337 Mr M. MacDonald, U.K. Secretary of State for Dominion Affairs, to Commonwealth Government

Cablegram 126 LONDON, 24 December 1938, 3.00 p.m.

IMPORTANT SECRET

(1) The position of His Majesty's Government in the United Kingdom resulting from their accession in 1931 to the General Act for the Pacific Settlement of International Disputes, has recently been examined by a Sub-committee of the Committee of Imperial Defence taking into account the existing situation as regards Article 16 of the Covenant of the League of Nations. Following is substance of Sub-committee's Report.

(2) At the time of accession there appears to have been a general feeling that, while the desirability in principle of machinery for the pacific settlement of international disputes could not be denied, the General Act itself, which had been framed in the main by Continental European legal experts, was not a very satisfactory instrument from the point of view of His Majesty's Governments. It was felt in a good many quarters that the procedures which the Act provided for the settlement of disputes, in so far as these did not duplicate those provided in other instruments (e.g. the Optional Clause in the case of justiciable disputes) were excessively complicated and that the Act did not in reality provide any means of settling disputes which could not be dealt with under already existing and simpler methods. In this connexion the Subcommittee draws attention to the fact that only a limited number of States have accepted the General Act as compared with the number of those which accepted the Optional Clause and that it has never been invoked by any State at any time since it was first concluded.

(3) Apart from these general considerations the Sub-committee feel that the provisions of the General Act might in certain circumstances prove a source of grave difficulty to His Majesty's Government in the United Kingdom. At the time of their accession, considerable doubt was expressed whether acceptance of such obligations might not unduly hamper His Majesty's Government in the United Kingdom, in the event of war, in taking certain measures, especially as regards the exercise of belligerent rights at sea. It was then decided that such a risk might safely be neglected since the obligations were accepted in respect only of disputes with Members of the League of Nations and it was assumed that, in the event of the United Kingdom being involved in a major war, all the other Members of the League would be bound to act in accordance with Article 16 of the Covenant of the League and could not claim the rights of neutrals and that no occasion should arise therefore for a dispute between the United Kingdom and any other Member of the League resulting from the exercise by the former of belligerent rights. At the time of signature of the Optional Clause the decision of His Majesty's Government in the United Kingdom not to make a reservation in respect of disputes arising out of the exercise of belligerent rights at sea was publicly justified on the ground of the new situation arising from Article 16 (see for example pages 8 to 11 of Cmd. 3452 [1]) and the same considerations were held to apply to the General Act to which His Majesty's Government in the United Kingdom acceded a year later.

Subsequent developments in connexion with Article 16 now make it exceedingly doubtful whether, if the contingency contemplated were to arise, such considerations would still hold good. If a situation such as is contemplated in Article 16 were to arise it would no doubt be the desire of His Majesty's Government in the United Kingdom that consultation among the Members of the League as to the possibility of action by them under the Article should be arranged immediately, in the hope that the result of such consultation might be to secure such agreement among the Members of the League as would enable His Majesty's Government in the United Kingdom to exercise belligerent rights at sea and other war measures without the risk of there arising from such measures disputes which might be referred to arbitration or any other procedure contemplated in the General Act. It is however probable that in fact some Members of the League, and especially the Scandinavian States having regard to their attitude towards Article 16 would not be willing to agree to such a course. If thereafter a dispute were to arise with some such State as a result of belligerent action by His Majesty's Government in the United Kingdom, the latter could not resist a demand, if made, that the dispute should be referred to a tribunal as contemplated under the General Act. In that event, if an award were eventually given against His Majesty's Government in the United Kingdom not only would this involve the possibility of heavy damages (which might run into millions of pounds) but it would be necessary to abandon measures considered vital to the successful prosecution of the war. It is indeed conceivable that the Tribunal might, on the opening of proceedings before it, make an order for the immediate suspension of the action complained of In the circumstances the Sub-committee feel that in the event of His Majesty's Government in the United Kingdom becoming at any time involved in war they should not enter upon hostilities bound by the obligations of the General Act in their present form.

(4) The Sub-committee observe that the General Act under the terms of Article 45 runs for successive periods of 5 years from the 16th August 1929 and a contracting party can only relieve itself of its obligations under the Act by denouncing it at least six months before the expiration of the current period. If therefore any action is to be taken by His Majesty's Government in the United Kingdom this must be taken not later than the 15th February, 1939, or they will continue to be bound by the Act in its present form for another 5 years.

(5) In the circumstances the Sub-committee reach the conclusion that the best course would be to give notice of denunciation of the General Act before the 15th February 1939 this action being accompanied by a statement to the effect that (i) in view of the existing position as to Article 16 of the Covenant His Majesty's Government in the United Kingdom desire to consider whether they can in future be bound to arbitrate disputes arising out of action taken in war time;

(ii) they observe that the General Act has never been invoked and that doubts have been expressed whether its procedures, so far as they differ from those already existing in other instruments, afford a really satisfactory means of settling international disputes;

(iii) under the terms of the General Act denunciation must be effected in February 1939 if its provisions are not to be binding for another five years;

(iv) they are willing to consider whether and, if so, on what terms reacceptance could be effected.

(6) The Sub-committee recommend that consideration should be given to the advisability, if any such statement were made, of including in it a suggestion for a review of the General Act by the League having regard to the failure to employ it hitherto.

(7) The Sub-committee point out that the considerations mentioned in paragraph (3) would apply also (as regards justiciable disputes) to the Optional Clause which was accepted by all His Majesty's Governments with effect from various dates in 1930.

Acceptance of the Optional Clause by His Majesty's Government in the United Kingdom was for a period of ten years and it would not be possible legally to withdraw from it before February 1940 though thereafter withdrawal could take place at any time with immediate effect. The general considerations mentioned in paragraph (2) above do not in the Sub-committee's view apply in the case of the Optional Clause and in all the circumstances they suggest that it is unnecessary at present to take any action in relation to the Optional Clause. They point out that the position in relation to the Optional Clause can be further considered in February 1940, though it seems doubtful whether any action would be necessary or desirable unless and until this country were in fact involved in war, in which event (if it occurred after February 1940) it would be possible to withdraw immediately from the Optional Clause if this were thought advisable. If His Majesty's Government in the United Kingdom were to become involved in war before February 1940, although legally it would not be possible to withdraw from the Optional Clause, the Sub-committee consider that it would be possible, if the League. procedure described in paragraph (3) had shown that Members of the League were not prepared to apply Article 16 of the Covenant, to notify that we no longer regarded ourselves as bound by the Optional Clause in respect of disputes arising out of belligerent action and to base our attitude on the fact that the procedure under Article 16 had broken down. In that event the position could if necessary be regularized by formal denunciation in February 1940.

(8) The Sub-committee have expressed the view that it would be highly desirable that on a matter of this nature similar action should, if possible, be taken by all the British Commonwealth Governments concerned.

(9) It will be seen from the above that the question raises important issues, and it will be remembered that accession to the General Act in 1931 was effected after considerable discussion between the Governments of the British Commonwealth (see my telegram Circular B. No. 7 of the 8th January, 1930, and subsequent correspondence). In all the circumstances we feel that the consideration mentioned in paragraph (8) above is very important and before examining the matter further we should be grateful if we could receive any observations which the other British Commonwealth Governments who are parties to the General Act may feel able to make both on the subject generally, and in particular on the Sub-committee's suggestions mentioned in paragraphs (5) (6) and (7) above as to possible future action. We are also taking steps to sound the French Government. In view of the position as described in paragraph (4) we should appreciate a reply at an early opportunity.

1 Not printed.

[FA : A2937, PACIFIC SETTLEMENT OF INTERNATIONAL DISPUTES]