SUEZ CANAL COMPANY

New Zealand Herald, Volume LXXII, Issue 22166, 20 July 1935, Page 9

SUEZ CANAL COMPANY

ANNUAL GENERAL MEETING OF JUNE 3, 1935 Extract from the Speech of M. le Marquis do Vogue. President of the Board of Directors. The delay necessiated by the printing of the Directors' report has not allowed us to broach therein a question which certainly preoccupies you. What can be the repercussions upon your Company's nffairs of the decree signed on May 2nd last by H.M. the King of Egypt, which cancels the gold clause in international contracts? Are the Company's receipts threatened or its obligations modified ? Already, in 1914, the decree instituting in Egypt a forced bank-note currency had cancelled the gold clause with regard to internal payments, but it was only from the month of September, 1931, after the almost simultaneous devaluation of the pound sterling and the Egyptian pound, that the decree of August 2nd, 1914, produced its full effect. It at once placed in a difficult position certain companies which had contracted foreign loans, and which, while collecting their receipts in Egypt in depreciated currency, were compelled, by strictly guaranteed engagements, to discharge their commitments on a gold basis. It was apparently to put an end to this contradiction that the decree of May 2nd, 193/5, was promulgated. It had been called for —and was accepted—by the companies which were to benefit therefrom, with an equanimity ail the more confident since, at the present clay, the respect for contracts has lost the place acknowledged by morality and right among the fundamental principles of civilisation.

The case of your Company is not the same.

The transit dues, which are the source of the Company's receipts, are not based upon a contract, but upon a right the Company possesses by virtue of its concession, a right granted as an essential element of the exploitation of this concession and exercised freely on the conditions and within the limits fixed by the concessive authority. On the other hand, the payments for which, the Company is liable, toward both its shareholders and its bondholders, arise from commitments expressed in francs and containing no gold clause. By several legal decisions subsequent to the decree of 2nd August, 1914 (one of which was delivered at the instigation of the British Government), tor the Company's statutory and contractual payments the franc was defined, correlatively with that of its receipts, as the international franc, the 20th part of a louis d'or. We are justified, therefore, in thinking that if, on the one hand, the decree of the 2nd August, 1914, did not apply to your Company —which is shown implicitly by the decisions given by competent courts —it cannot, on the other hand, be affected by the decree of 2nd May, 1935, tho validity of which, moreover, has been contested This opinion is corroborated by declarations emanating from the most authoritative sources. Furthermore, in the preparation of this decree, it was at first anticipated that cases already settled by judicial decisions which had acquired recognition and were acted upon, should b© exempt from its application. If this exception is not contained in the text arrived at, it is, as we were informed on High Authority, because it would be useless, the decree in question not affecting us. To-day, however, in the face of the accomplished fact, the contrary opinion lias its adherents. Precision on this point would not, therefore, have been superfluous. It would have been highly desirable that a precise text, beyond any controversy, should have rendered all dispute impossible. In the present state of uncertainty, and without prejudging decisions which events will impose upon us, here is our position. As regards transit dues, the position <»is simple. Nothing prevents us from expressing them in a currency other than the gold franc, provided the maximum stipulated by tho act of concession is not exceeded. We thus have means of preventing an unfavourable interpretation of the text, causing, at any rate temporarily, a falling off in our receipts. With regard to the service of the bonds (interest and redemption) and, by analogy, the statutory interest and the reimbursement of the shares, we consider, in the first place, that the decree of May 2, 1935, has no retro'active effect upon past maturities, and secondly, we are of opinion that, until light is thrown both on the validity and the effects of this decree, we are not released, at any rate morally speaking, from the legal decisions binding us. Thus we claim to protect the moral credit of your Company. The decision, however, does not rest with us. We shall not be able to draw up our line of action until we are certain as to the Conditions of application of the decree of May 2, 1935. Nobody will misunderstand us if, in doubt, we are driven to take precautions necessary to protect, in all circumstances, our responsibilities. As you sec, your Company does not escape the common fate, and also feels the pressure of circumstances. If, more fortunate than others, it has the power to resist, this is due to the wise and cautious policy the Board, with your assent, have always pursued. It would again have been in agreement with this policy to offer tho shipowners, users of the Canal, a new reduction of their Expenses, by putting into force the supplementary reduction in dues mentioned last year. In view of the situation created by the decree of May 2, 1935, your Company cannot, for the time being, forgo any of its resources, for it must be in a position to face any contingency. We readily admit that with the fall in wholesale prices the transit dues represent a proportionally larger part in the working expenses of tho ships. We are ever willing to take into consideration the shipowners' interests arid to reconcile them with those of the shareholders. Our entire past bears this out, but may we be permitted once again to point out that it was with the devaluation of tho pound that equilibrium began to waver, and that if this experience involves painful consequences, it would not be fair to cast them upon those who trusted your Company. Tt is not certain that tho present yield of their shares, some 15 per cent or 16 per cent larger than in 1913 in gold, gives them a greater buying power, while since 19)50 tho drop has been very substantial. Wo are, however, ready to take up again the idea of a reduction in duos, if tho Canal traffic continues to be satisfactory, as soon as we obtain the precise information we now lack regarding the decree of May 2, 1935. Our troubles, slight it is true, in comparison with many others, are but an episode in tho deadly fight international economy is putting up to recover its equilibrium. It seems to-day that tho principal obstacle to tho restoration of a normal world activity is the instability of certain leading currencies. Tho uncertainty which reigns over the relation between currencies, for the lack of a common fixed stand-

ard, renders transactions very hazardous. On the other hand, the restrictions imposed upon circulation of currencies force most countries to fall back upon their internal resources, and thus deprive international trade of the very substance of commerce. Owing to this, capital, which could help commercial enterprises,, forsakes them and seeks a more accessible profit in transactions bearing on the currencies themselves.

Let us hope that the responsible authorities will at last realise the extent of the disaster with which the present monetary- disorder threatens all countries of the world, and that soou a generally concerted stabilisation of currencies, combined with a betterment of the international position, will hasten the reawakening of economic activity, a necessity to the health of the social body and a condition of a better future.