View PDF

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

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.





Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102