Working Paper KALIURANG, 10 June 1948

CONFIDENTIAL

The Committee of Good Offices' Third Interim Report to the
Security Council [1], now nearing completion, will show that in
the five months that have passed since the signing of the Renville
Agreement, no significant progress has been made toward a
political settlement between the Kingdom of the Netherlands and
the Republic of Indonesia. We have, indeed, for some time had the
impression that negotiations toward such a settlement have been
approaching a standstill. Your Excellency's letter of June 4 to
the Prime Minister of the Republic [2], expressing the view that
the bridging of the gap between the points of view of the two
delegations along the lines followed so far would be difficult,
and inviting the Prime Minister and his principal advisers to
discuss outstanding problems with you and the Royal Commissioners,
indicates that we are not alone in fearing that a protraction of
the procedures so far followed in the discussions (in which, it
must be added, the Committee's role has been largely passive) will
prove barren. Furthermore, your evident belief that direct
conversations between the most highly placed officials of both
Governments might accomplish what negotiations between the
delegations of the two Governments, under the auspices of the
Committee of Good Offices, have so far failed to achieve raises
the question whether the Committee's effort can be of value unless
the Committee can make a positive contribution to an agreement,
which it has in the past refrained from attempting.

Before receiving a copy of Your Excellency's letter of June 4, we
had discussed among ourselves the difficulties that appear to
stand in the way of a successful conclusion of the negotiations
and the manner in which the Committee might be of assistance.

The enclosed working paper, which has taken shape from these
discussions, is tentative and subject to reconsideration in the
light of the discussions, questions, or objections which it may
provoke. We believe that only by coming forward with such a
suggestion now that the delegations of the parties appear unable
to make further progress towards an agreement, can we acquit
ourselves of our obligations and justify the seven and a half
months the Committee has spent in Indonesia endeavoring to assist
the parties.

Our Belgian colleague is reserving his position with respect to
the working paper.

We are offering this working paper informally to Your Excellency
and to Dr. Hatta in the sincere hope that it may prove useful in
any conversations that may take place between you and to the
delegations of your respective Governments should negotiations
continue between them. It is not our intention to refer to the
substance of the paper in any public statement or in any report to
the Security Council, unless, of course, we are forced to the
conclusion that the parties are unable to reach a political
agreement on the basis of our proposals or any other basis. In
this case we should feel obliged to include the working paper,
with such revisions as are called for in the light of the comments
of the parties, and to set forth the circumstances of the parties'
inability to come to an arrangement in a report to the Security
Council.

Enclosure

WORKING PAPER ON AN OUTLINE OF A POLITICAL SETTLEMENT [3]

Submitted by the Australian and United States Delegations of the
Committee of Good Offices

This paper offers suggestions for the principles of a political
agreement between the Government of the Kingdom of the Netherlands
and the Government of the Republic of Indonesia which would
provide the basis for the formation of a sovereign United States
of Indonesia in equal partnership with the Kingdom of the
Netherlands in a Netherlands-Indonesian Union. We believe that the
principles as set forth below will safeguard and reconcile the
proper and essential interests of the two parties as these have
been clarified in the current negotiations between their
delegations.

We have come to the conclusion that the main issues between the
parties involve the following:

1. The extent of the Republic's representation in the Provisional
Federal Government, which will constitute the Government of
Indonesia prior to the transfer of sovereignty by the Kingdom of
the Netherlands.

2. The powers to be transferred to the Provisional Federal
Government (in the sense that this will be a government by
Indonesian representatives) by the Kingdom of the Netherlands.

3. The powers to be transferred to the Provisional Federal
Government by the Republic of Indonesia.

4. The powers and functions to be reserved to the Netherlands-
Indonesian Union in the Statute of the Union as against those to
be exercised by the United States of Indonesia as a member nation.

We believe that the parties' differing positions on these issues
may be resolved in accordance with the letter and spirit of the
principles accepted by the parties on board the U.S.S. Renville.

OVERALL POLITICAL AGREEMENT

With regard to the problems pertaining to the interim period (the
period prior to the transfer of sovereignty by the Netherlands),
we are of the view that the key to a solution may be found in the
second of the Six Additional Principles, which states that 'in any
provisional federal government created prior to the ratification
of the constitution of the future United States of Indonesia, all
states will be offered fair representation'. [4] This principle
may be taken as grounds for maintaining that a provisional federal
government cannot be created until the states have been delineated
and formed.

We believe, however, that this principle need not be interpreted
so as to delay the creation of a provisional federal government
until the final delineation and formation of the component states
of the United States of Indonesia. At the same time, it is clear
that the representation of the Republic, as one of the states in
the future United States of Indonesia, must be based upon the
extent of the Republic if such representation is to be fair; that
is, proportional to the representation accorded the other areas.

The present geographical extent of the Republic is defined solely
by the location of the demilitarized zones, which were established
purely as a means of making possible a military truce between the
parties. The establishment of these zones, according to Article 3
of the Truce Agreement [5], 'in no way prejudices the rights,
claims or positions of the parties under the resolutions of the
Security Council of 1, 25 and 26 August and 1 November 1947'. [6]
In short, the area which the Republic properly represents is yet
to be determined. The area at present under the control of the
Republic contains, according to the Committee's information, about
two-fifths of the population of Indonesia. The islands of Java,
Madura and Sumatra contain about four-fifths of the population of
Indonesia. According to the fourth of the Six Additional
Principles [7] which, 'among others, form a basis for the
negotiations toward a political settlement,' accepted by the
parties on board the U.S.S. Renville, the states in Java, Madura
and Sumatra will be delineated in accordance with a plebiscite or
with another method for ascertaining the will of the populations
upon which the parties may agree. Should the populations of these
islands so elect, all may be incorporated in the Republic. (In
this connection, the Committee should point out that in its view
nothing in the Renville principles precludes the Republic from
subdividing into a number of states in the interests of a balanced
Indonesian federation, and that this subdivision could be effected
either on the basis of the territories it now controls or of the
territories that it may come to control when the populations have
had an opportunity to express their will in accordance with the
fourth of the Six Additional Principles. Insofar as an agreement
with the Netherlands is concerned, we consider that the Government
of the Republic represents all the territories of Java, Madura and
Sumatra the populations of which may, when the time comes,
demonstrate through democratic procedure their desire to be
incorporated in the Republic, irrespective of whether these
territories be ultimately included in a single Republican state or
be divided with the consent of the Republic into a number of
states.)
The fundamental question is whether it is possible to create a
Provisional Federal Government in which all the states, including
those which at the time of the formation of this Government have
not yet come into existence, may be fairly represented. We believe
that there is a solution to this problem and propose that the
following principles, which we believe contain such a solution, be
accepted by the parties:

1. Upon the agreement of the parties to the following principles,
the Netherlands to undertake as soon as possible to obtain the
agreement of the representatives of the areas outside Java, Madura
and Sumatra to the procedure envisaged in these principles in
order that it may apply to the entire territory of the future
United States of Indonesia.

2. Immediately upon the signing of the political agreement, the
parties to set up a Joint Commission of Technical Experts which
would have the task of studying the problem of the future
administration of Indonesia from an objective, non-political point
of view and of proposing the delineation of the future states,
taking account of all relevant considerations but particularly the
necessity for an efficient system of administration.

3. The Constituent Assembly (see below) to be empowered to
delineate the states of the United States of Indonesia but to be
bound to accept as states areas delineated as such by the Joint
Commission of Technical Experts, unless a proposal for a change in
any of the boundaries delineated by the Commission should receive
the support of the majority of the delegates to the Constituent
Assembly and the majority of the delegates elected from the areas
within the proposed states directly affected by the proposed
change.

4. Elections to the Constituent Assembly to be held as soon as
practicable after the signing of the political agreement but the
Assembly not to be convened before the Joint Commission of
Technical Experts has reported on the provisional delineation of
states.

5. The provisions for free and uncoerced discussion of vital
issues accepted by the parties on board the U.S.S. Renville to
apply in the period preceding the election, and persons charged
with abusing the freedom of speech, assembly and publication as
assured under the Renville principles to be tried without delay.

6. The Regencies in Java and the equivalent administrative areas
in other parts of Indonesia to constitute electoral districts for
the Constituent Assembly. Where a Regency or equivalent area is
divided by the status quo line, the two portions to constitute
separate electoral districts.

7. The number of delegates to the Constituent Assembly from each
electoral district to be in proportion to the population of the
district (perhaps one delegate for each 500,000 inhabitants).

8. An elector (or electors) to be elected by each dessa and by the
lowest administrative subdivision of each municipality within the
Regency or equivalent administrative area. The electors so elected
to convene at the seat of the Regency (or other area) government
and there elect delegates to the Constituent Assembly.

9. Secrecy of the ballot to be assured at both stages, at the
primary level by a method of voting suitable to a partially
illiterate electorate.

10. The Committee of Good Offices to place itself at the disposal
of the parties for observation of the election in accordance with
the fourth of the Six Additional Principles.

11. The Constituent Assembly to convene and to have the status
both of a Constituent Assembly and of a Provisional Parliament.

12. The Provisional Parliament to form the Provisional Federal
Government by electing a President, the President in turn to
appoint a Prime Minister who will select a cabinet. (The
Parliament, however, to be free to form the Provisional Federal
Government in any other democratic manner should it desire). The
Prime Minister and the Cabinet to be collectively responsible to
the Provisional Parliament and to cease to hold office in the
event of a vote of no confidence.

13. The Constituent Assembly to approve the delineation of states
recommended by the Joint Commission of Technical Experts subject
to any changes made in accordance with paragraph 3 above, the
delegates in the Constituent Assembly from the electoral districts
included within the boundaries of the states as delineated to be
considered thereafter as the representatives of these states in
the Constituent Assembly/Provisional Parliament. (The question
arises as to what would take place should a number of states be
represented in the Assembly by delegations of which the majority
of members are adherents of the Republic. Obviously the
delegations would have the option of voting to combine their
states in a single Republic of Indonesia which, subject to the
approval of the majority of the Assembly as a whole, would as such
become one of the component states of the United States of
Indonesia. The Republic of Indonesia, in these circumstances,
could be so enormous in population by comparison with the other
states as to throw the federation out of balance and render it
virtually unworkable and meaningless. Since the Government of the
Republic has, however, subscribed to the principle of a federal
Indonesia, we assume that it would not wish to vitiate, in this
manner, the planning of the Joint Commission of Technical Experts
and that, instead of combining, the states which have elected
Republican adherents to represent them in the Constituent Assembly
would choose to consider themselves 'Republican' states. However,
with the progress toward a sovereign Indonesia as far advanced as
it will be at this stage, we anticipate that the concept of the
Republic will have become merged with the concept of the United
States of Indonesia.)
14. The representatives of each state in the Provisional
Parliament to elect provisional state governments to prepare for
the election of duly constituted state governments.

We have the following observations to make in connection with
these principles:

Time of elections for the Constituent Assembly: The sixth of the
Twelve Principles [8] 'forming an agreed basis for the political
discussions' accepted by the parties on board the Renville states
that after a period of not less than six months or more than one
year after the signing of the agreement, free elections will be
held for self-determination by the people of their political
relationship to the United States of Indonesia. There is a
difference of opinion as to whether 'the agreement' referred to
the political agreement or the truce agreement. Irrespective of
which agreement was referred to, we believe that no obstacle
exists in the Renville principles to the parties' agreeing to
shorten the interval between the political agreement and the
holding of the elections. It was not anticipated by the Committee,
which originally suggested the limitation on the time of holding
the election, that such a long period would elapse between the
signing of the truce agreement and the signing of the political
agreement as has been the case. Since full political and economic
stability in Indonesia cannot be achieved until the process of
transition now in progress is completed, we suggest that the
elections be held no later than three months after the signing of
the political agreement and that the assembly be convened as
shortly thereafter as possible, subject to the report of the Joint
Commission of Technical Experts on the delineation of states
having been made.

Feasibility of election: We are aware that the present division of
Indonesia by the demilitarized zones, creating areas under
separate authorities, civil and military, imposes certain
obstacles to the smooth operation of election machinery. We regard
these obstacles as by no means insuperable, however, and consider
that between the present time and the time of the elections the
parties should devote their major effort toward the working out of
an electoral procedure. This procedure should, in the first
instance, give the candidates for election and the political
parties in all areas full opportunity to present their programs
and make their appeal for popular support without jeopardising the
maintenance of law and order, and in the second instance, assure
the absolute secrecy of the ballot. By these and other means the
effect of possible unwarrantable influences over the electorate
could be reduced to a minimum. We believe that no more
constructive step toward the creation of a stable United States of
Indonesia could be taken by the parties than the acceptance of the
principle of a representative Provisional Federal Government.

We do not see how the unification of Indonesia can now feasibly be
accomplished except under such a government or how such a
government can be created except through an Indonesia-wide
election, whatever difficulties this may present. During our stay
in Indonesia, we have come increasingly to believe that the
outstanding obstacle to a settlement between the Netherlands and
the Republic of Indonesia has been the disagreement between them
as to who, in fact, is qualified to speak for the Indonesian
people.

Until this question is settled and a representative body
assembled-and we know of no means of reaching this goal except by
an election-there would seem to be little hope of building the
foundations of the future United States of Indonesia on a broad
and stable basis. We should be glad to offer suggestions on the
subject of an electoral procedure, making use of the research at
present being undertaken in the United Nations.

The pre-election period: After the signing of a political
agreement looking toward the early creation of a representative
Provisional Federal Government of all Indonesia, we conceive that
the parties will have every incentive to closer cooperation. We
therefore believe that in addition to preparing for the election
the parties will also wish to proceed as far as possible, in the
interval between the agreement and the election, with the economic
rehabilitation of Indonesia as a whole and with preparations for
the integration, administratively, of the territories now under
the control of the Republic with the territories now under the
control of the Netherlands, so far as this will be necessary upon
the transfer of powers to the Provisional Federal Government. We
foresee the desirability of creating a number of joint commissions
to work on the problems of the pre-election period and suggest the
following:

1. Joint Commission of Technical Experts to delineate the future
states of Indonesia, as previously set forth.

2. Joint Electoral Commission to institute an electoral procedure
and to control the conduct of electioneering and of the elections
themselves.

3. Joint Reconstruction Board to expedite the restoration of non-
Indonesian private properties in Republican-controlled territories
to their owners and the resumption of trade and commerce with
Republican-controlled territories.

4. Joint Preparatory Commission to plan the integration of the
Republican fiscal and monetary systems and the administrative
system of the territories at present controlled by the Republic
(insofar as it includes federal functions) into the provisional
federal system.

5. Joint Defense Commission, including a joint staff, to carry out
the progressive reduction of the armed forces of the parties as
contemplated in the fourth of the Twelve Principles and to plan
the integration of the Tentara Nasional Indonesia into the army
of the Provisional Federal Government.

6. Joint Evacuee Commission to facilitate the return to their
homes of personnel displaced since 1942, including demobilized
soldiers and their families, and to make possible greater freedom
of movement by persons across the status quo lines.

We believe that as soon as the parties have agreed upon the broad
terms of the political agreement it would be highly desirable to
form the Commissions suggested above in order that study and
planning in connection with the problems to be dealt with by the
Commissions may proceed without awaiting the formal signing of the
political agreement. In particular, the period intervening before
the elections might be appreciably shortened by progress in
planning by the Joint Electoral Commission before the signing of
the political agreement and in preparing the country for the
election. During the pre-election period the Republic would remain
responsible for the security of areas under its control and retain
command of the Tentara Nasional Indonesia. With regard to the
Republic's foreign relations, the Republic would be expected to
give assurances that these relations would not be expanded during
the pre-election period.

Division of powers in the pre-federal period: We visualize a
division of powers in the pre-federal period between the
Lieutenant Governor General, as the representative of the Crown,
and the Provisional Federal Government, as an organization of
Indonesian representatives. We assume that in order to complete
the transitional process and to create the United States of
Indonesia as soon as practicable, the actual government and
administration of Indonesia would be progressively turned over to
Indonesian officials as rapidly as the development of an
Indonesian organizational structure would permit. In the first
instance, we believe that a delegation of powers on the highest
level should take place and that apart from certain specified
powers reserved to the Lieutenant Governor General, the full
powers of internal government should be vested in the Provisional
Federal Government immediately upon its formation. The Provisional
Federal Government would then itself determine how rapidly the
governmental and administrative functions could be transferred on
progressively lower levels from the present governmental and
administrative organization to the developing Indonesian
organization. We consider that key officials of the present
Netherlands Indies Government should by all means be asked to
remain in an advisory capacity even when, in the course of time,
their responsibilities have been taken over by officials
designated by the newly elected Provisional Federal Government.

Sovereignty in the interim period would rest with the Netherlands,
but it is suggested that the Crown issue a certificate of
instruction to the Lieutenant Governor General that the exercise
of his power be limited (1) to a veto over acts of the Provisional
Federal Government which are in contravention of the Charter of
the United Nations or of the Union Statute and (2) to the
direction, after consultation with the Provisional Federal
Government, of the employment of the federal armed forces and
other federal agencies in cases of civil conflict which the
Provisional Federal Government proves unable to control.

Coincidentally with the transfer of full powers of internal
government to the Provisional Federal Government by the
Netherlands, the Republic would transfer to the Provisional
Federal Government all federal functions which it now exercises,
including control of its armed forces, foreign relations, foreign
trade and currency.

With regard to the external affairs and relationships of
Indonesia, ultimate authority would remain with the Kingdom of the
Netherlands, but in practice the actual conduct of such affairs
and relationships would be taken over by the Provisional Federal
Government step by step with the organization and staffing of a
Ministry of Foreign Affairs (the Minister to be a member of the
initial Provisional Federal Government) and of an Indonesian
diplomatic and consular service. It is proposed that such
Indonesian overseas offices as already exist or may be established
in this period should operate in conjunction with the diplomatic
and consular posts of the Netherlands.

All armed forces in Indonesia in the pre-federal period should, it
is considered, be under the control of the Provisional Federal
Government with the following exceptions:

(1) The Netherlands command to operate such bases as may be set
aside for the use of the Netherlands in an agreement between the
Netherlands and the Provisional Federal Government of Indonesia,
and, (2) components of the Netherlands army to be free to engage
in non-tactical movements from one base to another or in
preparation for evacuation under the sole authority of the
Netherlands command.

Apart from its duties as a Provisional Parliament, the Constituent
Assembly should have the duties of formalizing the delineation of
the states, drafting and ratifying a constitution for the United
States of Indonesia and submitting it for ratification by the
representatives of the states, and of ratifying the Union Statute.

These tasks completed, the United States of Indonesia could, in
our view, be considered formed and to be eligible to receive the
transfer of sovereignty from the Netherlands and to seek
recognition as a sovereign state by other states and membership in
the United Nations and other international bodies.

The Committee offers the following comments on the foregoing
procedures: Drafting of the Union Statute: It is our understanding
that the Union Statute, out of which the Union of the Kingdom of
the Netherlands and the United States of Indonesia is to arise,
will provide the basis for the cooperation and consultation
between the member nations on all matters of common interest and
will contain basic guarantees of the legitimate economic, cultural
and military interests of the one nation in the other, together
with provisions for a judicial body to interpret the statute.

Principles which both parties might find acceptable as the basis
of the Statute are suggested below in the section headed The Union
Statute.

In any case, we feel strongly that in order to bring definitive
Netherlands-Indonesian negotiations to as prompt a conclusion as
possible, the complete and final text of the Union Statute should
be incorporated in the political agreement between the Netherlands
and the Republic, the Netherlands Delegation in this connection to
represent the interests of Indonesian groups outside Java, Madura
and Sumatra as well as of its own Government. The Statute as
drafted in the political agreement would be submitted to the
Constituent Assembly for ratification when the Assembly had
completed its other tasks. Ratification and the transfer of
sovereignty to the United States of Indonesia would be
simultaneous events. Should the Assembly fail to ratify and
express a desire to renegotiate the Statute in whole or in part,
the Kingdom of the Netherlands would reserve all rights respecting
the relinquishment of sovereignty.

Ratification of the Constitution: In accordance with the fifth of
the Six Additional Principles [9], approval of the draft
constitution by a majority of the delegates to the Constituent
Assembly will register the Assembly's ratification of the
constitution. Since the representation of the states in the
Assembly will be in accordance with their populations, such
ratification may be taken as an expression of the will of the
Indonesian people as a whole. With regard to obtaining
ratification by the states, we suggest that the constitution be
submitted to the representatives of each state in the Assembly. In
accordance with the sixth of the Six Additional Principles [10],
any state failing to ratify the constitution may negotiate a
special relationship with the United States of Indonesia and the
Kingdom of the Netherlands.

Scope of the political agreement: Matters that fall entirely
within the competence of the future United States of Indonesia,
such as the federal constitution and federal defense forces are,
in our view, outside the scope of the political agreement and are
subjects for consideration and decision by the Constituent
Assembly.

THE STATUTE OF THE UNION
Upon the transfer of sovereignty to the United States of Indonesia
in accordance with the terms of the political agreement, the
Kingdom of the Netherlands and the United States of Indonesia will
associate themselves together in a Netherlands-Indonesian Union.

In our view, the character of the Union must be based upon:

(1) The sovereignty of the member nations.

(2) The common interests of the member nations and the proper and
legitimate interests of the one in the other arising from many
years of close association and interdependence.

In our opinion, the aim of the Statute of the Union, out of which
the Netherlands-Indonesian Union will arise, should be to give
maximum assurance consonant with the full sovereignty of the
member nations that the member nations will consult and cooperate
and to the full extent possible follow a concerted policy in all
fields of common interest and that the interests of one member
nation in the other, which we construe to be primarily cultural,
economic, and military, will be safeguarded.

The powers, functions, and responsibilities of the Union will be
enunciated in a Statute of the Union annexed to and incorporated
in the political agreement.

We offer the following tentative suggestions for the principal
provisions of the Statute of the Union:

A. General
1. The Members of the Union will be the United States of
Indonesia, on the one hand, and the Kingdom of the Netherlands, on
the other hand.

2. Each Member will be a sovereign, independent state, united in
partnership on a footing of equality. (Immediately after the
transfer of sovereignty to the United States of Indonesia, the
Kingdom of the Netherlands will take the required steps to obtain
the admission of the United States of Indonesia as a member of the
United Nations, the International Trade Organisation, the
International Monetary Fund, the International Bank for
Reconstruction and Development, the Food and Agricultural
Organisation, and other appropriate international bodies.

3. The Union will be established when on the one hand the
Constituent Assembly of the United States of Indonesia has taken
the steps under the political agreement precedent to the transfer
of sovereignty, and when on the other hand the Kingdom of the
Netherlands has (1) transferred sovereignty to the United States
of Indonesia in accordance with the terms of the political
agreement and (2) ratified the Statute of the Union.

4. Any state in Indonesia that decides by failing to ratify the
constitution not to join the United States of Indonesia may have a
special relationship both to the Kingdom of the Netherlands and to
the United States of Indonesia.

5. The Union will ensure: (a) lasting cooperation between the
Members; (b) the mutual rights of the Members and the fulfilment
of their mutual obligations; (c) provision for mutual assistance;

(d) mutual exercise of rights of citizenship by Netherlands and
Indonesian citizens; (e) maintenance in both parts of the Union of
fundamental human rights and freedoms in accordance with the
Charter of the United Nations.

6. The Union will promote the common interests of the Members
through cooperation with regard to foreign relations, defence,
finance and economic and cultural matters.

7. These common interests will be ensured by cooperation and
consultation in the Union organs.

8. Her Majesty Queen Wilhelmina and her legitimate successors to
the Crown of the Netherlands shall be the Head of the Union.

9. The executive organ of the Union will be the Council of Union
Ministers composed of an equal number of ministers of the United
States of Indonesia and of the Kingdom of the Netherlands
entrusted by their respective governments with the direction of
Union affairs.

10. The members of the Council of Union Ministers are responsible
only to their respective governments according to the
constitutions of the Members.

11. The Members of the Union will consult the Council of Union
Ministers with respect to legislation on Union affairs. Such
legislation will be enacted by the Parliament of each Member in
conformity with the constitution of each Member.

12. In their inception the constitution of the United States of
Indonesia and the Statute of the Union will not conflict.

Thereafter the constitution of the United States of Indonesia will
be the supreme law of the United States of Indonesia and the
constitution of the Kingdom of the Netherlands will be the supreme
law of the Kingdom of the Netherlands. The Statute of the Union
will have all the force of a solemn treaty obligation entered into
by sovereign states.

13. The Members of the Union may conduct their own foreign
relations subject to the provisions of the Statute of the Union
for cooperation and consultation. By the agreement of the Members
of the Union in each case, the Union itself may take part in
international affairs and maintain diplomatic representation on
behalf of the Members.

14. A Union Court of Justice composed of an equal number of judges
of the highest court of the Kingdom of the Netherlands and of the
highest court of the United States of Indonesia, will be
instituted. The jurisdiction of the Union Court of Justice will be
limited to cases brought by the government of the Kingdom of the
Netherlands or the government of the United States of Indonesia
arising under the Union Statute, provided that in all cases
arising within the exclusive jurisdiction of the Members, the
highest courts of the Members may request the Union Court of
Justice for an advisory opinion.

15. In cases where the judges of the Union Court of Justice are
equally divided, the court itself may designate an additional
judge to cast the deciding vote; in the event of the court's being
unable to agree upon an additional judge, provision shall be made
for reference of the case to the International Court of Justice or
another international legal tribunal.

B. Economic and Financial Provisions
1. Non-discrimination. The principle of non-discrimination to
apply to all economic relations between the United States of
Indonesia and the Kingdom of the Netherlands.

2. Equality of import duties. Articles or products of one Member
imported into the territory of the other Member to be subject to
no import duty in excess of the duty imposed with respect to like
products or articles which are imported from any other country, or
to no import duty at all if such duty is not imposed with respect
to all such articles and products.

3. Equality in internal taxes. Products of one Member imported
into the territory of the other Member, or articles manufactured
wholly or in part from such products, to be subject to no internal
tax in excess of the internal taxes imposed with respect to like
products or articles from any source; and to be subject to no
internal tax at all if an internal tax is not imposed with respect
to such like products and articles.

4. Non-discriminatory import
and export controls. To the extent that selective or quantitative
import or export controls are applied by either Member, these to
be applied in a non-discriminatory manner as regards the products
or articles originating in or destined for the territories of the
other Member.

5. Equality of export taxes. To the extent that
either Member levies export taxes or duties on articles or
products destined for the territory of the other, such taxes or
duties not to exceed those levied on like articles or products
destined for the territory of another country.

6. National treatment. National treatment to be accorded the
citizens and enterprises of one Member resident in, conducting
commercial, agricultural, mining, industrial, or other business
activities in, or seeking to conduct such activities in, the
territory of the other. National treatment to be taken to mean
that the legal status, rights and obligations under legislative
acts and administrative regulations, and liability to taxation of
citizens and enterprises of one Member in the territory of the
other Member to be not less favorable than is accorded to the
citizens and enterprises of the other Member. The right to require
ownership of land not, however, to be granted under this article.

7. Supplementary agreements. Agreements elaborated under the
foregoing clauses of this section to extend for a period of, say,
20 years and to be renewable by mutual agreement thereafter.

8. Exemption from tax of articles for official use. No tax to be
imposed or collected in the territories of either Member with
respect to articles or products imported for the official use of
any department or agency of the other Member.

9. Currency and exchange agreements. The value of the currency of
one Member in relation to the currency of the other Member not to
be altered, the convertibility of the currency of one Member into
the currency of the other not to be suspended, and restrictions
not to be imposed upon the transfer of funds from the territory of
one Member to the territory of the other, except after
consultation between the Governments of the United States of
Indonesia and the Kingdom of the Netherlands.

10. Guarantees of Property Rights. Contractual rights and physical
properties held or owned by the nationals, business enterprises,
corporate bodies, or governments of one Member in the territory of
the other to be guaranteed. The Government of the United States of
Indonesia to honor for their full terms contracts and agreements
entered into with non-Indonesians by the Government of the
Netherlands East Indies prior to March 1942 and to restore to non-
Indonesian owners physical assets located within the territory of
the United States of Indonesia but not yet returned to them. In
those cases in which contracts and agreements entered into by the
Government of the Netherlands East Indies for any reason cannot be
honored or in which physical assets owned by non-Indonesians are
taken ever by the Government of the United States of Indonesia,
full indemnification to be made. Nothing in the foregoing to
protect the property rights of ex-enemy nationals.

11. Assumption of obligations. The Government of the United States
of Indonesia to assume all debts, internal and external, incurred
by the Government of the Netherlands East Indies prior to March 1,
1942, subject, however, to the qualification that adjustments may
be made to take account of territories previously under the
jurisdiction of the Government of the Netherlands East Indies that
may not join the United States of Indonesia. The proportion of
debts later incurred by the Government of the Netherlands East
Indies to be assumed by the Government of the United States of
Indonesia to be negotiated.

12. Transfer of rights and properties. The Government of the
United States of Indonesia to enjoy the privileges and rights
previously enjoyed by the Government of the Netherlands East
Indies within the territories coming under the jurisdiction of the
United States of Indonesia; and to assume full title to the
property owned by the Netherlands East Indies Government within
these territories and, subject to the terms of peace settlements,
to the properties of ex-enemy countries and of the nationals of
ex-enemy countries.

13. Reciprocity. All rights, obligations, and duties conferred or
assumed under the economic and financial agreement elaborated in
accordance with these provisions to be reciprocal.

C. Military
1. A combined Netherlands-United States of Indonesia staff to be
instituted to exchange information, to consult and to make
recommendations to the Governments of the Members on all matters
relating to the defence of the Union with the object of achieving
coordinated defence policy and system. 2. Each Member to be
granted base-rights in the territory of the other on a basis of
long-term leases.

3. The military education and training, equipment, organisation
and doctrine of the armed services to be standardised as far as
may be allowed by (a) the nature of the theatres of operation in
which the Members' forces may be engaged, (b) the sources of
supply of equipment available to the Members, (c) the possibility
of a severance of the lines of communication between the Members
in the event of large-scale conflict, and (d) the requirements of
such regional defence arrangements as the Members may enter.

4. Military personnel to be exchanged between the Members for the
purpose of assisting in the attainment of the foregoing ends,
particularly for purposes of giving and receiving instruction.

Military personnel assigned by one Member for duty with the armed
services of the other to be eligible to serve in any capacity
other than in a command capacity, which would require special
agreement.

It is suggested that provision be made in the Statute of the Union
for supplementary agreements to be entered into by the Members
elucidating and providing for the implementation of the principles
contained in the Statute which relate to economic, military, and
other special relations between the Members.

To recapitulate, the following schedule is offered as an outline
of the steps to be taken toward the creation of a sovereign United
States of Indonesia:

1. The delegations of the parties to initial the terms of the
political agreement, including the text of the Statute of the
Union.

2. Joint Commissions to be formed as soon as possible to delineate
provisionally the future states of the United States of Indonesia;

to prepare for the elections to the Constituent Assembly; to
prepare for the integration on a federal level of the government
of territories under the control of the Republic with the
governments of other areas; to plan the economic rehabilitation of
Indonesia as a whole; to carry out the reduction of the armed
forces of the parties and to plan the integration of the residual
Republican armed forces with those of the Provisional Federal
Government; and to remove barriers to the free movement of persons
across the status quo line.

3. The political agreement including the text of the Statute of
the Union, to be submitted to the Governments of the parties for
approval and signature.

4. The elections for delegates to the Constituent Assembly to be
held throughout Indonesia as soon as practicable after the signing
of the political agreement, and preferably within at most three
months.

5. The Constituent Assembly to be convened as soon as possible
after the elections and after the Joint Commission of Technical
Experts has reported on the delineation of the future states.

6. The Constituent Assembly acting as the Provisional Parliament
to form a Provisional Federal Government.

7. The Provisional Federal Government to receive simultaneously:

a. Full powers of internal self-government from the Netherlands
with the provision that the Lieutenant Governor General may
exercise certain rights within specified limits.

b. All powers now exercised by the Republic of Indonesia properly
pertaining to the Federal Government.

8. The Constituent Assembly to draft and ratify a constitution of
the United States of Indonesia.

9. The constitution to be submitted to the representatives of the
states in the Assembly for ratification and to be considered in
effect for all Indonesia with the exception of states failing to
ratify.

10. The Constituent Assembly to ratify the Statute of the Union,
and simul-taneously:

a. The United States of Indonesia to be considered formed and to
receive the transfer of sovereignty from the Kingdom of the
Netherlands.

b. The United States of Indonesia to be considered eligible to
seek recognition as a sovereign state by other sovereign states
and membership in the United Nations and other international
bodies.

c. The Kingdom of the Netherlands having ratified the Statute of
the Union, the Netherlands-Indonesian Union to come into being.