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treatment of the occupied parts of Belgium and France, and that, with the possible exception of Samoa and New Guinea, as to which (see below) further information is required, every step which has been taken can be justified on the score of military necessity.

3. In order to make this clear it will be desirable to recapitulate the action actually taken in the various territories concerned.

(a) Togoland. In this connexion I am to enclose, for convenience of reference, a copy of a letter which was addressed to the Foreign Office on the 3rd January, 1916, and of a replyf which was received from the Foreign Trade Department to this letter. As will be seen from these letters, the action taken in Togoland was based entirely upon considerations of military necessity, which made it necessary to deport enemy subjects, and consequently to take steps for dealing with their businesses, which were, generally speaking, trading houses with large stocks of import and export goods, and would otherwise have been left derelict. It could hardly be contended that, in these circumstances, it was the duty of the occupying Government to depute British subjects to superintend and continue the businesses in question on behalf of the deported enemy subjects, even had it been possible to find British subjects who could have undertaken such work. It was, therefore, necessary in the interests of enemy owners to dispose of the stocks of the businesses in question, which would inevitably have deteriorated if left unsold, and to collect book debts which might well have proved unrealizable had they been left too long outstanding. It was also thought desirable to meet out of the assets so realized the claims against such businesses on the part of non-enemy creditors and enemy creditors actually resident in the territory, but the process of liquidation has been No steps were taken for realizing the real estate, confined within these limits.

goodwill, and other permanent assets of these businesses, and, unless further action is taken hereafter, there will be nothing to prevent the enemy traders from returning and resuming their business after the War, when they may be paid by His Majesty's Government the actual proceeds, subject to deductions in respect of liabilities It seems discharged on their behalf, of all the assets which have been realized. clear that the action above described is not of a confiscatory character.

(b) Cameroons. Here it was found necessary, as stated in Major-General Dobell's despatch of the 14th January, a copy of which was enclosed in the Colonial Office letter of the 17th March,t for the stocks of the businesses which had been left derelict owing to the retirement of the European enemy population to be sold by the British Expeditionary Force before the establishment of any Civil Government. The Governor-General of Nigeria was subsequently asked whether there were any further assets available for realization in accordance with the Togoland policy. The Governor-General has now reported that he does not, so far as his present information extends, consider that any further action need be taken in the matter.

To Governor-General, Nigeria, 4th April. To ditto, 8rd June.

I am to enclose copies of the correspondence§ noted in the margin, in which the position is more fully explained, and to refer to the letter from this Department of the 5th April enclosing copies of correspondence relating to the management of enemy-owned plantations in this territory.

(c) In the cases of Samoa and New Guinea I am to refer to the correspondence terminating with your letter of the 26th October. I am to point out that, so far as concerns the former territory, it would seem that grounds of military necessity for the action taken were afforded by the repeated efforts, particulars as to which are available in this Department, made by enemy traders to contravene the censor- ship regulations and the law as to trading with the enemy, and also by the effect of the continuance of enemy trade on the minds of the native population, as indicated in the telegram from the Governor of New Zealand** a copy of which was enclosed in the Colonial Office letter of the 8th February last.** The Governments of the Commonwealth of Australia and of New Zealand have, however, been invited to furnish full particulars by telegram (copy enclosed herewith) of the action actually taken in these territories and the grounds on which such action was taken, and the contents of any replies which may be received from those Governments will be communicated to you in due course.

(d) German South-West Africa.-No action has been taken for the liquidation of enemy firms.

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(e) German East Africa. I am to refer to the correspondence ending with the Foreign Office letter of the 26th August, and to point out that it is not at present contemplated that any steps should be taken bevond the appointment of controllers of enemy businesses, unless it should be found desirable on grounds of military necessity to deport or intern enemy subjects carrying on business in that territory, or unless events should prove that the carrying on of such business by enemy subjects, even under control, constitutes a menace to the safety of the occupy- ing Government, or is assisting the German Government in carrying on the War.

4. Mr. Long is not aware to what lengths the German Government has pro- ceeded in the matter of trade restrictions in the occupied parts of Belgium and of France, but the general course of enemy legislation on this subject (see enclosures in your letters of the 8th July, of the 11th September, and of the 10th Octobert) would, subject to what is said immediately hereafter, appear designedly to have followed the general lead given by the legislation enacted by the Imperial Parlia- ment, and to indicate a desire to avoid any appearance of initiating a confiscatory policy. It is remarkable, however, that, so far as the German order of the 29th August, 1916, is concerned. Germany would seem actually to have adopted in the occupied part of Belgium a more drastic policy than that hitherto adopted by this country in German territory occupied by British forces.

5. In territories occupied by the British forces there have, as already indicated, been only partial or conservative liquidations, and, so far as is known, no sales of German real estate or other permanent assets have taken place. The German Government, on the other hand, so far as British firms in Belgium are concerned, would seem to have adopted the policy of complete liquidation, including sale of land, goodwill, and other permanent assets. This policy the British Government has only employed hitherto in British territory. The German policy in Belgium is, therefore, actually more severe than that hitherto adopted by His Majesty's Government in occupied territory. Moreover, it would seem, so far as it is a policy of reprisal, to be founded on the procedure adopted by His Majesty's Government with reference to enemy firms on British territory, and, as the order of the 29th of August, 1916, was issued at a date when the nature of the action taken by His Majesty's Government in occupied territory in Togoland and the Pacific must have been well known to the German Government, Mr. Long sees no reason to apprehend that that action will lead to retaliation on the occupied territory of Belgium and France.

6. In these circumstances Mr. Long desires me to express the hope that no decision will be come to at the proposed conference with the French and Belgian Governments which would conflict with the policy hitherto adopted in enemy territory under the occupation of His Majesty's forces, or would prevent the exten- sion of that policy to German East Africa should it become desirable, for reasons of military necessity similar to those which arose in Togoland, so to extend it.

7. As this Department is responsible for the administration of the Colonial territory which has been conquered from Germany, Mr. Long would ask Mr. Balfour to consider whether it would be advisable that it should be represented at the proposed conference.

8. I am to add that Mr. Long has not thought it necessary to deal in this letter with the measures taken in the British Colonies and Protectorates, as, allowing for the difference of local circumstances, these measures follow the action taken in the United Kingdom. In this connexion I am to refer to the letter from this Office of the 6th instant with regard to Trinidad and Ceylon.

I am, &c.,

HENRY LAMBERT.

* 41096.

+ 82427, 48581, and 48510

† 49427.

* 57228.

+ 1027.

† 7996.

§ 14882 and 24651.

|| 15858.

4 51488.

** 3564.

57806

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