841.4061 Motion Pictures/205: Telegram

The Ambassador in the United Kingdom (Kennedy) to the Secretary of State

2397. Embassy’s 2331, November 10, 9 p.m.18

1. Following is the final text of the film agreement. It has been accepted by Stanley and approved by me subject to the companies’ final O. K. Allport has been consulted and he likewise approves text.

Stanley is unfortunately being subjected to very considerable pressure to make some announcement in regard to films just as soon as possible. I would like to help him and would therefore appreciate receiving the assent of the companies by Monday19 afternoon if at all possible.

Does the Department wish me to accept in behalf of the companies or will this be done by Allport? In the latter case I suggest Hays cabling Allport, through Embassy, full powers.20

Text of Agreement

1. Period of agreement.

Agreement to run for 1 year. For the purposes of dollar remittances, the year will begin on 1st November, 1939. For the purposes of quota, it will run from 1st October, 1939.
If it should be necessary to consider a further agreement, at the expiration of the present arrangement, discussions will be opened at least 3 months before the termination of this agreement.
The term ‘companies’ as employed in this agreement means the seven distributing organizations listed in appendix ‘A’ to the agreement.
[Page 229]

2. Financial conditions.

During the period 1st November 1939, to 31st October, 1940, the companies will be authorized to remit in dollars an amount not exceeding $17.5 millions. This figure represents 50 per cent of $35 millions, which is understood to be the average of their remittances over the last 3 years. The allocation of this sum as between companies would be made on the basis of a scheme to be drawn up by the companies. During the first 6 months of the period, i. e., 1st November, 1939, to 30th April, 1940, each company will be entitled, should it so desire, to remit up to 75 per cent of its share of the $17.5 millions. During the second 6 months of the period, each company will be entitled to remit the rest of its allocation, the total dollar remittances for all companies during the period 1st November, 1939, to 31st October, 1940, not to exceed $17.5 millions.
Measures will be agreed between the companies and the Treasury and the Board of Trade which will effectively prevent the unauthorised transfer of their remaining revenues. For this purpose a control organisation will be set up representing the companies and the Board of Trade.
Any foreign exchange accruing to the companies as a result of the distribution overseas of pictures made (by them) in the United Kingdom may be retained by the companies or an equivalent amount of dollar exchange will be placed at their disposal for transfer from the United Kingdom in addition to the $17.5 millions specified in this agreement.

3. Quota conditions.

To ensure the continuance of film production in Great Britain, the renters’ quota will be maintained at its present level from 1st October, 1939, until 31st March, 1940. The necessary power would be taken to treat this period of 6 months as continuous with the preceding renters’ quota period (1st April to 30th September, 1939) for the purpose of fulfilling the quota obligations under the films act.
Powers will also be taken to make such other changes in the quota act as the Board of Trade may deem desirable in the interests of British production.
The quota provisions of the films act will be administered with due regard to the various obstacles that war time circumstances may cause to production.
Immediate consideration will be given to the possibility of replacing the quota provisions in the second period of 6 months by alternative arrangements under which the companies would spend an amount equivalent to the monetary obligations that they would have incurred during that period under the Cinematograph Films Act, 1938, this amount either to be spent directly on film production in this country or made available by way of guaranteed loan for financing such production.

4. Supply of films.

It is understood that the companies will, in so far as lies within their power, continue to export their films to this market to the same extent as before and that under no circumstances will an artificial shortage of films be created by the companies. If for unavoidable [Page 230] reasons there should be a substantial shortage in the number of films available to exhibitors, the companies agree not to take advantage of this position, if it arises, to raise film rentals above their present levels.” End of text of agreement.

2. With regard to second half of quota year covered by paragraph 3 (d) this paragraph has been worded in very general terms on the urgent request of the Board of Trade in order to permit the Board to broach this matter in its own way to the British film interests here.

I have however obtained a specific commitment from Mr. Stanley in a letter written to me personally accompanying the agreement, whereby Stanley agrees to replace the quota provisions of the films act on April 1, 1940, by one of the following two plans or by an alternative arrangement mutually agreeable to both the Board of Trade and the American renters:

  • Plan 1. The quota to be replaced by arrangements under which the companies would agree to make available for film production in the United Kingdom a sum of money equivalent to their obligation under the quota, the money to be guaranteed as to principal and interest. The interest on such a fund could be remitted in the form of dollars to the United States.
  • Plan 2. The quota to be replaced by an undertaking of the companies to spend collectively on the production of British films for domestic and international distribution between 1st April, 1940 and 30th September, 1940 an amount equivalent to the monetary obligations which the companies would have incurred during that period under the quota act.

3. Paragraph 3(b) was inserted in the agreement at the request of Allport. He has formulated some changes in quota law which he is now discussing with Board of Trade which should facilitate fulfilment of quota act by American companies.

4. With regard to non-remittable balances, I had Allport accompany Steyne in his discussions concerning the details of this matter with the Treasury. Paragraph 2(b) was drafted specifically to meet Allport’s wishes. Allport urgently requested that no hard and fast framework covering the disposal of non-remittable balances be made until he could discuss the matter with the companies’ accountants and present their joint scheme to the Treasury.

For your confidential background information, the Treasury informed me that it must insist that the non-remittable balances of the American distributors here be kept under some sort of Treasury supervision to prevent any unauthorized indirect or direct transfers. Their normal control restriction, they frankly admit, are as yet full of loopholes. The control of non-remittable balances may therefore even possibly extend to the requirement that some kind of special account be set up in the Bank of England for each company unless Allport, [Page 231] after consultation with the companies’ accountants, can produce an alternative control scheme satisfactory to the Treasury. I am not too sanguine that this will be possible. While it must be anticipated that the utilization of these non-remittable balances, for purposes other than the companies’ normal business and production requirements, will only be permissible in agreement with the Treasury, I have been assured that this agreement will not be withheld except when necessary to prevent direct or indirect transfer, of these non-remittable balances by means not approved by the Treasury.

5. As to companies’ worry that they do not wish to spend on quota more than they have tied up in sterling, my suggestion is that if the 17.5 million dollars should represent all their take and they have no exchange left for quota, they might borrow sterling here to pay off on the big amount they will have from this year on. My advice is for them to get all the money they can while the going is good.

  1. Not printed; it transmitted an outline of the film agreement, and in telegram No. 1444, November 16, 10 p.m., the Department reported the concurrence of eight motion picture companies (841.4061 Motion Pictures/200, 207a).
  2. November 20.
  3. This was done in telegram No. 1465, November 21, not printed.