. 28. RAILS TO REPLACE

Rails supplied free under a guarantee to replace shall not be included in the proportion to which the Group making such free delivery is entitled.

29. INFRINGEMENTS

Any action contrary to the terms of the Agreement, or to the decisions of the Management Committee, or of the London Committee, will be considered an infringement liable to a penalty.

The following actions, although not a complete list, will be particularly considered as infringements of the Agreement:

(a) Acceptance of an order, or of a firm offer, for Unreserved Areas, without being previously assured of the approval of the London Committee, or against its opinion.

(b) Acceptance of an order, even at the protective price fixed by the London Committee, but with a period of delivery shorter than, or at conditions of payment different from, those offered with the approval of the London Committee by the Group holding the allotment.

(c) The abnormally late reporting of an order obtained in a proper manner. Any order received must be reported immediately to the General Secretary, and in any case not later than ten days by the Continental and British Groups, and not later than thirty days by the American Group.

30. PROCEDURE IN THE CASE OF AN INFRINGEMENT

The London Committee shall decide by a majority of votes, each of its Members in this case being entitled to one vote only, whether an infringement has been committed, in which case the Group in default shall pay 20s. (Gold) per ton on the tonnage involved. This payment is due within 15 days following the decision of the London Committee, unless in the meantime, the Group concerned has recourse to any of the following provisions:

In cases where the decision of the London Committee is not accepted by the Group judged to be in default, such Group may appeal to a Special Committee, consisting of the first Delegate of each Group to the Management Committee, or by his substitute. This Committee will come to a decision by a majority of twothirds of votes, each of the Members being entitled to 1 vote only. They shall also have power, if unanimous, to reduce the amount of the penalty.

Any Group judged in default refusing to accept the decision of the Special Committee above-mentioned, has the right to demand arbitration. In that case, the Management Committee and the Group interested will each appoint an Arbitrator within a maximum delay of one month. Before the subject matter of the arbitration is disclosed, these two Arbitrators will appoint within a maximum delay of one month an independent person as the third Arbitrator.

The Arbitrators will decide, without appeal, by a majority of votes, taking as a basis the English text of the Agreement, if the Group demanding arbitration be either the English or American Group; the French text, if the Group demanding arbitration be the French, Belgian, Marigree, Luxemburg or Italian Group; and the German text, if the Group demanding arbitration be either the German, Czechoslovak-Austrian, Hungarian or Polish Group.

They will also fix the division of the expenses of the arbitration.

All the Group who are parties to the Agreement undertake to accept the arbitration awards and expressly renounce any recourse to law.

31. DIVISION OF PENALTIES

The amounts paid as the result of infringements shall be paid to a Special Fund, to be divided forthwith between the Groups who are not in default in accordance with their percentages under Clause 8.

Nevertheless, if any Group considers itself particularly injured by an infringement, the Special Committee, acting as provided in Clause 30, shall have power to allot to such Group immediately all, or part of, the sum paid by the defaulting Group.

32. INTERPRETATION

Any difference of opinion regarding the interpretation or the execution of this Agreement will be submitted to the examination of the Special Committee and subsequently if necessary, to arbitration, as provided in Clause 30, within the conditions defined by that Clause.

33. TEXT OF AGREEMENT

This agreement is drawn up simultaneously in English, French and German.

[Letter from R. F. Gurney, representative of the American group, I. R. M. A., to Edward Berkfield, secretary, the Steel Export Association of America, New York (dated September 14, 1938, submitting report of the proceedings of the 1935 rail agreement management committee meeting, in London, September 6, 1938]

Strictly Private.

INTERNATIONAL RAIL CARTEL-MINUTES

I. R. M. A. 1935 AGREEMENT-POOLS Nos. 1, 2, AND 3.

Minutes of meeting of management committee held at Claridge's Hotel, Brook Street, W. 1, on Tuesday September 6, 1938, at 10:30 a. m. :

Present:

American group: Mr. R. F. Gurney, Mr. P. Bianchi.

Belgian group: Mr. L. Greiner, Mr. J. Labreit, Mr. A. S. A. Corin.

British group: Mr. A. Dorman, Mr. A. O. Peech, Mr. J. Craig, C. B. E., Hon. R. G. Lyttelton, Mr. F. E. Parr.

French group: Mr. H. de Wendel, Mr. E. du Castel, Mr. F. Truchy, Mr. P. Pucheu, Mr. L. Charbonnel.

German group: Mr. E. Tgahrt, Mr. W. Schwede, Dr. Henle, Dr. K. HeimannKreuser, Dr. P. Maulick, Dr. R. Scheer-Hennings, Mr. E. Weichardt, Mr. R. Gussmann.

Luxemburg group: Mr. A. Meyer, Mr. H. Dieudonne, Mr. G. Noesen, Mr. B. Clasen, Baron L. Buffin.

Marigée group: Mr. F. Perot, Mr. L. Brichant, Mr. C. E. K. Menzies.

Czechoslovak group: Mr. O. Federer, Mr. A. Lepercq, Mr. O. F. Steiner, Dr. V. Mares, Mr. O. Dub, Mr. Peyr.

Hungarian group: Dr. P. de Biro, Mr. J. de Biro, Mr. A. Kallir.

Polish group: Baron J. Dangel, Mr. L. Horowitz, Count L. Dembinski, Mr. M. M. Mayzner.

Italian group: Mr. H. Shillitoe.

Mr. Rod M. Peat, General Secretary.

Mr. H. P. Robertson.

Mr. F. Millican.

169. Mr. R. F. Gurney was appointed to the chair.

170. Minutes.-The minutes of management committee meeting held on May 25, 1938, were taken as read and signed by the chairman.

BILBAO HOUSE,

London, E. C. 2, September 14, 1938.

Rails-1935 agreement, management committee meeting, London, September 6, 1938.

Mr. EDWARD BERKFIELD,

Secretary, The Steel Export Association of America,

New York.

DEAR SIR: We submit the following brief report of the proceedings of the above meeting:

Renewal of agreement-British position. We reported in regard to this in our letter to you of September 9.

Institut fur Weltwirtschaft an der Universitat Kiel-Ghent University.-The request from these universities for details of the organization of the rail association was considered, and we stated that we were unalterably opposed to furnishing any outsiders, irrespective of their qualifications or purposes, with copy of the rail agreement or any information pertaining thereto.

The Germans said that so far as they were concerned they would agree to give the information for the personal use of the universities on the strict understanding that it was not for publication.

The Belgians stated that they also would agree to give the information under this condition.

The Luxemburg representative considered it would be better to give the information required rather than surround the agreement in mystery, as our reluctance to accede to their wishes might give rise to ideas contrary to the facts.

The Poles thought it would not be proper to give full information, but the general secretary could be instructed to answer any definite questions put by the parties referred to.

The Czechoslovakian representative agreed to give the information, but the French and Marigree groups thought it should not be given.

The Hungarians said they would not object to general information, but no details.

The British remarked that if they were asked by Oxford or Cambridge for such information they would certainly say "no"; on the other hand, they appreciated that the Germans and the Belgians might have some reason why this information should be given, but actually the British were against the idea.

At this stage the Germans indicated that they would not insist if it were the opinion of the majority of the groups that the request from the universities should be turned down.

The Belgians did not press the matter further in regard to the request from the Ghent University.

In summing up the situation the chairman remarked that the agreement was strictly private and confidential, and he saw no reason why we should give a copy or any details to outsiders.

Under the circumstances it, was decided that no information should be given to either university.

Czecho-Austrian group.-The committee were asked to confirm the arrangement whereby the quota of the Czecho-Austrian group is to be divided between the German and Czechoslovakian groups beginning with pool 3, in the proportion of 29.12 percent in favor of the German group and 70.88 in favor of the Czechoslovakian group.

The German group expressed the view that this was a matter concerning themselves and the Czechoslovakian group only.

The British agreed insofar as the division of the quota was concerned but said there was one important point, and that was whether the Germans were entitled to a guaranteed tonnage, and, if so, how it was going to affect the working of the agreement.

The Germans answered that no group would be placed at a disadvantage and would be in the same position as before.

The Hungarians thought the position should be examined to see whether there was any disadvantage to the groups as a whole.

We said that while we had nothing to say in regard to the proportions, in our opinion we should not be expected to implement the Czecho-Austrian agreement in its present form. We agree to the continuance of the guaranty to the Czechoslovakian group, but did not see why we should give a similar guaranty to the German group. We thought the old agreement should be considered as null and void, and, if necessary, a new Czechoslovakian agreement prepared.

The Germans said they could not understand why there should be any objection to their retaining the same rights as given to the Austrian group. In their opinion there was no reason why the German group should lose any rights, and no difficulties could arise in the working of the agreement. As far as they could see it was merely a question of an arrangement between the German and Czechoslovakian groups to divide the quota, otherwise there was no real change in the position.

The chairman remarked that the agreement was signed with the Czecho-Austrians, and when one party ceased to exist the agreement was null and void. There could be no objection to renewing the arrangement with the Czechoslovakians on a proportionate percentage, transferring the balance of the Czecho

Austrian quota to the Germans, but we claimed that the German portion should not carry with it a guaranty. The American group had always objected to giv ing guaranties as they thought every group should take its chance; therefore, when the opportunity arose of getting one guaranty out of the way they desired to take advantage of it.

The Luxemburg representative thought the solution would be to let the two groups confer and report further to I. R. M. A.

The Germans agreed to this suggestion, and again remarked that there was no change in the situation; they represented the same works and they had the same obligations to give the works the same tonnage. There was no loss to any member of the rail association, and there was no reason why they should not ask for all the right and privileges given to the Austrians.

The French group thought a difficulty might arise if there were two quotas for the German group, one with a guaranty and one without.

It was agreed that the German and Czechoslovakian groups should discuss the position further and submit their proposals for approval at the next meeting of the management committee.

No. 2/390-Ministry of Public Works, Brazil.-We said there were many precedents to show why business booked in pool 2 should remain in pool 2.

The Belgians remarked that it was not a question of precedent, but one of rules.

The Luxemburg representative proposed that 50 percent of the tonnage should be debited under pool 2, and the balance under pool 3, pointing out that the offer covering 30,631 metric tons, was presented at the end of the pool at a time when the Belgians were only 15,000 tons in deficit.

The chairman ruled that the discussion was irrelevant as it was clearly defined in clause 6 of the agreement that allotments made or renewed during the life of a pool, and orders resulting therefrom within 2 months must be debited against that pool.

The French expressed the opinion that this question should be examined more closely, particularly the conditions under which the offer was made. It was known that this so-called firm offer was presented 2 or 3 days before the end of the pool, and the London committee had no time to enquire fully as naturally they were anxious not to lose any business presented. The facts are that the order has not yet been received, and the law to which reference has been made has not yet been passed. For this reason they were of the same opinion as the Luxemburg group that this tonnage should not all be debited under pool 2.

The chairman said that this suggetion must be ruled out definitely as the agreement cannot be changed. We were all aware that there was always a scramble at the end of a pool, but there was no question that allotments made under pool 2, if booked within 2 months after allotment, should remain. in pool 2. He again reiterated that it was useless to discuss the matter further as the position was clearly covered in the agreement under clause 6.

The Poles said that arising out of this matter it appeared that it might be desirable to restrict the time in which a firm offer is to remain open. They suggested that firm offers should only be considered as such, if the order is confirmed within 14 days, and that the London committee should be instructed accordingly.

We said there was nothing in the rules stipulating a time limit for firm offers. To this the French remarked that there are occasions when the rules must be relaxed. Take for example the proposal that a special committee should consider the question of the debiting of the orders taken by Algoma and Colorado. If relaxation of rules is being considered in favor of the British and American groups why not in this case? In the first place the French idea would be to agree with the Luxemburg proposal that some of this tonnage should be debited in pool 3, and they would further suggest that a special committee be appointed to examine whether this particular business was a firm offer or not. The special committee could also consider at the time No. 2/397 covering the Dutch State railway order booked by the Germans.

The Poles took the view that there should be no alteration in the rules, but every care should be exercised to avoid abuse in future.

The chairman stated that on some occasions it is not possible to report an order until some time after the firm offer has been accepted. Usually financial arrangements have to be made, and the seller is not prepared to proceed with the execution of the order until assured that the money is safe.

The Belgians stated that it would be difficult to undertake to report an order within 14 days of the firm offer as sometimes there were financial questions to

be settled. As regards this particular business the president was journeying home, and on his arrival in Brazil found that the responsible minister was ill. They expect, however, to hear definitely in a few days.

We pointed out that when groups are authorized to accept a firm offer they are immediately debited with the full tonnage, and not 50 percent.

After further discussion it was decided that the debit of this business should be in accordance with clause 6 of the agreement, and that if the order is taken within 2 months from the date of allotment it should remain under pool 2.

It was further agreed that the general principle relating to firm offers be referred to the London committee for their proposals to be submitted to the next meeting of the management committee.

No. 2/397-Dutch State Railways.-The French stated that they considered this business, allotted to the German group, should be debited under pool 3. The Germans did not agree, pointing out that the business was allotted to them on July 29, and the order reported by them under date of August 7. Therefore, they contended that this order was properly debited under pool 2.

The French said that the German group submitted this inquiry on July 28 after the London committee had finished sitting, and the matter was dealt with over the telephone. Under clause 10 (c) it was agreed that all enquiries or firm offers should stand over for one meeting, and while it was true that special urgency might justify an immediate decision, this did not apply when it was a question of speeding up matters in order to get an allotment before the pool closed. If the rule had been properly applied it would have automatically followed that this business would have been in pool 3.

The Germans explained that there was danger of Swedish competition, and the London committee were entitled to take these special circumstances into consideration. They claimed that everything was quite correct, and in accordance with the rules, and pointed out that notwithstanding they have taken debit for the 17,000 tons they were still in deficit about 5,000 tons under pool 2.

We expressed the opinion that in view of the probable intervention of Domnarvet there was no cause for complaint in regard to the allocation of this business, and the order should remain in pool 2. In this we were supported by the British and other groups, and it was finally agreed that the order reported by the German group should remain to their debit under pool 2, in accordance with the terms of clause 6 of the agreement.

Domnarret competition.-The general secretary reported that under date of July 25, 1938, the Comptoir Siderurgique de France, S. A., Paris, reported that Mr. Elliot, accompanied by Mr. Schwede, visited Sweden in August with a view to meeting the directors of Domnarvet Works in order to exchange views, with the possibility of an understanding with the E. I. A. At the request of the French group, and with the approval of the other groups, a statement of orders taken by Domnarvet, in competition with the rail association, was forwarded to Mr. Elliot.

Mr. Schwede advised that, with Mr. Elliot and Mr. Steiner, he called on Domnarvet and received the impression that they were not very anxious to join the steel cartel owing to the present condition of the Swedish market. Domnarvet, however, were quite prepared to consider any proposals made to them. It is anticipated that there will be difficulties in coming to an understanding, and it will be necessary to offer them favorable conditions. A report by Mr. Schwede had been circulated to all groups interested. It is intended to send the Swedes proposals based on a reference period, and in due course a special delegation will go to Stockholm to discuss further. It will be necessary to send delegates as soon as possible owing to the increasing competition of Swedish Works in export markets. It was agreed that most Swedish Works are fully booked at present, and not looking for export business, preferring to concentrate on special qualities of steel, but their competition in export markets is anticipated in the future.

The chairman said he understood that the delegates had not acted in any way for the rail association, for which the management committee alone was responsible.

Mr. Steiner answered that they were speaking for the E. I. A. only, and it was quite realized that they could not act for I. R. M. A. which must be settled separately. I. R. M. A. was not discussed, and the preliminary talk was a general one only. Actually Domnarvet did inquire about I. R. M. A., but were informed that this was a separate association and could be dealt with later. Mr. Steiner went on to say that it should be borne in mind that their visit was concerned with all Swedish Works, not only Domnarvet.

It was minuted that Mr. Schwede reported on the interview with Domnarvet and stated it would be difficult to arrive at an agreement with the Swedish Works,