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PUBLIC RECORD OFFICE
Reference :-
885
16 PUBLIC RECORD OFFICE, LONDON ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH-NOT TO
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although you have instructions from an alien enemy to pay his dividend into an English bank or into the London office of a German bank; for these instructions are rendered inoperative by the outbreak of war.
The Law Officers are referred to the Proclamation prohibiting certain tradings with the enemy, dated 5th August, 1914, page 6184 of the "London Gazette." The payment of dividends to alien enemies might well be a dealing with such enemies contrary to the common law, but it does not seem to be prohibited by the Proclama- tion which, so far as relevant, is confined to the entry into new commercial, financial, or other contracts or obligations. It would seem that, on the construction of the Proclamation, payment of the dividends, at all events to those who were share- holders before the outbreak of the war, is expressly permitted by the Proclamation. The same observations would appear to apply to the registration of transfers to or from alien enemies on contracts entered into before the outbreak of war.
It may, perhaps, be mentioned that it was the intention of Lord Desart's Com- mittee on Trading with the Enemy, on whose advice the Proclamation was framed, that dividends should be paid to enemy shareholders. (See page 14 of their Report, a print of which is herewith.)*
It is, of course, clear that enemy shareholders cannot, during the war, enforce the right to payment of a dividend, and it is also clear that their right, so far as it arises out of shares which they held before the war, is suspended, and not extin- guished, by the war. It may be, nevertheless, open for English Companies, if they think fit, to pay these shareholders, and it appears from the Report of Lord Desart's Committee that some commercial and financial interests in the City were in favour of discharging obligations to alien enemies, on the ground of the general effect on British credit of failure to do so. This was particularly the case with Insurance Companies.
The question, therefore, may become one of policy whether the payments, although not enforceable, are lawful and should be made, or whether it is better policy to take advantage of the fact that they cannot be enforced and to decline to make them during the war.
The Law Officers of the Crown are requested to advise the Treasury on the following points :—
(1) Whether the payment of dividends on shares held by alien enemies, as
above defined, is permissible by law?
(2) Whether transfers to or from alien enemies of shares in English Com-
panies can or must be registered by the Company—
(a) when made on contracts for sale entered into before the out-
break of war?
(b) when made on contracts for sale entered into after the outbreak
of war?
(3) Generally, on the question of policy, and otherwise, on the case. (See printed extract from "Times" of August 22nd, paragraph 4.)
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(3) It is rather unfortunate that a number of conflicting opinions should have been promulgated on this point, and we would suggest that all the Departments concerned should be notified of the present Opinion if the Treasury decide to act on it. The Attorney-General, before sending his letter on the subject, took steps to ascertain whether it was in a form consistent with the practice of the Committee on Trading with the Enemy, and understood that, as finally settled, it expressed the general view.
JOHN SIMON.
August 24th, 1914.
STANLEY O. BUCKMASTER.
OPINION.
(1) We do not think dividends declared after war broke out ought to be paid to shareholders resident in hostile territory; we think they should be dealt with as sug- gested in the Attorney-General's letter above set out. This is the common law rule, and, even if the King's Proclamation could vary the common law rule (which seems doubtful), we are not satisfied on the language of the Proclamation (which is diffi cult to construe) that such payments are authorised. As regards dividends declared and made payable before the outbreak of war, payment cannot be compelled during war, but, inasmuch as payment ought to have been made before war began, we should have thought immediate payment might be permitted.
(2)(a) Yes; this seems proper, for registration in such circumstances is a purely ministerial act-but registration during war could not be compelled.
(b) No.
• With Attorney-General's papers. (Not transmitted to Colonial Office.)