7 September 1939
THE OPTIONAL CLAUSE
1. A telegram dated 4th September, 1939 [1 has been received from the Secretary of State for Dominion Affairs indicating the intention of the British Government to address to the Secretary- General of the League of Nations  a letter stating that it will not regard its acceptance of the Optional Clause of the Statute of the Permanent Court of International justice as covering disputes arising out of the events occurring during the present crisis. The Secretary of State has asked for information as to any action which may be taken by other members of the British Commonwealth in a similar connection.
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 invests the Court with jurisdiction in all cases which the parties refer to it. The second part of the Article provides for a special compulsory jurisdiction without specific reference, and is known as the 'Optional Clause'.
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. Great Britain and the Dominions adhered to this 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 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 agreed to have recourse to some other method of peaceful settlement.
(ii) Inter-Dominion disputes.
(iii) Disputes which by international law fell exclusively within domestic jurisdiction.
(e) 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.
5. The Optional Clause was accepted by the Commonwealth Government on the basis of the belief that by the building up of a new international system based on the Covenant of the League and the Pact of Paris, a fundamental change had been brought about in regard to the whole question of belligerent and neutral rights. It was believed that in the event of a major war all Members of the League would, in accordance with Article 16 of the Covenant (the sanctions provisions), be bound to take action against a Member resorting to war in disregard of its obligations under the Covenant and so would be unable to claim the rights of neutrals- e.g., the right to trade with a belligerent. Hence, no disputes could arise with a Member resulting from the exercise of belligerent rights. These conditions were fully understood at the time of acceptance of the provisions.
6. As is pointed out in the proposed letter from the British Government to the League, it is clear that these conditions no longer exist and it has become evident that many of the Members of the League no longer consider themselves bound to take action of any kind under the Covenant against an aggressor State. Indeed, a number of States-Members have announced their intention to maintain strict neutrality in the present crisis. It is abundantly clear that the Covenant has completely broken down in practice, the whole machinery for the preservation of peace has collapsed, and the conditions in which the Optional Clause was accepted no longer exist.
7. The Commonwealth is at war with Germany and, although the present question does not affect Australia to the same extent as the United Kingdom, it is conceivable that the Commonwealth Government might find itself in certain circumstances liable to proceedings under the Optional Clause at the suit of a member of the League which was neutral in consequence of naval operations by Australian ships. For example, an Australian ship might desire to exercise the right of seizure of contraband aboard a neutral vessel and since no general agreement exists among nations as to what are contraband goods (apart from arms and munitions of war) proceedings might well be brought under the provisions mentioned in paragraph 3 (b) above for determination whether a particular seizure were valid. The possibility of such proceedings would hamper the operations of the navy during the war.
8. In these circumstances, it is submitted for consideration that the Commonwealth Government should take action on lines similar to those which have been adopted by the Government of the United Kingdom.
9. Strictly speaking, the Optional Clause could not legally be denounced until next year, since the acceptance of the Clause was for ten years from 18th August, 1930. The proposal, however, of the Government of the United Kingdom is to base its denunciation upon the fact that the principles of the Covenant have so far broken down as to justify it in releasing itself from its obligations.
10. Draft cable to the Secretary-General of the League of Nations is submitted for consideration. 3