[On 9 January 1939 F. Strahan, Secretary of the Prime Minister's Department, wrote to Lt Col W.R. Hodgson, Secretary of the Department of External Affairs, forwarding the request of the Prime Minister, J.A. Lyons, to 'let him have some notes' on the General Act. W.M. Hughes, Minister for External Affairs, thought that the question should go to Cabinet, and the following submission was prepared.]
GENERAL ACT FOR THE PACIFIC SETTLEMENT OF INTERNATIONAL DISPUTES
1. A cablegram No. 126 dated 24th December, 1938 , has been received from the Secretary of State for Dominion Affairs enquiring the views of His Majesty's Government in the Commonwealth of Australia on the subject of the General Act for the Pacific Settlement of International Disputes (Treaty Series No. 32 of 1931) to which the United Kingdom, Canada, Australia, New Zealand and India acceded, with certain reservations, in 1931. Before dealing with the contents of the cablegram in detail some statement of the existing position is desirable.
2. The United Kingdom and the Dominions are parties to the Statute of the Permanent Court of International justice, Article 36 of which contains the main provisions relating to the jurisdiction of the Court. That Article falls into two parts, the first of which provides that the Court shall have jurisdiction in all cases which the parties refer to it either specifically or by virtue of particular treaties or conventions. The second part of the Article provides for a special compulsory jurisdiction without specific reference, and is known as the 'optional clause'. Great Britain and the Dominions adhered to the Optional Clause in 1930, with the following reservations:-
(a) Acceptance of the Clause was for a period of 10 years and thereafter subject to notice of termination.
(b) Acceptance was on a basis of reciprocity-i.e., it applied only to disputes with countries which signed the Optional Clause.
(c) The jurisdiction accepted was in respect only of disputes arising after ratification with regard to facts or situations subsequent to ratification.
(d) The following classes of dispute were excepted from the jurisdiction of the Court:-
(i) Disputes in which the parties agree to have recourse to some other method of peaceful settlement.
(ii) Inter-Dominion disputes.
(iii) Disputes which by international law fall exclusively within domestic jurisdiction.
(c) The right was reserved to require the suspension of proceedings in the Court in respect of any dispute submitted to and under consideration by the Council of the League.
3. The Optional Clause provides that, as between the parties to it, the Court shall have jurisdiction in all or any of the classes of legal disputes concerning:-
(a) the interpretation of a treaty;
(b) any question of international law;
(c) the existence of any fact which, if established, would constitute a breach of an international obligation;
(d) the nature or extent of the reparation to be made for the breach of an international obligation.
4. By the Pact of Paris which was signed in 1928, the Members of the League and certain other States had already renounced war as a means of solution of international disputes and the principle of pacific settlement had been affirmed. The establishment of the Permanent Court had met the need for adequate machinery to effectuate this principle in practice so far as legal disputes were concerned, but no general procedure was available for the purpose of settling disputes other than those specifically provided for in the Statute of the Court. To meet this need and to obviate the necessity for the conclusion of a number of bilateral arrangements, the General Act of 1931 was drafted.
5. The General Act makes provision for the settlement of disputes of every kind between two or more parties to the Act. Such disputes may be settled by conciliation, arbitration or judicial proceedings. As regards disputes relating to the respective rights of parties, i.e., disputes of a legal nature, the General Act provides for submission to the Permanent Court, unless the parties agree to have resort to an arbitral tribunal, and this class of dispute is specifically stated in the Act as including those mentioned in Article 36 of the Statute of the Permanent Court. All other disputes are to be submitted to a Conciliation Commission which may be either permanent or special. The function of the Commission is to suggest a settlement, and the parties are under no obligation to adopt its proposals, but, in the event of their non-
acceptance, the parties are bound to submit the dispute to arbitration. It will thus be seen that, as regards legal disputes, the Act restated the provisions already existing for the settlement thereof, while it made provision also for the settlement of other disputes, the mode of settlement being, not judicial, but by way of conciliation and arbitration.
6. The United Kingdom and the Dominions (other than South Africa) acceded to the General Act, subject to certain conditions:-
(a) Certain classes of disputes were excluded from the procedure prescribed by the Act, namely, disputes arising prior to accession or relating to past events or situations, disputes with any party not a Member of the League, and disputes of the classes mentioned in the signature to the Optional Clause (see paragraph 2 above).
(b) The right was also reserved, as it had been previously, to require suspension in the case of juridical disputes where the question had been submitted to the Council of the League.
(c) In the case of non-juridical disputes, the procedure of conciliation was to
be suspended in the case of questions which had been brought before the Council of the League and the procedure of arbitration was not to be applied unless the Council should have failed to effect a settlement within twelve months or (if the procedure of conciliation was adopted) for a period of six months from the termination of the work of the Conciliation Commission.
The General Act was to remain in force for a period of five years and thereafter for further successive periods of five years unless six months' prior notice of renunciation should be given.
Any action to denounce the General Act must now be taken not later than 15th February, 1939, or the Act will continue in force in its present form for another five years from 16th August, 1939.
7. Other parties to the General Act arc: Belgium, Denmark, Estonia, Finland, France, Greece, Italy, Latvia, Luxemburg, Norway, Peru, Spain, Switzerland and Turkey.
8. The General Act was considered by the Imperial Conference in 1930 when, after considerable discussion, the United Kingdom and all of the Dominions approved of its underlying principles. Accession was agreed to by the United Kingdom and all of the Dominions except South Africa which desired further to consider its position with reference to certain domestic matters. The Australian delegate, Mr Brennan, stated that the Commonwealth of Australia was prepared to adopt the Act. It is quite clear from the statements made to the British Parliament at the time of signature of the Optional Clause and accession to the General Act that His Majesty's Government in the United Kingdom took both these steps in the belief that both instruments were complementary to the fundamental object of securing peaceful settlement of international disputes which had been foreshadowed in the Peace Settlement discussions and partially achieved by the Covenant of the League. As was stated in connection with the accession to the General Act, 'The signature of the Optional Clause was ... a logical consequence of the acceptance of the Pact of Paris. Accession to the General Act is only a further and equally logical consequence.'
Similarly the Prime Minister (Mr Scullin) and the Leader of the Government in the Senate (Senator Barnes) in moving the approval of the Houses of the accession to the Act referred to the fact that since war had been renounced it was essential that a peaceful means of settlement of international disputes should be provided.
9. The position of His Majesty's Government in the United Kingdom in relation to the General Act has been recently 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.
10. The Sub-Committee points out that at the time of accession there was a general feeling that the General Act was not a very satisfactory instrument because of the somewhat complicated procedures prescribed by it and the duplication of procedures already provided for in other instruments such as the Optional Clause. In this connection attention is drawn to the fact that only a limited number of States have accepted the Act and that it has never been invoked.
11. The Sub-Committee feels that the provisions of the Act may in the event of war unduly hamper the British Government in taking certain measures especially as regards the exercise of belligerent rights at sea. This question had been considered at the time of signature of the Optional Clause but it was felt at that stage that there was little risk because the Optional Clause was practically limited to disputes with Members of the League and that in the event of a major war all Members of the League would be bound to act in accordance with Article 16 of the Covenant which provides for the imposition of sanctions against a Member resorting to war in disregard of its obligations under the Covenant. In these circumstances no Member could claim the rights of neutrals and thus no dispute could arise with a Member resulting from the exercise of belligerent rights. (See Cmd. 3452.) When the question of accession to the General Act was considered, reference was made to the statement issued in connection with the Optional Clause (Cmd. 3803).
12. The recent developments in connection with proposals for reform of Article 16 of the Covenant (as a result of which the imposition of military, economic or financial sanctions cannot now be regarded as universally obligatory) have rendered this reasoning more or less unsound. In the event of a dispute arising to which Article 16 would be applicable, attempts no doubt would be made to obtain agreement as to joint action which would permit the taking of war measures by Great Britain in common with other States Members, without the risk of invocation of the provisions of the General Act. In the light of recent experience, however, it is probable that any such agreement would be unobtainable, as the Scandinavian States, Switzerland and Belgium would probably refuse to co-operate in any way. In the absence of such agreement, if belligerent rights were exercised by the United Kingdom it would be open to proceedings at the suit of an aggrieved State, in pursuance of the General Act, which might result in an order for immediate suspension and final abandonment of the measures taken and possibly an award of heavy damages.
13. In view of these considerations, the Sub-Committee feels that His Majesty's Government should not enter upon hostilities bound by the obligations of the General Act in their present form, and has concluded that the best course would be to give notice of denunciation before 15th February, 1939, accompanying the notice by a statement drawing attention to the existing position as to Article 16 of the Covenant and pointing out that in view of this, the United Kingdom desires to consider whether it can in future be bound to arbitrate disputes arising out of action taken in war-time, pointing out that the General Act is hardly satisfactory and has never been invoked; referring to the fact that denunciation must now be effected if the Act is not to remain binding for another five years, but stating that the United Kingdom is willing to consider the question of re-acceptance and possibly including a suggestion for a review of the General Act by the League.
14. The Sub-Committee observes that a similar risk in relation to the exercise of belligerent rights also exists in relation to the Optional Clause, but that withdrawal cannot be effected in this case until February 1940 in any event. In all the circumstances the Sub-Committee feels that it is unnecessary at present to take any action in relation to the Optional Clause, but that the matter should be further considered in February 1940. If war occurred after February 1940, the United Kingdom would probably withdraw immediately from the Optional Clause, while, if the United Kingdom became involved in war before that date, although legally it would not be possible to withdraw from the Optional Clause, the Sub-Committee considers that it would be possible to notify that the United Kingdom no longer regarded itself as bound by the Optional Clause in respect of disputes arising out of belligerent action and to base this attitude on the fact that Article 16 had broken down.
15. The Sub-Committee has expressed the view that it would be highly desirable that all the British Commonwealth Governments concerned should take similar action in this matter, and the Secretary of State would be grateful to receive any observations which we may feel able to make upon the subject.
16. It will be seen that the telegram raises important issues. In the event of the United Kingdom becoming involved in a war, a preponderance of legal, constitutional and political opinion supports the view that all the members of the British Commonwealth will also be regarded as being automatically at war. If this be so, it is obvious that the members of the British Commonwealth should ensure that the efforts of the United Kingdom in bringing the war to a successful conclusion are not affected by the restrictions of the General Act, and that on grounds of general principle of Empire co-operation all the Dominions should be on the same footing as regards the abrogation of this Act. From the local and practical point of view the question does not affect the Commonwealth of Australia to the same extent as the United Kingdom, but it is conceivable that the Commonwealth Government might find itself in certain circumstances liable to proceedings under the General Act in consequence of naval operations by Australian ships. Politically, the question is not so easy of solution, inasmuch as denunciation of the General Act might well leave the Government open to the charge that it was attempting to avoid its declared policy of securing the peaceful settlement of disputes wherever possible by all means other than war. At the same time it should be remembered that conditions are very different today from what they were in 1931 when accession took place. Then, although it was thought that the Act was not entirely satisfactory (see above), it was agreed that the general objects sought to be obtained were sound in principle and it was hoped that a clear lead by the British Empire would encourage other Governments to follow their example and that the acceptance of the ideas of arbitration, conciliation and judicial settlement would help to bring about a general feeling that war could be averted. The situation, however, has changed as the telegram from the Secretary of State points out, and, although denunciation of the General Act might be regarded in some quarters as a step away from the principle of pacific settlement and calculated to increase current fears that war is regarded as probable, it may be considered in all the circumstances a necessary step if the British Commonwealth is to avoid considerable difficulty in the event of the occurrence of a major war.
As indicated, the signature to the Optional Clause and accession to the General Act were both effected only after close consideration of their bearing upon the exercise of belligerent rights which was found to be irrelevant in the light of the provisions of Article 16 of the Covenant. Now that Article 16 has lost much of its force it is obvious that different considerations may apply.
17. On 7th January, a telegram was received from the Acting High Commissioner for the Commonwealth  stating that there seemed to be differences of view between the Ministers in Great Britain, some feeling that denunciation of the General Act would lend itself to misrepresentation and raise important political issues and that the Government would be attacked for 'abandoning the buttresses of peace.' This school feels that if war came the General Act and the Optional Clause would go by the board in any case and that no action is necessary at present. Other Ministers feel that the changed attitude in relation to Article 16 provides sufficient reason for denunciation. The Acting High Commissioner further states that he understands that the French Government was sounded on the question and semi-officially replied that it was not in favour of the proposed action, urging that if war broke out the whole situation would be changed and that it would then be easy to let the General Act go by the board. The French Government point out that Italy, notwithstanding that she had left the League, still adhered to the General Act and that the proposed action would encourage her to denounce it. The Acting High Commissioner stated that it was probable that the British Government might decide to take no steps at present and suggested that the Commonwealth Government might desire to do no more than express the view that on matters of this kind uniform action on behalf of all British Commonwealth Governments should be taken.
18. No advice confirming this information or indication of the views of the French Government has, however, been received from the United Kingdom, and on 13th January, the Secretary of State in a further telegram  expressed a hope that an early reply from the Commonwealth Government would be forwarded.
19. In view of the importance of the subject, it is considered that Cabinet should decide this question, and the following draft telegram is submitted for consideration:-
'Your telegram 126 General Act Pacific Settlement, His Majesty's Government in the Commonwealth of Australia has given careful consideration to the report of Sub-Committee of Committee Imperial Defence and is of opinion that it is inexpedient to denounce the General Act at this juncture.' 
1 Documents on Australian Foreign Policy 1937-49, vol. 1, Document 337.
2 Document 3.
3 Not printed.
4 Hughes personally rewrote the last part of the draft cablegram in paragraph 19, which in the submission prepared by the Department of External Affairs had read '... and agrees to proposal to denounce before 15th February, in which it is prepared to join'. The draft cablegram was approved by Cabinet in Hobart on 7 February (see AA: A981, Disarmament 46 and AA: A2694, vol. 16, Minute 534) and dispatched to the Secretary of State for Dominion Affairs as no. 11 on the same day. A cablegram was also sent on 7 February 1939 to the Acting High Commissioner in London, J.S. Duncan, advising him to see no. 11 as a reply to his own cablegram of 6 January 1939 (Document 3).
[AA: A981, DISARMAMENT 461]