Part 4

The industry had expanded, and the occasional chance business had been replaced by a more regular and closer connection with the spinners. The main thing to do now, was to find a proper basis upon which a regular market could be built up. The various questions of law had to be adjusted in a broad minded manner, to suit the particular need of the cotton market. Liverpool offered a good example for this, as there, everything had been adapted to the peculiarities of the cotton trade.

Here, in Bremen, first of all, the credit system had to be abolished. It was manifestly impossible to increase the import, as long as the importer was obliged to sell the cotton on 3-4 months open credit.

A good stock of cotton is the first necessity for a market of any importance, but how to obtain it, if the needful capital is lacking to pay for the cotton? The risk of the great price fluctuations, which are indigenous to cotton, gave the whole trade a bad name, and everybody, who had anything to do with it, lost prestige.

Was it worth while to follow up the idea of starting a cotton market?

We must praise the men, who made it practically their life's work, to overcome the difficulties, and must admire the cleverness with which they left certain items for the future to solve.

The men who laboured hard for this object, formed themselves into the "Committee for the Bremen Cotton Trade", later on, the name was changed, and on the 1st of October 1872, everything was ready, and under the new name of

"Bremer Baumwollbörse"

an organisation was started, which has since become known all over the cotton world.

On the 1st of October 1922, its birthday re-occurs for the fiftieth time.

Political occurrences make a deeper impression than those which fall into the sphere of National Economics, but the present has taught us, that the latter are by no means to be despised, in fact, deserve more attention than was given to them previously. It may be worth while to recall, that through the influence of the "Bremen Cotton Exchange", a well regulated trade of first magnitude has been built up. We are forced to observe the development of national economy, not only in our own country, but also, that in foreign countries, and by keeping the important factors constantly before us, we can learn a good deal.

ARBITRATIONS AND APPEALS.

The department of the "Bremen Cotton Exchange" which deals with questions relating to actual cotton, has a staff of sworn classers. It is their duty to fix, with the aid of the various standards, the class of cotton, or to pronounce an opinion on it, or to settle the disputes between buyer and seller, as far as they refer to the quality of cotton.

American cotton is divided into a number of classes, and each has its standard. Originally, these standards were obtained from Liverpool, but later on, Bremen produced the standards independently. There are original standards and standard copies; the former, remain unchanged, while the latter are renewed every year, because, through constant use, they are liable to deteriorate. The freshly made up standards are subject to the examination and approval of a Committee, elected for that purpose, and which consists of Members of the Trade and the Industry. The sworn classers are nominated by the directors, and concern themselves solely with the classing and arbitrating of cotton. They have sworn a solemn oath, to conduct their office with absolute impartiality; this is further safeguarded by the fact, that the names of the parties interested are kept strictly secret. If a party consider, that they have a right to complain about the verdict of the classers, they can appeal against the decision. The verdict of the appeal is given by Appeal Judges, who are appointed by a Committee, elected for that purpose. They are selected from the merchants and spinners, and great care is exercised that they possess the necessary expert knowledge. The names of the interested parties are also withheld from the appeal judges, nor are they informed whether buyer or seller have appealed. It is of great advantage to the whole arbitration system, that the appeal judges are actively engaged in the cotton business, by this means a bureaucratic verdict is avoided. Up to a point, the arbitrators and appeal judges work together, and thereby, the former remain in close touch with the general business life, which is of importance for various reasons. It is not sufficient for a correct verdict, to simply compare the cotton with the standards, the judges must know, how the difference in the quality is to be valued; and how far the character of each crop is to be taken into consideration, etc. etc. It is therefore apparent, that the judging of cotton requires a certain connection with the actual business activity, and, it is certain, that only the commerce itself can produce and educate the individuals, who are chosen to pronounce an expert opinion upon questions of such importance and difficulty.

* * * * *

The "Bremen Cotton Exchange" does not only decide questions concerning quality, but settles also all other disputes, which may arise between members. These decisions are given by, what may be called, a court of arbitration and a court of appeal. To the former each party appoints its own expert, while the Exchange appoints the experts to the latter. The conditions of the "Bremen Cotton Exchange" are adapted to the common law, but take into account, the decided peculiarities of the cotton trade.

The following is an explanation of an important point, where the conditions differ from the Common Law. A deviation from the guaranteed quality, does not give the buyer the right to cancel the contract. He is awarded an allowance, when the difference is small; if the inferiority be greater, penalty is added to the allowance, but, when a heavy allowance is not likely to compensate the buyer for the damage sustained, he may return the cotton, but not by cancelling the contract. In such cases, the contract will be what is called, "regulated" or "invoiced back", in which method, the market differences are duly taken into account, with the addition of penalty for the guilty party. When sales are made for specified deliveries, and these should not be made within the proper time, the buyer has also the right of invoicing back, in the manner described. This invoicing back, takes the place of the cancelling of a contract, according to law.

It is possible, that when a party practically goes by default on a contract, through a very inferior tender, or by a late delivery, they may yet be entitled to claim from the other party, a difference in price. For instance: Somebody sells cotton at 22 cents, the market drops to 20 cents, the contract is invoiced back for bad delivery, then, the seller, who is the guilty party, has a claim against the buyer, for a difference in the market of 2 cents less penalty of 2% = 0.44 cents, equalling 1.56 cents net.

This claim would not be possible according to Common Law. The conditions of the "Bremen Cotton Exchange" make it a principal, that no party shall take an advantage of the market fluctuations.

In the above case, the buyer would have a profit of 2 cents, if he could have simply cancelled the contract on account of bad delivery, because he could have immediately re-bought the cotton at 20 cents, while all his calculations were based on a purchase at 22 cents. This apparently strange fact, that the innocent should pay to the guilty, is the direct consequence of the elimination of market fluctuations from the Law Codes.

It has been of great benefit to all concerned, that any differences of opinions are promptly settled by the "Bremen Cotton Exchange", and not by having resort to a costly and wearisome law suit. Everybody in cotton knows, that quarreling is always bad business, and, it is with some pride, that the cotton Exchange looks back upon the big number of decisions given.

Only very rarely has it happened, that disputes have been referred to the ordinary Law Courts. The "Bremen Cotton Exchange" has, according to the Rules, the power to do so, but that right is only exercised, where purely matters of Law are concerned.

THE UNION WITH THE INDUSTRY.

The Bremen Cotton Market made slow progress and now and then the progressive movement was interrupted. It required courage to pursue the projected course, but "never despair" was the motto which finally carried the day. It became apparent, that the "weal or woe", of the market depended upon the attitude of the Industry. Far sighted men strove hard to awaken an interest for Bremen amongst the spinners, who still utilised considerably the Liverpool market.

The following letters bear witness how this idea was received:

Bremen, ... 1886.

The time has arrived, when the South German Cotton Industry should decide to come a step nearer to the sea. Frequently, complaints have been made about mutual misunderstandings, and that this lack of understanding had given rise to friction. If the spinners would unite with the Bremen cotton trade, an opportunity would be created for eliminating these misunderstandings. By talking matters over in a friendly spirit, and becoming known to each other, common interests could be defended and furthered. There is no danger that the spinners might be outvoted in Bremen, for there is a strong feeling here, that the common welfare must predominate, and that the Bremen trade depends, to a large extent, upon the goodwill of the Industry.

* * * * *

Augsburg, ... 1886.