Communication Received from United Kingdom
Delegation Concerning Palestine 3% Defence
Bonds & Palestine Savings Certificates
I should be grateful if you would bring the following information relating to Palestine 3% Defence Bonds and Palestine Savings Certificates to the notice of the Commission.
(1) These Bonds and Certificates (which should, of course, be distinguished from the Bearer Bonds) were issued under the Palestine War Loan Ordinance of 1941 for the purpose of lending the proceeds to His Majesty’s Government in the United Kingdom to asset war expenditure. The Bonds and Certificates were issued by the Government of Palestine on prescribed terms of redemption; in the case of the 3% Defence Bonds, seven years from the date of purchase and in the case, of the Savings Certificates, the normal ten-year period.
(2) Thus this money was raised in Palestine by the Government of Palestine and then re-lent by the Government of Palestine to His Majesty’s Government in the United Kingdom. Under the Palestine War Loan Ordinance of 1941, the liability to repay the holders of these Bonds and Certificated lay with the Government of Palestine but His Majesty’s Government have recently assumed the responsibility hitherto falling upon the Government of Palestine for the repayment of these Bonds and Certificates.
(3) On the 16th April, an Order was made by the High Commissioner for Palestine repealing Section 4 of the War Loan Ordinance, 1941 and thus relieving the Government of Palestine (4) The obligation which His Majesty’s Government in the United Kingdom will incur to honour these Bonds and Certificates will, of course, be provided for by legislation in the United Kingdom and not by local legislation in Palestine.
(5) Clause 5 of the Order is designed to release the Government of Palestine and the Postmaster General from any liability to proceedings for failure to issue Bonds in accordance with Rule 7 of the Rules in cases where applications have been made after 1st August 1946. An alternative method of dealing with this problem by making Clause 4 of the Order retrospective to the 1st August 1946 could not be adopted became orders under the Palestine Order in Council 1948 cannot be made retrospective to a date before the Order in Council came into force.
(6) A copy of a Press Communique relating to Government sponsored securities in Palestine, which was issued on the 16th April together with the Order referred to above, is also enclosed for the information of the Commission.
(7) As the Commission will observe, this communique deals not only with the arrangements referred to above as regards Palestine 3% Defence Bonds and Savings Certificates, but also refers to
GOVERNMENT SPONSORED SECURITIES IN PALESTINE
Many enquiries have been made whether there will be redeemed before termination of the Mandate. The answer is that this cannot be done. The Ordinances governing the respective issues of Bearer Bonds provide only for redemptions at the end of twenty years, except in the case of bonds drawn for redemption at a premium at the quarterly drawings.
It is to be presumed that a successor Government, whatever form it takes, will also accept the obligation to continue with the quarterly drawings.
The drums containing the undrawn numbers will remain locked and will, in addition, be sealed. They will be deposited in a strong room, and the keys of the strong room together with the keys of the drums will be handed over to the representative of a successor administration on termination of the Mandate, or, if no such representative is immediately available, the keys will be deposited in safe custody. Should a successor Administration, when about to resume quarterly drawings, have any reason to believe that the drums had been tempered with, in spite of the above-mentioned precautions, a fresh series of tickets could be spared from the records available and without any difficulty.
It is emphasised that the unallocated balance of Bearer Bond fund (amounting to approximately LP.2 1/2 million) is invested in United Kingdom securities, and the allocated sums have been loaned to Municipalities in Palestine on excellent security.
In the foregoing circumstances there in no good reason why the face value of these Bonds should not be reflected in their exchange value and the full price maintained.
Palestine 3% Defence Bonds and Saving Certificates
The Government has accepted an offer by His Majesty’s Government to take over, on the same terms as at present, direct responsibility for payment to the holder of both principal and interest on outstanding Bonds and Certificates. A resolution to this end has now been submitted to, and approved by, the Home of Commons and will become law through the United Kingdom Finance Bill, later in the year.
In order to implement this proposal, it is necessary to make certain changes in the present Palestine legislation controlling the issue of these securities. Such legislation will have the effect of converting the existing guarantee by the Government of Palestine into a guarantee by Big Majesty’s Government.
There will be no break in the continuity of security, but a short period, will inevitably elapse, while the records are being transferred to the United Kingdom, during which it will not be possible to realize investments. For these purely administrative reasons it will be necessary to suspend the local encashment of Bonds and Certificates as from Applications for repayment already in the hands of the Postmaster General or in course of post will be dealt with locally, but no further applications for repayment can be entertained by the Postmaster General of Palestine after the date of this announcement.
The procedure to be followed by persons who, after the date of announcement, desire to realize their investments, will be more fully announced later. The intention is that after the termination of the Mandate repayment warrants will be issued by the United Kingdom Post Office in respect of Palestine Bonds and Certificates in the same way as for similar securities of United Kingdom issue, and that such repayment warrants will be encashable through some agency in Palestine or, alternatively, at any post office in the United Kingdom.
Arrangements will be made to obviate any difficulties which might arise over Exchange Control.
It is most strongly emphasised that, while holders of securities will suffer the immediately though temporary, inconvenience of inability to realise their investment at short notice, this may be regarded as only a slight disadvantage, having regard to the British Government guarantee.
Post Office Savings Bank
The Post Office Savings Bank is not affected by this change. This particular investment is secured against the general revenues of Palestine and, moreover, the sums in the Bank are fully covered by investments In the United Kingdom.
AND WHEREAS provision was further made by the empowering the High Commissioner to lend any money to His Majesty’ Government in the United Kingdom and the moneys so raised have been lent to His Majesty’s Government accordingly;
AND WHEREAS no further bonds have been issued since the first day of August, 1946 and it is not intended to issue any further bonds;
AND WHEREAS His Majesty’s Government has agreed to take over all obligations of the Government of Palestine in respect of the bonds issued and the Government of Palestine has agreed to release His Majesty’s Government from any obligation to repay the principal or interest of the loans made to Majesty’s Government;
AND WHEREAS it is expedient to amend the Ordinances in the manner hereinafter appearing;
NOW, THEREFORE, the High Commissioner in exercise the powers conferred upon him by the Palestine Order in Council, 1948 and all other powers enabling him in that behalf, hereby makes the following order:-
By His Excellency’s Command.