may be undertaken by the Directors at such time or times as they may think fit, and further may be suffered by them to be in abeyance whether such branch or kind of business may have been actually commenced or not, so long as the Directors may deem it expedient not to commence or proceed with the same. 7. No part of the funds of the Company shall be employed 3. in the purchase of or in loans upon the security of the Company's shares. 14 LIEN. 14. The Company shall have a lien on every share (not being a fully paid share) for all moneys, whether presently payable or not, called or payable at a fixed time in respect of such share ; and the Company shall also have a first and paramount lien and charge on all shares standing registered in the name of any Member for all the debts and liabilities of such Member to the Company, and that whether the same shall have been incurred before or after notice to the Company of any equitable or other interest in any person other than such Member and whether the period for the payment or discharge of the same shall have actually arrived or not, and notwithstanding that the same are joint debts or liabilities of such Member or his estate and any other person whether a Member of the Company or not. The Company's lien (if any) on a share shall extend to all dividends payable thereon. 15. The Company may sell, in such manner as the Directors may by a special vote of the Board determine, any shares on which the Company has a lien to any corporation being already a Member of the Company or duly qualified for membership under the Memorandum of Association, but no sale shall be made unless some sum in respect of which the lien exists is presently payable, nor until the expiration of fourteen days after a notice in writing, stating and demanding payment of the sum presently payable, and giving notice of the intention to sell in default shall have been given to the holder for the time being.of the share. 16. The proceeds of sale shall be applied in or towards payment or satisfaction of the debt or liability in respect whereof the lien exists so far as the same is presently payable, and any residue shall (subject to a like lien for debts or liabilities not presently payable as existed upon the shares prior to the sale) be paid to the Member. The purchaser shall be registered as the holder of the shares and he shall not be bound to see to the application of the purchase money, nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings in reference to the sale. CALLS ON SHARES. 17. The Directors may from time to time make calls upon the Members in respect of any moneys unpaid on their shares, provided that no call shall exceed one-fourth of the nominal EP 16 thereof without the approval of a special vote of the Board, save and except only that if any Corporation being a Member of the Company shall go into liquidation, whether voluntary or compulsory, all or any of the shares in the Company held by such corporation shall unless otherwise determined by a resolution of the Board passed by a special vote of the Board of Directors be offered for sale to the other shareholders in proportion to the shares in the Company held by them respectively. TRANSFER OF SHARES. All transfers of shares (where allowed) shall be effected by transfer in writing in the usual common form, and the Directors may decline to recognise any instrument of transfer unless such fee as the Directors may require is paid to the Company in respect 24. thereof, and the instrument of transfer is accompanied by the certificate of the shares to which it relates, and such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer, and unless the transferee shall have covenanted with the Company and with all the other shareholders in the Company to be bound by the terms of the agreement scheduled hereto with such modifications only (if any) as May from ime to time be approved by all the shareholders in the Company. The instrument of transfer of a share shall be executed both by the transferor and transferee, and the transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the Register of Members in respect thereof. 25. FORFEITURE OF SHARES. 26. If a Member fails to pay any call or instalment of a call on the day appointed for payment thereof, the Directors may at any time thereafter during such time as any part of such .call or instalment remains unpaid, serve a notice on him requiring payment of so much of the call or instalment as is unpaid, together with any interest and expenses which may have accrued. The notice shall name a further day on or before which and the place where the payment required by the notice is to be 27. made, and shall state that in the event of non-payment at or before the time and at the place appointed the shares on which the call was made will be liable to be forfeited. 17 If the requirements of any such notice as aforesaid are not complied with any share in respect of which such notice has been given may at any time thereafter before payment of all calls and interest and expenses due in respect thereof has been made be forfeited by a resolution of the Directors to that effect. 28. 29. A forfeited share may be sold or re-allotted either to the Member who was before forfeiture the holder thereof (if still a Member or qualified for membership under the Memorandum of Association) or to any other corporation being a Member or qualified for membership upon such terms and in such manner as the Directors shall think fit, and at any time before a sale or re-allotment the forfeiture may be cancelled on such terms as the Directors think fit. 30. A Member whose shares have been forfeited shall cease to be a Member in respect of the forfeited shares, but shall notwithstanding the forfeiture remain liable to pay to the Company all moneys which at the date of forfeiture were presently payable by such Member to the Company in respect of the shares, with interest thereon at seven per cent. per annum from the date of forfeiture until payment. 31. A statutory declaration in writing that the declarant is a Director of the Company and that a share had been duly forfeited on a date stated in the declaration shall be conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the share, and such declaration and the receipt of the Company for the consideration (if any) given for the share on the sale or re-allotment thereof shall constitute a good title to the share, and the person to whom the share is sold or disposed of shall be registered as the holder of the share and shall not be bound to see to the application of the purchase money (if any) nor shall his title to the share be affected by any irregularity or invalidity in the proceedings in reference to the forfeiture, sale, or re-allotment of the share. COMPULSORY RETIREMENT OF MEMBERS. 32. If any Member of the Company shall commit any breach of, or shall fail or refuse to carry out or perform, any obligation of such Member under any agreement entered into by such Member as a term of such Member's admission to membership as provided by Clause 6(c) of the Memorandum of Association, the Company may serve on such Member a notice in writing calling the attention of such Member thereto and requiring it to perform its said agreement in the respect in which such breach, omission or C 180 18 refusal has occurred if then still capable of being performed, 2nd in any other case to make compensation therefor in such manner as the Directors may reasonably require. Such notice shall name a reasonable period (not being less than one month) within which the same is to be complied with, and shall state that in the event of non-compliance therewith the Member will be liable to compulsory retirement under this Article. 33. If any such notice is not complied with, or if any share- holder fails within a reasonable time after the award of any arbitrator in an arbitration under the provisions hereafter con. tamed to comply with the terms of such award, then the Directors may require the Member who has failed to comply with such notice or award to offer to sell the shares of such Member or any part thereof on the terms hereafter stated and thereupon such Member shall be deemed to have offered its shares for sale accordingly. Where any share held by a Member is to be offered for sale pursuant to any provision of these presents, the price to be paid therefor shall in the first instance be fixed by the Directors of the Company, but if the selling shareholder (hereafter referred to as the retiring Member) shall within 14 days of such price notified to it in writing by the Board of the Company so require, the price to be paicDr shall be submitted to arbitration under the provision hereinafter contained, and the decision of the arbitrator shall be final. The price so arrived at is hereafter referred to as the "prescribed price." In arriving at the prescribed price of any share the Directors orthe arbitrator, as the case may be, shall take into account not only the fair value of the share but also the extent 34. to which the retiring Member is to blame for having failed to observe the terms of the said agreement or the award of an arbitrator, as the case may be, it being the declared intention of the parties that the Directors or the arbitrator shall not be bound by any rules of law in arriving at their decision, but thatthey are to fix the price at such a figure as will in their opinion impose upon the retiring Member such penalty for default as may be reasonable, having regard to the importance of the default, the direct and indirect damage suffered by the Company and the other shareholders owing to such default, the extent to which such default was wilful or due to causes beyond the control of the retiring Member and generally to all the circumstances of the case, with power to the Directors or the arbitrator in suitable cases to fix the prescribed price at a purely nominal sum or at the full value of the share, or at such intermediate figure as they may in their discretion think fit. 20 convert any paid-up shares into stock, and may with the like sanction reconvert any stock into paid-up shares of any denomination. 39. Stock shall only be transferable in the same manner, and subject to the same regulations and restrictions as and subject to which the shares from which the stock arose was previously to conversion transferable, and no stock shall be transferable except in sums of E1 or multiples of £1. 40. The holders of stock shall, according to the amount of the stock held by them, have the same rights, privileges and advantages as regards dividends, participation in assets on a winding up, voting at meetings of the Company, and other matters as if they held the shares from which the stock arose, but no such privilege or advantage (except participation in dividends and in assets on a winding up) shall be conferred by any such aliquot part of stock as would not, if existing in shares, have conferred such privilege or advantage. 41. All such of the provisions of these presents as are applicable to paid-up shares shall apply to stock, and the words " share " and " shareholder " therein shall include " stock " and " stockholder." INCREASE OF CAPITAL 42. The Company in General Meeting may with the approval of a special vote of the Board but not otherwise from time to time increase its capital by such sum to be divided into shares of such amounts as the resolution shall prescribe. Unless it be decided by a special vote of the Board that the new shares or any of them are to be issued to a Corporation 43. not already a member the same shall be offered in the first place to the existing members in proportion to their existing holdings of shares and for the purposes of any such offer the provisions of Articles 35 shall mutatis mutandis apply so far as the same are applicable. Subject as aforesaid the new shares shall (subject to the provisions of the Memorandum of Association) be at the disposal of the Directors in the same manner as the shares in the original capital. 44. 21 The new shares shall be subject to the same provisions with reference to payment of calls, lien, transfer, transmission, forfeiture and otherwise, as the shares in the original capital. 45. ALTERATIONS OF CAPITAL. The Company in General Meeting may by Ordinary Resolution- 46. (A) Consolidate and divide all or any of its share capital into shares of larger amount than its existing shares. (B) Cancel any shares which, at the date of the passing of the resolution, have not been taken, or agreed to be taken, by any person, and diminish the amount of its capital by the amount of the shares so cancelled. And may also by Special Resolution- (c) Sub-divide its shares, or any of them, into shares of smaller amount than is fixed by the Association (subject, nevertheles of Memorandum visions of Section 41 (1) (d) of the A (D) Reduce its capital in any manner autho GENERAL MEETINGS. 47. The Statutory Meeting of the Company sh such time (within a period of not less than one mo than three months from the date at which the Comp to commence business) and at such place as the D determine, and the provisions of Section 65 of the A provisions of the Statutes relating to the Statutory be duly observed. 48. A General Meeting shall be held in the yea every subsequent year, at such time (within a perio than fifteen months after the holding of the last prec Meeting) and place as may be determined by the Di General Meetings referred to in this Article sh Ordinary Meetings. All General Meetings other t Meetings and the Statutory Meeting shall be called E The Directors may call an Extraordinary M ever they think fit, and shall, on the requisition of 49. not less than one-tenth of the issued capital of t 24 shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against such resolution. 59. If a poll be duly demanded, it shall be taken in such manner as the Chairman may direct and the result of a poll shall be deemed to be the resolution of the meeting at which the poll was demanded. In the case of an equality of votes, whether on a show of hands or on a poll, the Chairman of the meeting at which the show 60. of hands takes place or at which the poll is demanded shall be entitled to a second or casting vote. 61. A poll demanded on the election of a Chairman or on a question of adjournment shall be taken forthwith. A poll demanded on any other question shall be taken at such time and place as the Chairman directs. 62. The demand for a poll shall not prevent the continuance of a meeting for the transaction of any business other than the question on which the poll has been demanded. VOTES OF MEMBERS. On a show of hands every Member who is present in person shall have one vote. On a poll every Member who is 63. present in person or by proxy shall have one vote for every share of which he is the holder. 64. No Member shall be entitled to vote at any General Meeting unless all calls or other sums presently payable by him in respect of shares in the Company have been paid or in respect of any shares held by him which are under offer to the other Shareholders pursuant to the provisions for the compulsory retirement of Directors. 65. Votes may be given by proxy. The instrument appointing a proxy shall be in writing either under the Common Seal of the appointor or under the hand of an officer or attorney of the appointor duly authorised. 66. 67. No person shall act as a proxy unless he is either a Director of the Company or a Director or employee of a Member of the Company. 26 Every Member holding £100,000 or upwards of shares of the Company shall be entitled to be represented on tM Board of Directors by one Director appointed by such Member. Any member holding £250,000 of shares or more shall be entitled to be represented on the Board of Directors by two Directors appointed by such Member, but no Member shall be represented by more than two Directors whatever the number of shares held by such 73. Member, and any such Member may accordingly at any time appoint any person to be a Director and remove any Director appointed by him and appoint another Director in his place or in the place of any Director appointed by such Member who dies, resigns, or otherwise vacates office, provided that the total num ,er of Directors appointed by such Member and holding office at the same time shall not exceed the number by which such Member is entitled to be represented on the Board under the provisions of this Article. All appointments and removals of Directors under this Article shall be effected by writing under the Common Seal of the Member making the same, or the hand of an officer of such Member duly authorised thereto and authenticated in such manner as the Board may from time to time require or prescribe. 74. The Directors may, and in case of a vacancy shall, by resolution of the Board, appoint some person (not already a Member of the Board), to be Chairman of the Company, and determine the period for which he is to hold office as such. The Chairman shall be ex officio a member of the Board. 75. Save and except as provided by the foregoing Articles no Directors of the Company shall be appointed, and in particular the Company in General Meeting shall have no power to appoint Directors, and every Director appointed under or pursuant to the foregoing Articles or any regulations or bye-laws made by the Directors pursuant thereto shall hold office until he is either removed or vacates office under the provisions of such Articles, regulations, or bye-laws, or of Article 78. The Directors shall be entitled to remuneration at such rate as shall be fixed either each year or from time to time by the Company in General Meeting. Such remuneration shall in default of agreement to the contrary be divided between the Directors equally. The Directors shall (unless the Board shall by resolution in any particular case otherwise determine), be repaid all such 76. 28 invalidate any prior act of the Directors which would have been valid if such regulation had not been made. The general powers given by this Article shall not be limited or restricted by any special authority or power given to the Directors by any other Article. 80. The Directors may establish any local boards or agencies for managing any of the affairs of the Company in any part of the world, and may appoint any persons to be members of such local boards, or any managers or agents, and may fix their remuneration, and may delegate to any local board, manager or agent any of the powers, authorities and discretions vested in the Directors and exercisable by Ordinary Resolution of the Board (other than powers to allot, make calls on or forfeit shares, and to allocate business to the Members of the Company), with power to sub-delegate, and may authorise the members of any local board, or any of them, to fill any vacancies therein, and to act notwithstanding vacancies, and any such appointment or delegation may be made upon such terms and subject to such conditions as the Directors may think fit, and the Directors may remove any person so appointed, and may annul or vary any such delegation, but no person dealing in good faith and without notice of any such annulment or variation shall be affected thereby. The Directors may from time to time and at any time by Power of Attorney under the Seal appoint any company, firm or person, or any fluctuating body of persons, whether nominated directly or indirectly by the Directors, to be the Attorney or 81. Attorneys of the Company for such purposes and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Directors under these presents, and not including power to allot, make calls on or forfeit shares and to allocate business to the Members of the Company) and for such period and subject to such conditions as they may think fit and any such Power of Attorney may contain such provisions for the protection and convenience of persons dealing with any such Attorney as the Directors may think fit and may also authorise any such Attorney to sub-delegate all or any of the powers, authorities and discretions vested in him. The Company may exercise the powers conferred by Section 79 of the Act with regard to having an official Seal for use abroad, and such powers shall be vested in the Directors. 82. a 29 83. The Directors may exercise all the powers of the Company to borrow and raise money, and to mortgage or charge its undertaking, property and uncalled capital, and to issue debentures, debenture stock, and other securities. 84. No Director or intending Director shall be disqualified by his office from contracting with the Company either as vendor, purchaser or otherwise, nor shall any such contract, or any contract or arrangement entered into by or on behalf of the Company in which any Director is in any way interested, be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company for any profit realised by any such contract or arrangement by reason of such Director holding that office, or of the fiduciary relation thereby established, but the nature of his interest shall be disclosed by him at the meeting of the Directors at which the contract or arrangement is determined on, if his interest then exists, or in any other case at the first meeting of the Directors after the acquisition of his interest, unless his interest consists merely of being a Director or Shareholder of or otherwise interested in the Member of the Company by whom he is appointed a Director of this Company, in which case no disclosure shall be required. A Director may vote in respect of any contract or arrangement in which he is interested. 85. All cheques, promissory notes, drafts, bills of exchange, and other negotiable or transferable instruments, and all receipts for moneys paid to the Company, shall be signed, drawn, accepted, endorsed, or otherwise executed, as the case may be, in such manner as the Directors shall from time to time by resolution determine. MANAGING DIRECTOR. 86. The Directors may from time to time appoint one or more of their body to the office of Managing Director or Manager for such term as they think fit, but every such appointment shall be subject to determination ipso facto if the Director appointed cease from any cause to be a Director, or if the Company in General Meeting resolve by Extraordinary Resolution that his tenure of the office of Managing Director or Manager be determined. 87. A Managing Director or Manager shall receive such remuneration (whether by way of salary, commission or participa- 180 S 33 105. All appointments and removals of alternate Directors shall be effected by writing under the hand of the Director making or revoking such appointment left at the office. DIRECTORS VOTING BY PROXY. Any Director shall be entitled by writing under his hand to appoint any other Director his Proxy either to attend a particular meeting or meetings or to attend all meetings and to 106. vote on his behalf thereat and the Director so appointed as Proxy shall be entitled, provided the appointor is not himself present to vote in place of the appointor and to cast the vote or votes which the appointor would himself have been able to cast, had he been present in person. DIVIDENDS AND RESERVES. 107. The Company in General Meeting may declare dividends to be paid to the Members out of the profits of the Company available for dividend. No dividend shall be payable except out of the profits of the Company or in excess of the amount recommended by the 108. Directors. All dividends shall be declared and paid according to the amounts paid on the shares in respect whereof the dividend is paid, but no amount paid on a share in advance of calls shall, while carrying interest, be treated for the purposes of this Article as paid on the share. All dividends shall be apportioned and paid pro rata according to the amounts paid or credited as paid on the shares during any portion or portions of the period in respect of 109. which the dividend is paid but if any share is issued on terms providing that it shall rank for dividend as from a particular date, such share shall rank for dividend accordingly. 110. The Directors may from time to time pay to the Members such interim dividends as appear to the Directors to be justified by the profits of the Company. The Directors may from time to time set aside out of the profits of the Company (including therein premiums obtained on 111. the issue of shares) and carry to reserve or reserves such sums C 180 H S 35 (ii) Whenever and as often as such a resolution as aforesaid shall have been passed the Directors may pay up unissued shares or debentures or other securities of the Company as the case may be to the amount authorised by the resolution, and distribute the same amongst the shareholders entitled thereto as nearly as may be in accordance with the foregoing provisions with full power to the Directors to make such provision by the issue of fractional certificates or by payment in cash or otherwise as they think fit for the case of fractions, and the Directors may, if thought fit, authorise any person to enter on behalf of all the holders of the said shares into an agreement with the Company providing for the allotment to them in the proportion aforesaid credited as fully paid-up of the shares, debentures or securities, authorised by the resolution to be distributed amongst them, and any agreement made under such authority shall be effective and binding. ACCOUNTS. 116. (A) The Directors shall cause true accounts to be kept :Of the sums of money received and expended by the Company and the matters in respect of which such receipt and expenditure takes place ; and (B) Of the assets and liabilities of the Company. The books of account shall be kept at the office, or at such other place as the Directors think fit, and shall always be open to the inspection of the Directors. 117. 118. Once at least in every year the Directors shall lay before the Company a proper profit and loss account, made up to a date not more than six months before the meeting, and a balance sheet containing a general summary of the capital, the assets, and the liabilities of the Company arranged under suitable heads. The Directors shall, in preparing every such balance sheet, have regard to the provisions of the statutes applicable thereto. Every such balance sheet as aforesaid shall be signed on behalf of the Board by two of the Directors. It shall also have attached to it, or there shall be inserted at the foot thereof, a reference to the Auditors' report. 119. 38 or any part of the assets of the Company, and may with the like sanction vest the whole or any part of such assets in Trustees upon such trusts for the benefit of the contributories as the Liquidator with the like sanction shall think fit. ARBITRATION. 132. In the event of any dispute between the Company and any Member in any way arising out of these presents, or the agreement signed by any Member as a condition of his admission to membership, or as to the rights or liabilities of the', Company or such Member, or as to the true intent and meaning of these presents or any such agreement as aforesaid, the same shall be referred to arbitration before a single arbitrator, such arbitrator to be agreed upon or failing agreement to be nominated on the application of any party to the dispute by The arbitrator so agreed upon or nominated shall determine where the arbitration is to be held and the manner in which the same is to be conducted, it being the express intention of the parties that the arbitrator shall without being bound by the rules of law of any country, be entitled to give such decision as will in his opinion be equitable having regard to the objects with which and the special circumstances in which the Company has been incorporated and the international character of the Company. The Company and all the members of the Company shall be bound to abide by and give effect to the decision of the arbitrator without appeal. INDEMNITY. 133. The Directors, Managing Directors, Agents, Auditors, Secretary and other officers for the time being of the Company and the Trustees (if any) for the time being acting in relation to any of the affairs of the Company and every of them and every of their heirs, executors, and administrators shall be indemnified and secured harmless out of the assets and profits of the Company from and against all actions, costs, charges, losses, damages and expenses which they or any of them, their or any of their heirs, executors or administrators shall or may incur or sustain by or by reason of any act done, concurred in, or omitted in or about the execution of their duty or supposed duty in their respective offices or trusts, except such (if any) as they shall incur or sustain through or by Proof 27/2/22. THE COMPANIES ACTS, 1908 to 1917. COMPANY LIMITED BY SHARES. Stntaranhum AND Artirirs Assnriatirrn OF THE NATIONAL CORPORATION, LIMITED. L1NKLATERS & PAINES, BOND COURT, WLLBROOK, LONDON, E.C.4 THE COMPANIES ACTS, 1908 to 1917. COMPANY LIMITED BY SHARES. jiltuurrattbunt AIM Artirits of Association OF The National Corporation, LIMITED. LINKLATERS & PAINES, 2, BOND COURT, WALBROOK, LONDON, E.C.4. BVILIIIP, MATEINSON & SPRAGUE, Ltd., 31, Throgmorton St., London, E.C.2. Tekphons 4420 Hop (4 hoes). THE COMPANIES ACTS, 1908 TO i917. COMPANY LIMITED BY SHARES. Mernotatibum of Etzsociation F The National Corporation, LIMITED. 1. The name of the Company is NATIONAL CORPORATION, LIMITED." THE 2. The Registered Office of the Company will be situate in England. 3. The objects for which the Company is established are :- (A) To subscribe for, acquire and hold, shares, stocks, securities and obligations of The International Corporation Limited (being a Company incorporated under the Comday of panies (Consolidation) Act, 1908, on the 1922) and to exercise all rights, privileges and advantages conferred by any such stocks, shares, securities, or obligations for the time being held by or belonging to the Company. (B) As a term of being admitted to acquire shares in the said Corporation, to enter into an agreement with the said Corporation in the terms (with or without modification) of the form of agreement scheduled to the original Articles of Association of the said Corporation, and duly to observe, carry out and perform all the terms and stipulations of any agreement so entered into. a. 0 (c) At the request or with the consent or on the nomination or allocation of the said International Corporation Limited (but not otherwise), and either as principal or as agent, contractor, or trustee for the said Corporation, or any C 181 2 other person, firm, company, authority or government and upon and subject to such terms and conditions, if any, as may be arranged with, or stipulated by the said Corporation, to do al or any of the following things in any part of the world, namely :- (i) To construct, execute, carry out, equip, and work, develop, administer, manage or control, or be interested in all kinds of works and conveniences, public or private, and in particular (but without limiting the generality of the foregoing), railways, tramways, hotels, ships, docks, harbours, piers, wharves, canals, reservoirs, embankments, irrigations, reclamations, telegraphs, telephones, and sewage, drainage, sanitary, water, gas, electric, hydraulic and shipbuilding works, but as regards telegraphs and telephones not within the United Kingdom. (ii) To lend money on the security of, acquire, hold, issue, negotiate, place, guarantee subscription of, underwrite and deal in stocks, shares, debentures, debenture stock, bonds, mortgages, obligations and securities of all kinds, issued, created, granted, guaranteed or made by any government, sovereign, ruler or other authority, national, local, municipal, or of any other description, or of any corporation, company, firm or person, and to give any guarantee for payment of money, or the carrying out of any contract or obligation, and in particular to guarantee the principal or capital and interest or dividends of any shares, stocks, debentures, loans, obligations or securities. To carry on the business of banking in all or any of its branches and departments, and for that purpose to establish, manage, carry on and register offices, branches or agencies in any part of the world, and to promote and further in all respects within its powers, financial and commercial, relations between all or any countries of the world. (iv) To lend or advance money, securities and property, to discount, buy, sell, and deal in bills of exchange, promissory notes, coupons, drafts, bills of lading, warrants and other instruments and securities, whether transferable or negotiable or not, to give is 3 acceptances and guarantees and generally to promote financial facilities for any purposes, to negotiate loans and advances, to issue warrants for goods and raw materials under its control, to collect and transmit money and securities and generally to transact all kinds of agency and other business commonly transacted by bankers. (v) To seek for and secure openings for and promote the employment of capital for any purposes which may be considered calculated to promote employment or to improve existing economical or industrial conditions and to enter into any arrangements with any Governments or authorities, supreme, municipal, local or otherwise, and to obtain from any such Government or authority any rights, privileges, or concessions, which may be considered desirable, and to carry out, exercise and comply with any such arrangements, rights, privileges and concessions. (vi) To take or concur in taking all such steps and proceedings as may be considered calculated to uphold R and support the credit of the Company or of The International Corporation Limited, or any Companies or bodies with which it is associated in any way, or to obtain and justify public confidence or to avert or minimise financial, industrial, polit:cal or other disturbances. (vii) To act as agents for the investment, loan, payment, transmission and collection of money, and for the purchase, sale, improvement, development and management of property, including business concerns and undertakings of all kinds and generally to transact and undertake all kinds of agency and commission business. (viii) To lend and advance money at interest or otherwise on any security or without security, and generally upon such terms and subject to such conditions as may be considered expedient. (ix) To form, promote, subsidise, finance and assist Governments, authorities, companies, syndicates, partnerships and other bodies of all kinds. (I) To subscribe or guarantee money for any national, charitable, benevolent, public, general or useful object or for any exhibition. (J) To grant pensions or gratuities to any employees or ex-employees of the Company or its predecessors in business, or the relations, connections or dependents of any such persons, and to establish or support associations, institutions, clubs, funds and trusts which may be considered calculated to benefit any such persons or otherwise advance the interests of the Company or of its members. (K) To invest any moneys of the Company not for the time being required for the general purposes of the Company in such investments (other than shares in the Company) as may be thought proper, and to hold, sell or otherwise deal with such investments. (L) To distribute among the Members of the Company in specie any property of the Company. (M) To do all or any of the things and matters aforesaid in any part of the world, and either as principals, agents, contractors, trustees or otherwise, and by or through trustees, agents or otherwise, and either alone or in conjunction with others. (N) To do all such other things as may be considered to be incidental or conducive to the above objects or any of them. 4. The liability of the Members is limited. 5. The capital of the Company is £4,000,000, divided into 4,000,000 shares of £1 each. Any of the said shares for the time being unissued and any new shares from time to time to be created may from time to 6. time be issued with such preferred, deferred or other special rights or such restrictions whether in regard to dividend, return of capital, voting, or otherwise as the Company may from time to time by extraordinary resolution determine, but so that the special rights belonging to the holders of any shares issued with preferred or other special rights shall not be modified or abrogated except with such sanction as is provided by the Articles of Association of the Company for the time being. 40 WE, the several persons whose names and addresses are subscribed, are desirous of being formed into a Company, in pursuance of this Memorandum of Association, and we respectively agree to take the number of Shares in the capital of the Company set opposite to our respective names. NAMES, ADDRESSES, AND DESCRIPTIONS OF SUBSCRIBERS. No. of Shares taken by each Subscriber. To Dated the day o Witness to the above Sign i 12 SHARES. 9. The shares shall be at the disposal of the Directors, and they may allot, grant options over, or otherwise dispose of them to such persons, at such times, and on such terms as they think proper. Provided that the Directors shall, as regards any offer or allotment of shares, comply with the provisions of Sections 85 and 88 of the Act, if and so far as such provisions may be applicable thereto. 10. On any offer or allotment of share capital to which Section 85 of the Act shall apply, the minimum subscription upon which the Directors may proceed to allotment shall be seven shares. 11. The Company (or the Directors on behalf of the Company) may exercise the powers of paying commissions conferred by Section 89 of the Act. Provided that the rate per cent. or the amount of the commission paid or agreed to be paid shall be disclosed in the manner required by the said Section, and shall not exceed the rate of 10 per cent. of the nominal amount of the shares in respect whereof the same is paid, or an amount equal to 10 per cent. of the nominal amount of such shares (as the case may be). The Company (or the Directors on behalf of the Company) may also on any issue of shares pay such brokerage as may be lawful. If any shares of the Company are issued for the purpose of raising money to defray the expenses of the construction of any works or buildings, or the provision of any plant which cannot be 12. made profitable for a lengthened period, the Company, or the Directors on behalf of the Company, may, subject to the conditions and restrictions mentioned in Section 91 of the Act, pay interest on so much of such share capital as is for the time being paid up and may charge the same to capital as part of the cost of construction of the works, buildings or plant. 13. No person shall be recognised by the Company as holding any share upon any trust, and the Company shall not be bound by or recognise any equitable, contingent, future or partial interest in any share, or any interest in any fractional part of a share or (except only as by these presents otherwise provided) any other right in respect of any share, except an absolute right to the entirety thereof in the registered holder. 14 18. The proceeds of sale shall be applied in or towards payment or satisfaction of the debt or liability in respect whereof the lien exists so far as the same is presently payable, and any residue shall (subject to a like lien for debts or liabilities not presently payable as existed upon the shares prior to the sale) be paid to the person entitled to the shares at the time of the sale. The purchaser shall be registered as the holder of the shares and he shall not be bound to see to the application of the purchase money, nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings in reference to the sale. CALLS ON SHARES. The Directors may from time to time make calls upon the Members in respect of any moneys unpaid on their shares, provided that no call shall exceed one-fourth of the nominal amount of the share or be payable at less than two months from the last call, and each Member shall (subject to receiving at least one month's notice specifying the time or times and place of payment) pay to the Company at the time or times and place so specified the amount called on his shares. 19. 20. A call shall be deemed to have been made at the time when the resolution of the Directors authorising the call was passed. 21. The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof. If a sum called in respect of a share is not paid before or on the day appointed for payment thereof, the person from whom the sum is due shall pay interest on the sum from the day appointed for payment thereof to the time of actual payment at such rate, not exceeding 10 per cent. per annum, as the Directors determine, but the Directors shall be at liberty to waive payment of such interest wholly or in part. 22. 23. Any sum which by the terms of issue of a share becomes payable upon allotment, or at any fixed date, whether on account of the amount of the share or by way of premium, shall for all the purposes of these presents be deemed to be a call duly made and payable on the date on which, by the terms of issue, the same becomes payable, and in case of non-payment all the relevant provisions of these presents as to payment of interest and expenses, forfeiture or otherwise, shall apply as if such sum had become payable by virtue of a call duly made and notified. -4b 16 TRANSMISSION OF SHARES. 31. In case of the death of a shareholder the survivors or survivor where the deceased was a joint holder, and the executors or administrators of the deceased where he was a sole holder, shall be the only persons recognised by the Company as having any title to his shares, but nothing herein contained shall release the estate of a deceased joint holder from any liability in respect of any share jointly held by him. Any person becoming entitled to a share in consequence of the death or bankruptcy of a Member may upon such evidence 32. being produced as may from time to time be required by the Directors, and subject as hereinafter provided, either be registered himself as holder of the share or elect to have some person nominated by him registered as the transferee thereof. If the person so becoming entitled shall elect to be registered himself he shall deliver or send to the Company a notice in writing signed by him stating that he so elects. If he shall elect 33. to have his nominee registered he shall testify his election by executing to his nominee a transfer of such share. All the limitations, restrictions and provisions of these presents relating to the right to transfer and the registration of transfers of shares shall be applicable to any such notice or transfer as aforesaid as if the death or bankruptcy of the Member had not occurred and the notice or transfer were a transfer executed by such Member. A person becoming entitled to a share in consequence of the death or bankruptcy of a Member shall be entitled to receive 34. and may give a discharge for all dividends and other moneys payable in respect of the share, but he shall not be entitled to receive notices of or to attend or vote at meetings of the Company or save as aforesaid to any of the rights or privileges of a Member until he shall have become a Member in respect of the share. FORFEITURE OF SHARES. 35. If a Member fails to pay any call or instalment of a call on the day appointed for payment thereof, the Directors may at any time thereafter during such time as any part of such call or instalment remains unpaid, serve a notice on him requiring payment of so much of the call or instalment as is unpaid, together with any interest and expenses which may have accrued.- 18 into stock, and may with the like sanction reconvert any stock into paid-up shares of any denomination. The holders of stock may transfer the same or any part thereof in the same manner, and subject to the same regulations 42. as and subject to which the shares from which the stock arose might previously to conversion have been transferred, or as near thereto as circumstances admit, but no stock shall be transferable except in sums of £1 or multiples of £1. No warrants to bearer shall be issued in respect of any stock. 43. The holders of stock shall, according to the amount of the stock held by them, have the same rights, privileges and advantages as regards dividends, participation in assets on a winding up, voting at meetings of the Company, and other matters as if they held the shares from which the stock arose, but no such privilege or advantage (except participation in dividends and in assets on a winding up) shall be conferred by any such aliquot part of stock as would not, if existing in shares, have conferred such privilege or advantage. 44. All such of the provisions of these presents (other than those relating to share warrants) as are applicable to paid-up shares shall apply to stock, and the words " share " and " shareholder " therein shall include " stock " and " stockholder." INCREASE OF CAPITAL. The Company in General Meeting may from time to time by resolution increase its capital by such sum to be divided into shares of such amounts as the resolution shall prescribe. 45. 46. The Company may by the resolution increasing the capital direct that the new shares, or any of them, shall be offered in the first instance, either at par or at a premium, to all the ordinary shareholders for the time being, in proportion to the number of ordinary shares held by them respectively, or make any other provisions as to the issue of the new shares. In default of any such direction, or so far as the same shall not extend, the new shares shall be at the disposal of the Directors, who may allot, grant options over, or otherwise dispose of them to such persons and on such terms as they shall think fit. The new shares shall be subject to the same provisions with reference to the payment of calls, lien, transfer, transmission, 47. forfeiture and otherwise, as the shares in the original capital, 20 Meeting) and place as may be determined by the Directors. The General Meetings referred to in this Article shall be called Ordinary Meetings. All General Meetings other than Ordinary Meetings and the Statutory Meeting shall be called Extraordinary. The Directors may call an Extraordinary Meeting whenever they think fit, and shall, on the requisition of the holders of not less than one-tenth of the issued capital of the 51. Company upon which all calls or other sums then due have been paid, forthwith proceed to convene an Extraordinary Meeting. The requisition must state the objects of the meeting, and must be signed by the requisitionists, and deposited at the office, and may consist of several documents in like form, each signed by one or more of the requisitionists. NOTICE OF GENERAL MEETINGS. 52. Seven days' notice at the least (inclusive of the day on which the notice is served or deemed to be served, but exclusive of the day for which the notice is given) specifying the place, the day, and the hour of meeting, and in case of special business, the general nature of such business, shall be given in manner herein- after mentioned to such Members as are, under the provisions herein contained, entitled to receive notice from the Company. The accidental omission to give notice to, or the nonreceipt of notice by, any Member, shall not invalidate the proceedings at any General Meeting. 53. Whenever it is intended to pass a Special Resolution the two meetings may be convened by one and the same notice, and it 54. shall be no objection that the notice only convenes the second meeting contingently on the resolution being passed by the requisite majority at the first neeting. PROCEEDINGS AT GENERAL MEETINGS. All business shall be deemed special that is transacted at the Statutory Meeting or at an Extraordinary Meeting, and also all business that is transacted at an Ordinary Meeting, with the 55. exception of sanctioning dividends, the consideration of the accounts and balance sheet, and the ordinary reports of the Directors and Auditors, the election of Directors and Auditors and other officers in the place of those retiring by rotation or 23 The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing, or if the appointor is a corporation either under the 70. common seal or under the hand of an officer or attorney so authorised. No person shall act as a proxy unless either he is entitled on his own behalf to be present and vote at the meeting at which he acts as proxy or he is appointed to act at that meeting as proxy for a corporation. 71. The instrument appointing a proxy and the power of attorney or other authority (if any), under which it is signed, or a notarially certified copy of such power or authority, shall be deposited at the office not less than 48 hours before the time 72. appointed for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote, and in default the instrument of proxy shall not be treated as valid. No instrument appointing a proxy shall be valid after the expira- tion of 12 months from the date named in it as the date of its execution. An instrument of proxy may be in the following form, or in any other form which the Directors shall approve. 73. THE NATIONAL CORPORATION, LIIVCITED. of I being a Member of the above named Company hereby appoint as my proxy to of vote for me, and on my behalf, at the Ordinary [or Extraordinary as the case may be] General Meeting of the Company to be held on the , 19 , day of and at any adjournment thereof. As Witness my hand this day of 19 . A vote given in accordance with the terms of an instrument of proxy shall be valid, notwithstanding the previous death or insanity of the principal or revocation of the proxy, or of the authority under which the proxy was executed, or the transfer of the share in respect of which the proxy is given, provided that no 74. intimation in writing of such death, insanity, revocation or transfer as aforesaid, shall have been received by the Company at the office before the commencement of the meeting or adjourned meeting at which the proxy is used. 30 purpose of filling up vacancies in their body or of summoning General Meetings of the Company, but not for any other purpose, and may act for either of the purposes aforesaid whether or not their number is reduced below the number fixed by or in accordance with these presents, as the quorum of Directors. 102. The Directors may elect a Chairman of their meetings and determine the period for which he is to hold office, but if no such Chairman be elected, or if at any meeting the Chairman be not present within five minutes after the time appointed for holding the same, the Directors present may choose one of their number to be Chairman of the Meeting. 103. A resolution in writing, signed by all the Directors for the time being in the United Kingdom, shall, provided they constitute a majority in number of the Directors for the timebeing, be as effective as a resolution passed at a meeting of the Directors duly convened and held. 104. A meeting of the Directors for the time being, at which a quorum is present, shall be competent to exercise all powers and discretions for the time being exercisable by the Directors. 105. The Directors may delegate any of their powers to Committees consisting of such Member or Members of their body as they think fit. Any Committee so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on them by the Directors. 106. A Committee may elect a Chairman of their meetings ; if no such Chairman be elected, or if at any meeting the Chairman be not present within five minutes after the time appointed for holding the same, the Members present may choose one of their number to be Chairman of the meeting. 107. A Committee may meet and adjourn as they think Questions arising at any meeting shall be determined by a majority of votes of the Members present, and in case of an equality of votes the Chairman shall have a second or casting vote. proper. 108. All acts done by any meeting of Directors, or of a Committee of Directors, or by any person acting as a Director, shall, notwithstanding it be afterewards discovered that there was some defect in the appointment of any such Director, or person acting as aforesaid, or that they or any of them were disqualified, or had vacated office, be as valid as if every such person had been 35 meeting, provided that if after a notice of the intention to nominate an Auditor has been so given an Ordinary Meeting is called for a date 14 days or less after that notice has been given, the notice though not given within the time required by this provision shall be deemed to have been properly given for the purposes thereof and the notice to be given by the Company may, instead of being given within the time required by this provision, be given at the same time as the notice of the meeting. The Auditors' report to the shareholders made pursuant to the statutory provisions as to audit for the time being in force shall be read before the Company in General Meeting and shall be open to inspection by any shareholder, who shall be entitled to be furnished with a copy of the balance sheet and 134. Auditors' report at such charge not exceeding sixpence for every hundred words as the Directors determine. NOTICES. Any notice or document may be served by the Company on any Member either personally or by sending it through the post 135. in a prepaid letter addressed to such Member at his registered address as appearing in the Register of Members. In the case of joint holders of a share all notices shall be given to that one of the joint holders whose name stands first in the Register of Members, and notice so given shall be sufficient notice to all the joint holders. Any Member described in the Register of Members by an address not within the United Kingdom who shall from time to time give to the Company an address within the United 136. Kingdom at which notices may be served upon him shall be entitled to have notices served upon him at such address, but save as aforesaid no Member other than a registered Member described in the register of Members by an address within the United Kingdom shall be entitled to receive any notice from the Company. 137. Any notice or other document, if served by post, shall be deemed to have been served at the time when the letter containing the same is posted, and in proving such service it shall be sufficient to prove that the letter containing the notice or document was properly addressed, stamped and posted. 38 NAMES, ADDRESSES AND DESCRIPTIONS OF SUBSCRIBERS. Dated the day of Witness to the above Signatures- 1922. Proof-27/2/22. ,intrtnturc of Aguntatt day of 1922 made the BETWEEN incorporated under the laws of (hereinafter called " the tional Company ") of the first part incorporated under the laws of (hereinafter referred to as " the National Company ") of the second part incorporated under the laws of (hereinafter referred to as "the National Company ") of the third part incorporated under the laws of (hereinafter referred to as the National Company ") of the fourth part ' and THE CENTRAL INTERNATIONAL CORPORATION LIMITED incorporated under the Companies Acts of the United Kingdom of Great Britain and Ireland (hereinafter called the Central Company ") of the fifth part WHEREAS the above-mentioned parties of the first parts (hereinafter collectively referred to as " the National Companies ") have applied to be admitted as members of the Central Company as subscribers for each in its Capital as follows viz :- Shares of E1 National Company Shares National Company Shares National Company Shares National Company Shares (being approximately 10 per cent. of the original issued share capital of such National Companies respectively) on the terms The The The The of the Central Company's Memorandum and Articles of Association AND WHEREAS it is one of the fundamental conditions upon which the Central Company has been formed that the shares of the Central Company (other than two shares to be subscribed by the incorporators) shall be issued to and held only by Corporations formed for the purpose and approved by the Central Company and that no shares shall be issued or transferred to any Corporation unless on or before the issue or transfer thereof such Corporation enters into an agreement with the Central Company and the other shareholders in the form of these presents or covenants with the C 186 2 Central Company and the other shareholders thereof to be bound by the terms of such Agreement as if it had been a party thereto. Now THESE PRESENTS WITNESSETH as follows :1. Tab expression the shareholder means and includes the National Companies and such other Corporations as may be admitted to membership of the Central Company from time to time. THE Board of Directors of the Central Company will from time to time decide uponwhat businesses operations or transactions 2. are to be undertaken and carried out by the Central Company or by all or any of the Shareholders either alone or in conjuction with the Central Company such businesses operations or transactions being hereafter referred to as " approved business." IT IS HEREBY DECLARED by the parties hereto that as far as reasonably possible having regard to all the circumstances 3. of each case each. Shareholder will be offered an interest or participation in all approved business which the Board of the Central Company determine to divide among the Shareholders proportionate to such Shareholders' shareholding in the Central Company as compared with the total issued share capital thereof at the time when such business was approved (hereafter referred to as a " pro rata participation"). SUBJECT to the provisions of Clause 3 hereof the Board of the Central Corporation will decide what interest or participation in any approved business shall be offered to all or any of the Shareholders and shall determine at the same time the proportion of such interest or participation to be offered to each Shareholder. 4. IN allocating approved business among the Shareholders the Board of the Central Company shall as equitably as 5. may be apportion such business so that in the aggregate such business is fairly and reasonably apportioned among the Shareholders in their pro rata proportions. Any differences in connection with one business shall be equitably adjusted by means of other business or businesses provided however that there shall be no adjustments in respect of non-participation in any business where such non-participation arises under 3 The decision of the Board of the Central Company as to the allocation of business shall be final and Clause 8 hereof. binding. In carrying out approved business which the Central Company may determine to carry out direct the Central Company will place orders for materials and supplies required to be purchased in countries where a National Corporation is registered through such National Corporation provided such National Corporation is willing to deal with such orders on 6. reasonable terms. IF any Shareholder which has undertaken engagements or commitments to the extent of the whole of its capital and other financial resources is willing to accept a participation in any new approved business offered to it but is unable to do so for financial reasons such Shareholder shall be entitled to ask the Central Company for financial assistance to enable it to accept and carry out the said participation so offered and the Central Company will use its best endeavours to provide such 7. financial assistance but the Central Company shall not be bound to give such financial assistance. 8. WHERE the representative of a Shareholder on the Board of the Central Company has voted against a resolution for the undertaking of any business or against a resolution for the offering of such business for division among the Shareholders such Share- holder shall not be entitled to claim and shall not be bound to accept a participation in such business but each Shareholder whose representative on the Board has voted in favour of any such resolution as aforesaid shall be bound to accept up to but not exceeding twice its pro rata participation in such business as defined in Clause 3. THE Board of the Central Company may with regard to any approved business appoint some one or more of its Shareholders or any other company firm or person as Managing Agents to manage and conduct such business on behalf of all the Shareholders interested therein and may lay down rules for the guidance 9. of such Managing Agents and may determine what (if any) remuneration they are to receive for their services as such in addition to their participation (if any) in such business. 4 10. EACH Shareholder accepting a participation in any approved business shall be bound to provide his rateable proportion of the finance required to carry such business through and shall be entitled to receive and shall be bound to bear his rateable proportion of any profit or loss resulting therefrom such rateable proportions being in each case based upon the participation taken by each such Shareholder. 11. THE Director or Directors representing any Shareholder on the Board of the Central Company shall be fully empowered by such Shareholder to act on behalf of such Shareholder and to accept any participation in any approved business either for the tull pro rata share or more or less than the pro rata share of such Shareholder and to consent to act as Managing Agent in respect of any business and generally to act for such Shareholder. THE Central Company will be entitled to reserve for itself such remuneration (whether by way of a fixed sum or a percentage or a commission or otherwise) in connection with any approved business as the Board of the Central Company may fix and such remuneration shall be treated as an expense of 12. conducting such business. 13. EXCEPT on questions requiring a special vote resolutions at Board Meetings of the Central Company will be passed by a simple majority of the votes of those Directors present in person or by alternate or by proxy and voting on such resolutions. The expression "a special vote" shall have the meaning assigned thereto by the Articles of Association of the Central Company. 14. THE National Companies in consideration of the Central Company admitting them to membership and allotting to them respectively shares in the Central Company representing approximately 10 per cent. of the present issued share capitals of such National Companies respectively hereby covenant and agree with the Central Company and with each other :- (A) That so long as any National Company continues to be a Shareholder in the Central Company such National ,Company will not either alone or jointly with or as Manager or Agent for others or another directly or indirectly carry on undertake enter upon or carry out or be concerned engaged or otherwise interested it any business undertaking 5 transaction or operation whether whatsoever THE CENTRAL INTERNATIONAL CORPORATION, LIMITED, SECPET AND CON2ILMTTIAL. PRELIMINARY MEETINGS iOR THE GENOA CONFERENCE. Experts Report. The economic and financial experts of the powers responsible for the summoning of the Conference at their meeting for the exchange of views, after examining together a number of suggestions and schemes, have prepared draft resolutions embodying the ideas and proposals which met with general acceptance. The drafts are set forth in the pages of this report arranged under the following headings: - PART I RUSSIA, Section I. Preamble. Section II. Conditions under which fanign enterprise and capital can be enlisted for the restoration of Russia. Chapter I. Liquidation of past obligations. Chapter II. Provisions for the future. Section III. Measures by which the speedy recovery of Russia would be facilitated. PART II Restoration of Europe. Section I. Financial provisions. Section II. Economic provisions. Section III. Transport provisions. PART 4. RECONSTRUCTIOL OF RUSSIA, Section I. Preamble. The question of Russia has boon aprr,ached both from the point of view of what is equitable and from the point of view of 7hat is necessary for the economic restoration of Russia, The economic restoration of Russia is largely dependent upon her enlisting the support of foreign enterprise and capital. Without a considerable transformation of the prevailing conditions which affect particularly trade and industry foreigners will be reluctant either to return to their former undertakings or to start fresh undertakings. So long as precarious and unstable con- ditions continue, only speculators will be willing to venture on trade, and there is a fear that the chief result would be net the reconstruction but the exploitation of Russia and the Russian peeple, which it is the purpose of the Governments represented at Genoa to avoid. Effective co-operation between Russia and other European countries will be difficult to realise unless a determination is shown in Russia to set to work whole heartodly to restore the economic life of Russia. The foundation is agriculture, and here no loss than else- where security both in respect of holdings and of the disposal of crops is an essential pre-requisite of revival. Once this security is realised, there is no doubt that foreign help will be forthcoming in.the shape of agriculuulai tultunwtwurs anu yvtu.lo, k In the industrial sphere it is even more apparent that revival cannot be expected in the absence of foreign assistance and capital, which will only become avail4lo when the goodwill and co--operation of the Russian tovernment can be relied upon. Active measures will be necessary for the protection and liberty of action of employers, their employees, and for the protection of their industrial operations and their capital, combined with the right to hold the movable and immovable property necessary for the conduct of business and with the liberty to import what is requisite and to dispose of the products of their undertakings. Much the same may be said of transport, in which case foreign firms will have to be relied upon for the furnishing cf material and plant, including fresh rolling stock, and the setting up of repair shops; and it needs no emphasis that the reorganisation of transport is essential to the industrial and agricultural recovery of Russia. The question of the instrument by which effect could be given to these conditions and to contingent provisions has not been consid'ered, nor the relation of any such in- strument to existing trade agreements with Russia. These with certain other questins have been reserved as political. Indications are given in the drafts which follow of some of the points reserved. The same applies to the question whathe,-and, if so, to what extent, new States whioh have been recogni:;o1 as such and whioh wero formerly part of Russia, as well as States whioh have acquired part of the former territory of Russia, should undertake part of thecbligations dealt with in those provisions. Article 2. The Russian Soviet Government shall recognise the financial engagements entered into before this date by all authorities in Russia, provinoial or local or by public utility undertakings in Russia, with other Powers cr their nationals, and shall guarantee the fulfilment thereof. Article 3. The Russian Soviet Government shill undertake liability for all actual and direct losses, whether arising out of breach of contract or otherwise, suffered by nationals of other Powers, due to the action 'or negligence of the Soviet Government or its predecessors or of any provincial er local authorities, or of an agent of any such government or authority. Article 4. The liabilities under the preceding Articles will be determined by a "Russian Debt Commission' and by IlMixod Arbitral Tribunals" to be set up. A soheme for the establishment of these bodies is contained in Annexes I and II. They shall determine the amount and method of payment to be made whether by ray of compensation, or otherwise as laid down in Annexes I - III. Article 5. All ±nter-governmontal debts, liabilities and obligations of every sort which arose between the Russian Government on the one hand and a foreign Government on the other hand after August 1, 1914, shall be considered to be completely discharged by the payment of the net sums laid down in a schedule to be agreed. Article 6. Without prejudice to the provision of Article 116 of the Treaty of Versailles, the net sums fixed under Article 5 shall take into account all claims by Russian nationals for loss or damage arising directly from hostile military or naval operations, or from other operations of a similar nature and any other claims specified at the time of the adoption of the schedule referred to in Article 5. Balances standing to the credit of a former Article 7. Russian Government in any bank situate in a oountry the Government of which made advances to a former Russian Government between August 1, 1914, and November 7, 1917, shall be transferred to the Government which made the advances and the liability of the Russian Soviet Govern- ment in respect of the advances shall be ELT tanto reduced. The transfer provided for in the preceding paragraph shall not prejudice the rights of third parties. ANYEXES./. Note. With regard to the security on which the Russian debt is in future to be charged, two solutions have been put forward by different delegations. They are shown, where necessary, in parallel columns in Annexes I to III. Agreement has not been arrived at in favour of either of these two solutions or of any of the numerous intermediate solutions which might be devised. To add to Article 7. This article shall also apply in the case of any country, the Government of which has assuiied responsibility for any Russian Government loan. floated in that country in the period named.- ANNEX I. HUSSIAIT DEBT COLSIISSION, A Russian Debt Corlmission shall be established 1. consisting of members nominated by the Russian Government and members nominated by the other Powers, together :with an independent Chairman chosen from outside by agreement among the other members, or, in default, named by the League of Nations, either through the Council or through the Permanent Court of International Justice, The Comission will have the following functions: 2, (a) To constitute and prescribe the procedure of the T-axed Arbitral Tribunals, to be set up in accordance with the provisions of Annex II, and to issue such instructions as may be necessary in order to secure uniformity in their proceedings. (b) To issue new Russian Ponds in accordance with the provisions of Lnnex II to persons entitled thereto, under awards of the !A.xed Arbitral Tribunals, to holders of existing State bonds and other bonds and stock for which the new P.ussian Bonds are to be given in exchange, and to persons entitled thereto in respect of landed interest and repayment of capital. The rate of interest adopted for the purpose of calculating the present value of claims shall be the sal-ae as that prescribed under Anne:: III, paragraph (2). (c) To determine all questions arising out of the 7 issue, rates of interest -and terms of redemption of the new Russian bonds referred to in paragraph (b). (d) nil. (d). To detenaine, if necessary arrong the revenues of Russia, those which should be specially -assigned to the service of the debt, for example an allocation of certain taxas or of royalties or dues upon undertakings in riussia. Should occasion arise to control, if the Con fission thinks fit, the collection of all or part of these assigned revenues, and to deal rith the proceeds. These assignments and this control (if imposed) should cease as soon as the Russian debt service appears adequately assured by the inclusion of the appropricte sums in the Fuscian budget. INNEX II. DETERIJIN/TION OF OLtImS. 1, The liabilities of the Russian Government under Articles 1 to 3 shall be assessed in accordance with the following principles:A The responsibility for claims provided for in Article 2. 3 shall be determined by the Mixed Arbitral Tribunals in accordance with the provisions of this Report and in default with the general principles of International Law. Russian Government bonds in foreign currencies will 3. be revived with all the conditions of the contract but interest and repayment of capital due from the date when payments ceased until govember 1. 19277 will be funded. and the bonds will be secured in the same way as the new Russian Bonds in accordance with Annex III 5. Provincial, Municipal, Railway or Public Utility 4, Bonds in foreign currencies will be revived with all the conditions of the contract but interest and repayment of capital due from the date when payment ceased until (November 1, 1927,) will be funded. All such bonds shall be guaranteed by the Soviet Government whether guaranteed by any former Government of Russia or not. and the bonds will be secured in the same way as the new Russian Bonds in accordance with Annex III. 5. 5. Russian Government Rouble Loans or Provincial, Municipal, Railway or Public Utility Bonds issued in roubles will if proved to have been continuously in foreign ownership since the date of repudiation by the Russian Government be exchangeable into new Russian Bonds. The present value of the obligations in respect of capital and interest embodied in the original bond, in so far as they have not been fulfilled, shall first be calculated in roubles, and then converted into the foreign currency at the rate determined in paragraph16.The present value of the new bond should be equal to the present value in the foreign currency of the original bond, interest being calculated at the rate to be prescribed under the provisions of Annex III, 6, 2. New Russian Bonds will be issued in respect of funded interest and capital due for repayment between the date when payment ceased and (November 1, 7. 1927). Claims not provided for under Paragraphs 3 to 5 of this Annex in respect of injury to property, rights and interests shall, subject to any agreements between the Soviet Government and such of the other Powers as may be concerned be dealt with on the following principles. Claimants will be entitled to demand the return of the property, rights and interests. If the property, rights or interests are still in existence and capable of identification, they will be returned and compensation for their use or for injury thereto during the dispossession will in default of agreement between the Soviet Government and the private party concerned be settled by the }Mixed Arbitral Tribunals. Agreements for doncessions in relation to pubic utility undertakings shall be modified so as to be brought into harmony with present economic conditions, for example as regards charges, duration of concessions and conditions of operation. MEM If the property,rights and interests are not still in existence or cannot be identified, or the claimant does not desire their return, the claiL may by agreement bet7een the Soviet Government and the private party concerned be satisfied either by the grant of similar property rights or interests coupled with compensation to be agreed or failing agreement to be fixed by the Mixed Arbitral Tribunals, or by any other agreed settlement* In all other cases claimants shall be entitled to compensation on a monetary basis to be fixed by the Mixed Arbitral Tribunals, Note. In the opinion of tie experts it may be necessary to add some condition in the case of claims for destruction, loss or damage of property, rights or interests which were acquired subsequent to the events of 19170 It miPait be desirable to give the Mixed _irbitral Tribunals a discretion, in some cases at any ratc,to take the matt3r into account when they are satisfied that the price at which the property was acquired renders payment of compensation on the basis of the full value.of the property inequitable, 11. w The tribunal in assessins compensation shall take account primarily of the actual value in roubles of the property, rights or interests at Noveuber1,1917, but may make allowance for any te]porary and special circumstances which may at that ti:Je have Anterially affected the value. 9. Yhere a debtor is entitled, or if he had been a national of one of the other Powers, would have been entitled, to claim compensation under Chapter I, the creditor may (whether the debtor has claimed compensation or not) make a direct clail71 against t]-,e Soviet Government in respect of the loss arising from his unpaid debt instead of against the debtor. Any property restored in accordance with paragraph (7) shall be subject to any charges or obligations attaching thereto upon November 1, 1917, without prejudice to the rights of creditors to make a direct claim against the Soviet Government. 10. Any liability met by the Soviet Government under the preceding paragraph will be set off against the compensation payable to the debtor; but if the Soviet Government has already paid the compensation to the debtor, it may recover from the debtor the amount paid to the creditor but the liability of the former may be discharged in new Russian 11. Bonds. Russian financial, industrial and camAercial companies which on Nomilber 1, 1917, were controlled by nationals of other Powers or in which at the same date such nationals possessed a substantial interest shall, if the najority of the foreign interests (shareholders and bondholders) so desire, be covered by the term "Nationals of other lowers" wherever used in Chapter and the Annexes. w In cases to which a claim is not made under the k 12, preceding paragraph or other provision of this Chapter or its annexes any national of the other Powers who is a shareholder in any Russian Company whatever may claim compensation in accordance with article 3 for the injury done to his holding in the company. 13. Claims, excluding those referred to in paragraphs 3-5 above, but including claims for monetary compensation arising from death or personal injury, shall be referred by the Comission for adjudication and assessment on a monetary basis as promptly as possible by Mixed Arbitral Tribunals. All claims shall be resistered with the Russian Debt Commission, and options shall be exercised within one year from the esOalishment of the Contnission or such longer period as may be permitted by the Commission for particular cases or classes of cases. The Pussian Soviet Government shall not be liable in respect of any claim not registered within the prescribed period. 15. No claim shall be recognised in respect of rights which had ceased legally to exist before March, 1917. 16. The rates of conversion between paper roubles and the various foreign currencies will be fixed by the Russian Debt Commission at the time of issuing the new Russian fonds. For this purpose t.ie Commission will first ascertain the average gold value of the rouble in October, 1917, and will then calculate the equivalent of that gold value in each of the foreign currencies at the time of the issue of the bonds. 17, Interest at the rate prescribed under paragraph (2) of Annex III shall accrue as from November 1, 1917 on all amounts awarded by the tribunal. ANNEX III. 411 L NEW RUSSIAN BONDS. 1. A11 accepted claims for monetary compensation against the Russian Soviet Government will be met by the issue of new Russian Bonds up to the amounts fixed by the Mixed The terms of issue of the bonds, together Arbitral Tribunals. with all questions arising out of the conversion of existing bonds, and out of the new issues, will be determined by the Russian Debt Commission. 2. The Bonds shall carry a rate of interest to be determined by the Russian Debt Commission. They shall be free both as to interest and capital from all Russian taxation both present and future and shall be subject to redemption by annual drawings. 3. In general the bonds will be expressed in the currency of the holder's country. Nevertheless the Debt Commission may allow him, if he so requests, to take bonds in the currencies of certain specified countries. 4. In order to determine the value of the bonds for any pay- ment under these provisions the bonds shall be discountE)d at the rate of interest prescribed under paragraph 2 above. 5. The bonds shall be a or (5 The bonds shall be a charge on the whole assets charge, primarily upon assets of the Russian State. selected by the Russian Debt Commiesion:in accordance with Annex I, 2(d) and secondarily on the whole assets of the Russian State. 8. Interest shall be funded and the Russian Soviet Government shall not be required to redeem any bonds until (November 1st, 1927.) It shall be within the competence of the Debt Commission to issue bonds of a special series in respect of funded interest. Any such Interest Bonds shall carry the same rights and be in all respects the same as the new Russian -14- CHAPTER II. B. CONDITIONS OF RESIDENCE AND TRADE IN RUSSIA. Article 9. The Russian Soviet Government shall undertake to permit the entry an-e, egress of foreigners into and from its territory in accordance rith the usual practice of States. Article 10. Foreigners while sojourning in Russia shall be exempted from all kinds of compulsory services and from any contributions rhatever imposed as an equivalent for personal service; they shall not be subject to any fcroed loans. Article 11. Foreigners shall be at liberty to communicate freely by post, telegraph or wireless telegraph, and to use telegraph codes under the conditions and subjeot to the regulations laid down in the International Telegraph Conventions. Article 12. Foreigners shall enjoy all protection, rights and facilities which are necessary to enable them to carry on any permitted trade, profession or occupation in accordance with the usual practice of States; they shall not be subject to any discriminating legislation or restrictions on account of their nationality. They shall not be compelled to join any local organisation. Article 13. No discrimination against the workmen employed in undertakings belonging to foreigners or directed by foreigners shall be exercised in respect of military service, or forced labour; nor shall any taxation be levied in lieu thereof. 17. Article 14. Foreigners shall have adequate facilities for travelling on Russian railways, roads and waterways, and for the carriage of their goods and merchandise. These facilities shall not be less than those accorded to Russian Government enterprises or Russian nationals and shall be applied without discrimination, Article 15. Requisitions shall not be imposed save in exceptional circumstances and subject to adequate compensatioa payable at the time. Article 16. Foreign companies and associations duly constituted shall be alloyed to carry on any business open to foreigners in Russia, and for this purpose shall have the same rights as private individuals, including that of appearing before the tribunals. Article 17. Foreign firms or individuals, and also foreign companies and associations, carrying on any permitted trade, profession or occupation in Russia shall be subject to no higher taxation than is borne by Russian nationals. The system of taxation shall not in practice impose on branches of foreign companies carrying on permitted trades, professions and occupations in Russia any greater burden of taxation than on similar businesses carried on there by Russian Companies. Article 181 The Russian soviet Government shall be invited to become a party to the International Conventions for the pretection of industrial, literary and artistic property. 18. C. Note: TREATIES AND CONITMIONS. All questions concerning political treaties and conventions are reserved. Article 19. The multilateral conventions and agreements of an economic, technical or legal character to which the former Russian Governments were parties shall be regarded as still binding on Russia, Article 20. Contributions owing by Russia in respect of the upkeep of any central bureau or office established by any treaty or conr,:ntion referred to in Article 19 shall be paid. All other claims by or against Russia arising out of the non-fulfilment of the provisions of such treaties or conventions shall be waived, Article 21. Subject to the provisions contained in Chapter I any bilateral treaties, conventions or agreements of an economic, technical or legal character between Russia and a foreign Power not already denounced shall not be regarded as having lost their force, but their continuance shall be dealt with independently between Russia and the Power concerned. n Section III. Measures by which the Immediate restoration of Russia would be facilitated. The re-starting at the earliest moment of undertakings of all kinds, which belonged to foreigners before the uve-t:J Nowite-of 1917 and the establishment of fresh undertakings would be of the greatest assistance in bringing about the speedy reconstruction of Russia. This being so, in the present situation the speedy recovery of Russia would be facilitated by the following:Article 22. Foreigners, who enter Russia to practice their profession, trade, industry or occupation shall be free to import into Russia such food, apparel and tools as are necessary for their personal use, and these shall not be liable to any kind of requisition. They may, under the same conditions, import food and apparel for the exclusive use of their staffs or of the workmen whom they employ, whether Russian or foreign. The same shall apply especially to medicines, surgical dressings, etc. which they may need for themselves and for their staff. Article 23. The visa of passports by the competent Russian authorities shall confer on holders complete protection by the Russian authorities and the free exercise of their industry, trade, occupation or profession. Article 24. No domiciliary search may be made in the residence or establishment of a foreigner settled in Russia, nor may his arrest be carried out without the assistance or consent of his Consul. In the case of an appearance before a Russian Air Court on a criminal charge, judgment can only be carried out with the consent of the Consul concerned. The only punishment that may be inflicted as a result of a prosecution on political grounds is expulsion, subject to the above condition. Article 25. Undertakings belonging to foreigners or directed by them shall be worked under conditions of freedom, including freedom of engagement or discharge of workmen subject only to the application of laws of hygiene and to conditions of labour in accordance with the general practice of other countries. In case of need, wages shall be fixed by committees representing employers and employed. Article 2G. The acquisition in Russia and abroad of all products and raw material necessary for the restoration of industry and their transport shall be specially facilitated by the Russian Government. Article 27. Duties, taxes, and other charges on the industry, trade or occupations of foreigners settled in Russia shall not be such as to prevent a reasonable return on invested capital. Article 28. Free zones shell be created in a tertain number of ports. 21. PA.RT II. RESTORATION OF EUROPE. The drafting of a Convention has not been attempted, but the resolutions are in su ch a form that their substance could, if it were thought desirable, be embodied in a Convention. The resolutions are arranged in throe groups, viz Se ction I Se ction II Se ction III Financial . Economic. Transport. Section I k FINANCIAL SECTION chapter I. CURREITCY Article 29. An essential requisite for the economic reconstruction of EUrope is the achievement by each country of stability in ,the value of its currency. No country can gain control of its own currency so long as there is a deficiency in the annual budget which is met by the creation of paper money or bank credits, It is for every country to overcome such a deficiency by its own independent efforts; only then will its way be opon to currency reform. Article 30. Measures of currency reform will be facilitated if the practice of continuous co-operation among central banks can be developed. A permanent association or entente for the co-operation of central banks, not necessarily confined to EUrope, would provide .oppcnities of co-ordinating credit policy, without hamrering the freedom of the several banks. It is suggested that an early meeting of representatives of central banks should be hold with a view to considering how best to give effect to this recommendation, Article 31. It is desirable that all :.wropean currencies should be based upon a common standard. Article 32. Gold is the only common standard which all European countries could at present agree to adopt. Article 33. In a number of countries it will not be possible for some years to restore an effective gold standard; but it is in the general interest that European Governments should declare now that this is their ultimate object, and should agree on the programme by way of which they intend to achieve it. 2a. viwZi Article 34, In each country the first step towards re-establishing a gold standard wi-0 be the the annual expenditure of the State w7 balancing of 1071t, the creation of fresh credit unrepresentod by new a6 tits; 11, Article 35, The next step w:.11 be t^ dote7r1!.ne and fix the gold value of the monetary unit. ThJ.s step can only be taken in each country when the economic circumstances permit; for the country will then have to dec;:)de the vital questions whether to adopt the old gold pary or a new parity appro::ima',;:i.ng to the exchange value of the moneary un:Lt Article 360 a gold at the time. These steeps ril.ght by themselves suffice to standards est,ablish, but its successful maintenance would be materially premcted, not only by the proposed association or entente of central banks: but by an international convention to be adopted at a suitable time. The purpose of the convention would be to centralise and co-ordinate the demand for gold, and so to avoid those wide fluctuations in the purchasing power of gold, which might otherwise result 7 from the simultanecus and competitive efforts of a number of countries to secure mete].:lic reserves. It is suggested that the convention should embody some means of economising the use of gold by maintaining reserves in the form of foreign balances, such, for exavple: as the gold exchange starLard, or an international clearing system. 24. Chapter IT CIVM7TS. 46 Article 37. Whilst private credit will undoubtedly again become available as soon as currencies are stabilised and confidence is restored, it is recognised that under existing conditions special machinery is necessary for facilitating the immediate co-operation of the economically stw.mger countries for reconstruction purposes. The negotiations now proceeding for the establishment of an International Corporation are accordingly to be welcomed. Article 38. It is essential for countries in need of credits to take steps at once to make their assets available to serve as security for the assistance they require whether through the proposed International Corporation or through other channels; for this purpose they should enter into consultation at the earliest possible moment with the Corporation when established or with other agencies for the purpose of securing such co-operation. el 4'1' a Section II 110 ECCNOMIC SECTION. Chapter I. Custom Tariffs and Restrictions. Article 41. In view of the agreement relative to restrictions and prohibitions signed by the represenat:7.ves of certain States at the Conference at PoAo-rose (Protocol Noel) in November 1921, it is suggested that those States should adopt the recommendations of that Conference and should take the necessary measures to give effect to them without delay. Article 42. Inasmuch as the development of normal trade with all countries is only possible where traders are in a positiein to ascertain some time in advance the conditions under which goods can be legally imported into and exported from each country, it is proposed that any Customs duties and Customs resi;r1tions incident to importation and exportation should be regulated by the following principles: A. Customs Tariffs, -Article 43. All Customs Tariffs should be published; such publication should be accompanied by a clear and precise indication in regard to each category of goods of all the duties which are leviable on the importation or exportation of the goods concerned. Article 44. The tariffs should be made so far as possible applicable over substantial periods of time, and changes in rates and in customs regulations should be made as rarely as possible and duly published, the practice of frequent modification for the purpose of economic warfare being entlrely abandoaod. -;70- fi No duties should be maintained or imposed after Article 45. on the exports of raw materials other than such duties as lb are found desirable for revenue purposes; export duties imposed for such purp:.sos should be applied without any diseriminatin as between different foreign countries of destination. Er Article 46, Import and Export Pr^,hibitions, The system of prohibition or Isestriction of imports or exports which certain States have introduced temporarily ta protect their finances or to control their markets is in principle injurious from the point of view of the economic restoration of Europe. Every country has nevertheless the right, unless precluded by treaties, to prohibit absolutely the importation of goods of certain descriptions in the interests of national health, national security, national morals or for other special purposes, or to allow the importation of specified ommodities only if consigned to recognised organisations either for the purpose of giving effect to a State monopoly or for seeing that the whnlo importation is put to a specified use, but prohibitions framed for any such purpose should b' publicly announced and as limited in extent as possible. Such prohibitions and mc.nopolies should not be used for the purpose of discriminating arbitrarily between different foreign markets or different sources of supply. Article 47. Where for any reason it is desired to limit the amount of any commodity to be imported through ordinary trade channels such limitation should be effected by the medium of customs duties rather than by a system of prohibition modified by licences; e72ry acv,:rnm9nt should at once Article 47. (Contd.) examine the possibility of abandoning or reducing to the smallest possible dimensions the number of goods to which the latter system is epplied, so that the general pre-war position in this regard may be attained so soon as possible and, in any case before . . . save in so far as it hP.s been modified by general Internatio41 al Conventions concluded since the outbreak of war. Article 48. Pending the complete abolition of the system of prohibition accompanied by 11:vams., licences should be granted on conditions which are publicly announced, unambiguously stated, and uniformly applicable. Any trader should accordingly be in a position easily to estimate in advance whether and under what conditions a licence is procurable. Administration should be on the simplest lines possible and every arrangement should be made to secure that applications for licences are dealt with expeditiously by competent bodies organised for the purpose. Ma the grant of licences there should be no discrimination of any kind in respect of the nationality of the importer, the origin of the goods or their nature, nor should the grant be dependent on the prices at which they are to be purchased. Article 49. Similar provisions mutatis nutandis to those laid down in Articles 46 to 48 should bo applied in regard to any restriction of exportation which any Government may find necessary for national security or for the purpose of conserving its economic resources; the licensing system should be such as to allow of no discrimination in regard to the prices at which the goods are to be disposed of. 0. litticle 50. General. rrhore the adrission or transit of goods of any description into any country or the duties leviable thereon are dependent on the fulfilment of particular teohnioal conditions with regard, for instance, to their constitution, their purity, their district of origin, their sanitary condition, the Governments should come to arrangements with eaoh other providing for the acceptance in accordance with rules and principles mutually agreed of certificates issuod by competent scientific institutions or recognised authorities or bodies in the country of origin of the goods. IIP The necessary steps should be taken to secure that Article 51. the preceding provisions should be observed in the letter and in the spirit by all Government Authorities, central or ti local, and that no regulations of an administrative character shall be issued which would conflict therewith. It is desirable to arrange for enouiry to be made from Article 52. time to time through a suitable organisation, e.g. the League of Nations, into the progress rade by the various States in carrying these principles into operation. All the governments concerned should inform immediately Article 53. the organisation referred to in Article 92 of all changes in customs tariffs or in the regulations relating to prohibition or restriction of imports or exports. NOTE 1. In addition to the provisions contained in Articles 41-93 a suggestion was considered that resulutions shouldsp3 cabmitto.mi to the -:a.loa Conference for acceptance providing during a certain period for the mutual accord to each other by all the nations represented of the treatment of the mostfavourednation in customs matters, subject to certain reservations which would be necessary to meet special difficulties. Thilst it was generally recognised that on purely economic grounds scme such provision could be welcomed in the present general situation, some of the experts did not feel able to accept the proposals as presented. NOTE 2., The experts have also considered the question of facilitating the use of arbitration clauses in commercial contrJets relating to foreign butliness. They agreed that the ouestion was one calling for careful consideration, but in view particularly of its technical and legal aspects they were of opinion that further investigation of the subject was necessary before a resolution could be prepared for submisston to the &enoa Cenforenae. Chapter III. PROTECTION OP INDUSTFIAL PROPIRTY AND OOPYPIGETS. 1t is desirable that all European States which Artiele-560 have not already done so should at once take steps to adhere to the International Convention of Paris of March 20, 1883, as revised at Washington in 1911, for the protection of industrial property and to the International Convention of Berne of September 9, 1886, revised at Berlin on November 13, 1908, and completed by the Additional Protocol signed at Berne on March 20, 1914, for the Protection of Literary and Artistic Work. Pending such adhesion every Luropean State should, Article 57. in so far as Industrial, Literary and Artistic property is not now reciprocally protected as between itself and other States, give effective protection to such property on condition of reciprocity; and should further save in so far as such rights have been or shall be dealt with by the Treaties of Peace with Germany, Austria, Hungary, Bulgaria and Turkey - recognise, restore-and protect all right in such property belonging to the nationals of other States which would now be in force in its territory, but for any exceptional legislative or administrative action taken in contequence of war or revolution between August 1,1914, and the present date. Note. In the opinion of some of the exoerts it is highly desirable that any European State which is not already a party thereto should adhere to the Arrange. ment signed at Eadrid on April 14, 1891, for the repression of false indications of origin, Seotion III. TRANSPORT SECTION, Article 58. Efficient transport is an essential requisite for the revival of production and trade. It is therefore desirable that States should continuo to devote their unremitting efforts to the restoration and improvement of the organisation of their railways, harbours and other means of communication; where necessary, surveys of requirements should be made under adequate expert direction, and where the present resources of any State appear to be inadequate to restore the equipment and structure of those undertakings, including the fuel supply, steps should be taken without delay to secure assistance, whether from the International Corporation when established or from other suitable sources. Article 59. The principles of the Agreement for the Regulation of International Railway Traffic signed at Portorose on November 23, 1921, should immediately be applied to all the European States represented at Genoa. Tho Council of the League of Nations should be invited to enquire into the measures already taken to carry the Portoroee Agreement and Recommendations into effect. Article 60. It is desirable that representatives of the railway administrations of the States concerned should attend a conference to define what further steps are necessary to rostore international tra2fic conditions at least as satisfactory as those existing before the war, and should agree upon recommendations to their governments. Similar conferences should be hold In regard to water conmunications and harbours. 31. 1.1111=7 It is desirable that favourable consideration should ...411 be given to the recommendations of theso conferences with a view to their immediate application or if necessary to the conclusion as early as possible of conventions to give effect to them. Article 61. The conditions cf international transport should not be determined by political considerations but rather by commercial and technical considerations, as in the case of the Conventions concluded at Barcelona cn April 20th, 1921, regarding Freedom of Transit and the Regime of Navigable Waterways of International Concern, together with the additional Protocol to the latter Convention, and the Recommendations relative to the International Regime of Railways. It is desirable that the vari.ous other oonventIons provided for in treaties now in force should be prepared and put into operation as soon as possible. "ECONOMIC REVIEW" - r4- 107th Iti, CH, 1922. r t , JUN 3 122 FELERAT, -T; Armistice, with this- object in view, they should have regulated the discount rate in accordance with the CERTAIN ASPECTS OF THE PROBLEM OF EXCHANGE STABILIZATION. direction and rate of change of the internal commodity price level. The Federal Reserve Board of the United States has made the same mistake, though for rather different reasons. The policy of the Board has been very ably A Criticism of British Monetary Policy. criticised by Mr. Hawtrey in a paper read to the Royal Statistical Society last month. " The whole world," says Mr. Hawtrey, " has been plunged into the most appalling distress for nearly two years by the strain of raising the commodity value of the dollar 80%." I agree with him that this was unnecessary, and that it Appeal for Fresh Currency Committee. (Paper read by Mr. 0. T. Falk, C.R.R., at the Royal Society of Arts, on Wednesday, March 15, 1922. was due to a failure on the part of the responsible authorities to understand what he calls the vicious I shall discuss in this paper the problem of the stabilization of the gold or dollar value of sterling. If If he were not an Assistant Secretary of our Treasury, Mr. Hawtrey might have extended his criticism to the policy of those in control in this country, for we need not be dragged at the heels of American circle of deflation. this subject is narrower than the title of the paper suggests, I must plead forgiveness on the ground that I had to choose the title before the paper was written. In January, 1918, the Cunliffe Committee was appointed to " consider the various problems which will connection the currency and to foreign arise inreport upon withsteps required thebring about error. the exchanges during thenormal conditions in due course." The restoration of period of reconstruction and two reports of the Corpmittee were published in the autumn of 1918, and at the end of 1919. Very little thought was given to the difficulties of the reconstruction period ; it was assumed that the pre-war financial system was the goal to be aimed at, and attention was directed almost exclusively to a rather doctrinaire and rigid scheme for the attainment of this goal. Worst of all, the Committee made the mistake of discussing the problem from the point of view of finance rather than This past history is important, because it throws some light upon the mentality of those responsible for dealing with the present and future problems which are the main concern of this paper. Bank rate in London is now (Feb. 27) 41%, the rediscount rate of the Federal Reserve Bank of New York also 41%, and the New York-London exchange 4.42. I have said that in my view Bank rate ought to be 2%, and that London need not wait for American reductions. On the contrary, the rapidity of the recent rise in sterling is a very strong reason for putting London rates below New York rates. The rise is harmful to our trade, and from the much more important point of view of industry, trade and the general welfare of the community. Our we ought to check it, not stimulate it. If we are to aim at restoring the pre-war parity with the dollar, let success, and for its failures the Cunliffe Committee are partly responsible. not when it is in the depths of depression. We can financial policy since the Armistice has not been a But the sins of the Committee were mainly sins of omission, and it has not been any real or assumed obligation to obey the precepts of the reports which has caused the Treasury and the Bank of England to make their chief mistake of the last three years. During this period we have suffered from a wild boom, a disastrous slump and prolonged depression. A boom, a slump and depression we should have suffered in any case, but all three might have been less acute if those in control of financial policy had used the discount rate wisely. Bank rate was raised much too slowly during the boom, and lowered too late and too slowly during the slump. Tho rate ought to have been at its present level months ago, and to-day there is as much justification for a 2% rate as there was in the years following the Baring crisis. In tinlea such at these, . hz-zi;:ur eurrez_cy is inconvertible and exchange far away from the level regarded as the ultimate goal, the discount policy of the Bank of England cannot be operated satisfactorily if those in control fix their attention primarily upon the volume of currency and bank deposits, the reserve, and the premium on dollars. They must remember that it is their duty to endeavour to prevent booms and slumps, and to keep the standard of value as stable as . 'hie. Since the us stimulate the rise in sterling when trade is booming, more easily afford to check a boom than to knock trade on the head when it is trying to get on its feet again. I do not propose to discuss the question of devaluation. At present the discount on sterling is being so rapidly reduced that the restoration of the old parity appears within easy reach, but in a few months' time the rate may fall away again, and devaluation may in the end become desirable, if not inevitable. If we were to attempt to stabilize sterling immediately we should have to devalue, but, an immediate choice being unnecessary, all we need do is to make up our minds not to damage our trade by a financial policy designed to restore the old parity at an early date. The problem of maintaining exchange stability is quite different from the problem of fixing and attaining the level at which stabilization is to be attempted. are, ' conditions of an attempt at stabilization :(1) A practicable settlement of the Reparation and Inter-Allied Debt problems. (2) A reduction in the size of the favourable trade balance of the United States, and the maintenance of this reduction for a considerable period. restoration of complete confidence in the (3) A http://fraser.stlouisfed.org/ ability and determination of our Government Federal Reserve Bank of St. Louis THE GENOA RESOLUTIONS ON CURRENCY THE Financial Commission of the Genoa Conference passed a series of twelve Resolutions (Cmd. 1667, pp. 60-2) on the subject of currency, which were adopted by the full Conference, and which may therefore be regarded as the united voice of the Governments of Europe. That there should really be twelve propositions on the subject of currency, which command the agreement of all Europe, would seem to be a fantasy hardly deserving serious consideration. That there should even be the appearance of agreement invites the suspicion that the resolutions must be strictly confined to pious platitudes, and surely the stock of pious platitudes respecting currency must long ago have been exhausted, if not at the Brussels Conference of 1920, at any rate at the multitudinous conferences and discussions which have taken place since the end of the war. By most critics the Genoa resolutions are dismissed with And there is no difficulty in supporting their criticisms with quotations from the resolutions some such remarks as these. themselves. That stability is desirable, that central banks should be independent of political pressure, that all European currencies should be based on a common standard, that the only possible common standard is gold, that, so long as budget deficits are met by the creation of paper money, currency reform is impossible, these are propositions of the familiar type. But to suppose that all the resolutions conform to this model is to do them something less than justice, and in the following pages I shall endeavour to show what is their practical bearing, and what results we may hope for from them. The first practical step recommended in the resolutions is the meeting of representatives of central banks (Res. 3), to be summoned by the Bank of England (Res. 12), to which representatives of the United States are to be invited (Res. 10). The primary object of this meeting is to develop " the practice of continuous co-operation among central banks of issue, or banks regulating credit policy in the several countries " (Res. 3), but there is specifically referred to it a scheme for an international 292 THE ECONOMIC JOURNAL [SEPT. government for budget expenses is cut off, the banking and trading community can only get fresh supplies of currency from the central bank through the instrumentality of trade borrowing, such as discounts and advances. The only means of regulating the supply of currency is then by encouraging or discouraging trade borrowing. Legislative or administrative regulations, limiting or prescribing the issue of legal tender money, may play an important part, but, in the last resort, only by affecting the action of the central bank. Anyone who can borrow from the central bank can thereby procure legal tender money, and in such borrowing operations (which in most countries take the form of re-discounting) is concentrated the whole demand for currency. If the issues .of currency are to be limited, whether by statute or otherwise, practical effect can only be given to the limitation through a control of re-discounts. In the scheme which is referred to the meeting of central banks is embodied the plan of campaign adopted by the governments at Genoa. It starts (Res. 11, par. 1) with the necessary governmental and legislative action, viz. (a) the elimination of inflationary methods from the budget, and (b) the determination of the gold value of the monetary unit. The next step, (c) " the gold value so fixed must then be made effective in a free exchange market," is one involving credit regulation, and therefore demands co-operation by the central bank. For the determination of the gold value of the monetary unit fixes implicitly a standard for its purchasing power in terms of goods and services. If the standard diverges from actual market conditions, then the purchasing power of the unit must be modified. gold or foreign exchange is not practicable until the unit is at or very near the parity determined upon, and thus in the first instance the value of the unit must be adjusted through the central bank's credit policy. If the prescribed value is above the existing market value of the unit, credit must be contracted ; if below, credit must be relaxed. Now changes, through credit regulation, in the purchasing power of the unit are not to be made at will and without limit. An undue expansion or contraction of credit, involving a general rise or fall in price, has detrimental and even disastrous results upon the economic life of the community. Therefore when the legislation is introduced for the second stage, (b) the determination of the gold value of the unit, the central bank, by whose action alone effect can be given to the decision, must be consulted and must participate. Convertibility in 294 THE ECONOMIC JOURNAL application of which forms the subject of pars. 2-5 of Res. 11. The principle is that the currency of each participating country, instead of being convertible into gold, may be convertible at par into the currencies of the others. To secure convertibility, the participating countries will hold reserves of " approved assets " (bank balances, bills, short term securities or other suitable liquid resources) in one another's currencies, and will undertake to buy and sell such assets freely for their own currencies. Different currencies linked by an exchange standard so planned could be maintained permanently at par with one another without the intervention of any metallic medium at all. If the system is to be based on a gold standard, then, at some point or other, one at least of the currencies must be convertible not merely into other currencies but into gold. Accordingly " certain of the participating countries will establish a free market in gold, and thus become gold centres " (par. 2). At the gold centres some gold reserves must be maintained. But if the convention is practically world-wide, if all the goldstandard countries adhere to it, gold will nowhere be needed as a means of remittance, and gold will only be withdrawn from the reserves for use as a raw material of industry. The precise extent of the industrial demand is not accurately known, but it can hardly amount to £50,000,000 a year. At any rate, even with the fall since 1914 in the value of gold in comparison with other commodities, it is unlikely that the industrial consumption of gold has so far increased as to approach the annual output, which is now about £70,000,000. The aggregate gold reserves held for monetary purposes exceed Here we have a " visible supply " of a commodity equal to something like thirty years' consumption. In face of the existence of such a stock, the gold market cannot but be entirely artificial. A release from stock of a quantity of gold, £1,500,000,000. quite moderate in proportion to the total, might completely swamp the market. In fact the gold exchange standard is too effective in economising gold. If it were pushed to its logical limits, far the greater part of the existing gold reserves would become redundant, and the commodity value of old, upon which the value of every ui enc epends, might be deessed below even the low value which it reached in 1920 (when e purchasing power of the gold dollar fell to three-eighths of hat it had been in 1914). It is therefore apparent that in tying our currency units to old, we are not securing a natural or stable standard of value at [SEPT. 296 THE ECONOMIC JOURNAL [SEPT. they in turn usually put the rates they charge to borrowers up or down with it. Thus trade borrowing as a whole is discouraged or encouraged, and the supply of the means of payment restricted or stimulated. This is not the place to dwell upon the mechanism of the control of credit in detail. But there is one complica important that it must be mentioned. With a given volume of business, prices depend not only upon the quantity of the means of payment, but upon its rapidity of circulation. Rapidity of circulation is not a very satisfactory expression, and it is not necessary to enter upon a criticism of it. What we are really concerned with is anything which tends to increase or decrease rapidity of circulation. And the practical form which such a tendency takes is a decreased or increased willingness on the part of the public, and especially of traders, to hold balances of money (in cash or credit). Above all, an expectation that prices will rise makes people less willing to hold such balances, and an expectation that they will fall makes them more willing. When, therefore, the central bank, by re-discounting at low rates, has once succeeded in stimulating trade borrowing, and the increase in the supply of the means of payment has started a rise in prices, the consequent increase in rapidity of circulation immediately tends to exaggerate the tendency. And vice versa, when high re-discount rates have checked trade borrowing, the consequent decline in rapidity of circulation exaggerates the fall of prices. The quantity theory, enunciated, as it sometimes is, without any reference to variations in rapidity of circulation or any reservation covering such variations, is fallacious. But the prin- ciple of the regulation of the currency unit through the control of credit is not dependent on this crude form of the theory. For the changes in rapidity of circulation arising from the control of credit reinforce its effects. Provided the action of the central bank is effective in accelerating or retarding trade borrowing, the resulting rise or fall of prices is greater, not less, than in proportion to the change in the quantity of means of payment. Money is not borrowed to be kept lying idle. It is paid away, as soon as borrowed, either directly, or through the medium of dealers, for the expenses of production. It is almost literally true to say that a net addition to the amount of trade borrowing in any period of time is an addition to the money income of the community for that period. The changes in the quantity of the means of payment are subsequent and consequent. 298 THE ECONOMIC JOURNAL [SEPT. General price variations are closely identified with the trade cycle, interest in which has lately been revived by the great trade fluctuation of the past three years. Active trade is accompanied by rising prices, that is to say, by a depreciating currency unit, and depressed trade by falling prices, or an appreciating unit. Which is cause, and which is effect ? have been made to show that the trade cycle is explicable by some deep-seated non-monetary cause, and that the price variations are merely symptomatic. There are two principal theories. One traces the trade cycle to periodical over-production, the other to periodical states of over-confidence. According to the former, if at any time trade is active, people are tempted to invest too much money in extending the means of production. The process of investment takes time, and, as it progresses, output is gradually swollen, till it outstrips demand. Excess supply then depresses prices and discourages investment, till supply falls off, prices recover and the cycle begins again. According to the other theory, the root cause of the trade cycle is a long-period change in the state of business confidence. A rise or fall in confidence is contagious, and, once started, markets cannot free themselves from it till it runs up against some physical obstacle in the state of production. The two theories are not mutually exclusive, and are usually combined, the over-investment being attributed to the overconfidence. Nor are monetary causes altogether ruled out. It is admitted that the over-confidence leads to too much trade borrowing, and so to an inflation of the means of payment. If these theories of the trade cycle are correct, is it not vain to hope that prices can be steadied ? Is it not impossible for a central bank to alter the conditions of production or of supply and demand, or to correct the weakness of mob psychology ? I believe not. And I shall not stop to argue (what I believe to be true) that the trade cycle is a purely monetary phenomenon. Let the non-monetary theories be admitted. What then can be done by means of the control of credit ? Assume a state of over-confidence. " Confidence " here means an expectation that prices will rise, that and nothing else. To be pedantically correct, it is better to say that it means an expectation that effective demand at a given price will grow. " General business confidence " means an expectation that the effective demand for all commodities will grow. This expectation makes trade borrowing for the purchase of commodities attractive, Various a 300 THE ECONOMIC JOURNAL [SEPT. countries where government finance was not in extreme disorder. This state of things was abnormal. It is by no means true that under pre-war conditions a revival of trade synchronised with a shortage of stocks or a falling off with a glut. But it is not necessary to argue that point ; it is enough to say that, if the shortage or the glut did occur, its effects upon prices, and therefore upon profits, and therefore upon investment, could be counteracted through the instrumentality of the control of credit. In short, whatever other factors affect the purchasing power of the monetary unit, one, the volume of trade borrowing, is amenable to human control. By its means the agency which exercises the control, that is to say, the central bank, can correct the effects of all the others. That does not completely dispose of all doubts as to the practicability of stabilisation. It would be vain to ignore the many difficulties in the way of the detailed application of the policy. How is the purchasing power of the unit to be measured ? Any available index number is bound to be affected by price variations in particular commodities arising from non-monetary causes, such as harvest conditions, new inventions, discovery or development of new sources of supply or exhaustion of those that exist. A blind adherence to the index may hide a real departure from the path of stabilisation. And, what is almost more fundamental, a change in the monetary supply may manifest itself at first not in a change of prices at all, but in a change in the volume of purchases ; it may have made material progress before the index number is affected. Stabilisation cannot be secured by any hard-and-fast rules. The central banks must exercise discretion ; they must be ready to detect and forestall any monetary disturbance even before it has affected prices. The policy can only be perfected by long experience. Nor can it be assumed that perfect stabilisation of internal purchasing power is always reconcilable with perfect stabilisation of the foreign exchanges. The maintenance of the exchanges within a small fraction of parity, which is of the essence of the scheme, may involve a small departure of the internal purchasing power of the unit from the norm in one or more countries. A suitable compromise must be arrived at by the central banks among themselves, but it is no use to under-estimate the difficulty of preserving an even course under such conditions. Finally, it may be asked what real benefit a policy of direct II1922] e THE GENOA RESOLUTIONS ON CURRENCY 301 stabilisation of the unit, even if practicable, will confer upon us. It may be freely granted that any large fluctuations in the commodity value of the unit, such as occur in countries with " collapsed " currencies, are a deadly evil. But is there any harm in the limited fluctuations that occurred under a gold standard before the war ? The maladjustment of gold reserves, referred to above, must of course be corrected. But once the gold supply is suitably distributed, why should we not get on as we did before the war, and leave index numbers of prices to amuse the theorists ? The assumption that the maladjustment of gold reserves will have been corrected is rather a large one. But there is no need to press that point. For before the war the world did suffer gravely from the fluctuations in the commodity value of money, moderate as those fluctuations seemed to be. It has been pointed out above that the fluctuations of the currency unit are intimately related to the trade cycle. Now the problem of unemployment, as we knew it before the war, was nothing more nor less than the problem of the trade cycle. Unemployment there might be in particular industries independently of the trade cycle. But general unemployment such as prevailed in 1908-9, in 1903-5, in 1892-5, in 1884-7, in 1877-9, and in many earlier periods, was invariably a symptom of the adverse phase of the trade cycle. So long as credit is regulated with reference to reserve proportions, the trade cycle is bound to recur. The flow of legal tender money into circulation and back is one of the very tardiest consequences of a credit expansion or contraction. If the central bank waits for this flow to affect its reserves, and sits passively looking on at an expansion or contraction gathering impetus for years before it takes any decisive action, we cannot escape from the alternations of feverish activity with depression and unemployment. If the central bank watches, not the reserve propor- tion, but the aberrations of the flow of purchasing power (as measured by prices, subject to the necessary allowances) from a perfectly even course, early action will become the rule, the expansion will be checked in time and the contraction will be avoided. Expansion and reaction have been more pronounced and more injurious in the short period that has elapsed since the war than ever before. That is because the credit situation has been allowed to drift without much regard even to the old test of reserve proportions. To attribute our present unemployment to credit contraction may seem to run counter to the prevalent opinion, which finds 302 THE ECONOMIC JOURNAL [SEPT. the cause in the collapse of Central and Eastern European currencies. But if Continental customers cannot buy British goods, that is largely on account of that very pressure to sell, which has been brought about by the credit contraction. This pressure to sell has not only reacted adversely upon production here, but has raised the value of sterling both in commodities and in foreign currencies, and has congested markets with accumulated stocks all over the world. These consequences are not more conspicuous in European markets than elsewhere, for example in South America and the East. Nor have we really suffered materially from the low cost of production in the countries with collapsed currencies, for by the test of the volume of exports their competition is much less formidable than before the war. It is quite superfluous to seek for other causes of depression and unemployment, when there has been so tremendous a deflation as to reduce prices by half in less than two years. The relation of business depression to falling prices is so well recognised, not merely among economists but among practical men, that it is hardly necessary to labour the point. Experience has confirmed theory scores of times. That does not mean to say that we do not suffer through the distresses of Europe. Our loss is heavy enough, but it does not take the form of unemployment. Unemployment is due to a defect of organisation, a maladjustment of the monetary machinery. The defect can be cured, the maladjustment can be corrected. This is all very well, it may be said, for the countries which already have healthy currencies. By taking thought, they can perhaps do even better than before the war. But that is not the urgent problem for which the Genoa Conference was called together. What help do the resolutions offer to the countries with collapsed currencies themselves ? It may be quite true that their disorders are not the cause of our depression, but that does not mean that the disorders themselves are unimportant. These disorders are due, one and all, to budget deficits. This is true without qualification. The budget deficits themselves are due to many causes. It may possibly be true in one case that no financial expedients can provide adequate resources for the expenses of government. If so, the budget deficit is there a symptom of a more deep-seated economic malady, a real inability to attain the subsistence level. But that, at any rate, is exceptional. Elsewhere budget deficits have less fundamental causes. 1922] 303 THE GENOA RESOLUTIONS ON CURRENCY We need not examine them in detail, but we may refer in particular to the case of international indebtedness. To international indebtedness, whether reparations or war debts, have been attributed all the currency and exchange disturbances of Europe. Those who take this view have overlooked the fact that, apart from German reparations, practically none of the debts have even begun to be paid. Even the sums paid by Germany have been moderate in comparison with the capacity of the exchange market. The real difficulty is that the debtor countries have failed to budget for their liabilities. The reparation payments made by Germany up to now have been effected not by raising the money from the tax-payer to buy the necessary exchange, but by creating inflated credits. So long as this is so, the reparation difficulty is merely the budget difficulty over again. Undoubtedly it might be that a country, which could successfully budget for the equivalent in its own currency of its foreign obligations, would fail to create the necessary export surplus, and in that event the exchange market would break down. That situation would have to be dealt with if it arose, but it has not yet arisen. In one respect the Genoa resolutions are really unsatisfactory. It is impossible to point to any particular time at which effect can be given to them. Not only must they wait for the balancing of budgets before they can take effect in the weaker countries ; even in the stronger they must wait for the establishment of a gold parity, whether the restoration of the old one or the adoption of a new. England and half a dozen other countries are within less than ten per cent. of par. But no one can say for certain how long it will take to bridge the gap. Further deflation is out of the question, and all we can do is to stabilise our currency at its existing purchasing power till the redundant supplies of gold now in America have brought down the commodity value of the dollar to the corresponding level. Some countries, whose currencies are at less than half their pre-war gold parities, are nevertheless extremely unwilling to give up the prospect of restoring them. France, Belgium and Italy all took this attitude at Genoa. It seems to involve an almost indefinite postponement of stabilisation so far as they are concerned. On the other hand, countries with collapsed currencies, as soon as they have surmounted their budget difficulties, and are in a position to stabilise, will have no compunction about adopting No. 127.-voL. xxxa. Y 304 THE ECONOMIC JOURNAL [SEPT. 1922 a new parity. For them the stabilisation of the healthy currencies is by no means a matter of indifference. One of the great practical ...ai difficulties in the way of currency reform in countries like Finland w or Czecho-Slovakia, which have gained effective control of their credit situation, has been the rise in the commodity value of the dollar and the pound during the past two years. R. G. HAWTREY No. 127 SEPTEMBER, 1922 THE VoL. XXXII s'e ECONOMIC JOURNAL THE QUARTERLY JOURNAL OF Ube 1Ropat tconomic ,,Bocictp EDITED IW F. Y. EDGEWORTH AND J. M. KEYNES Reprinted from "The Economic Journal" September, 1922 Zonbon MACMILLAN AND CO., LIMITED NEW YORK: THE MACMILLAN COMPANY Price Six Shillings net All communications respecting Advertisements to be sent to WALTER JUDD, Ltd., 97, Gresham Street, London, E.C. 2 ROYAL ECONOMIC SOCIETY G. R.S., President. OUNT MILNER, G.C.B. VISCOUNT MORLEY OF F.R.S. sor J. B.A. S. NICHOLSON, sor A. C. Plano. L. PRICE (lion. Sec.). ight Hon. Sir HERBERT L. MUEL. LIX SCHUSTER, Bart. sor W. R. ScoTr, F.B.A. LLEWELLYN SMITH, G.C.B. C. STAMP, K.B.E. DNEY WEBB. RTI.EY WITHERS. D., Secretary. Asst. Secretary.