Desire following view of Commonwealth Government be communicated
to Dominions Office reference telegram B.185 of 30th July. [1]
Application of principles of Covenant. His Majesty's Government in
the Commonwealth of Australia has given careful consideration to
proposals put forward in your telegram.

As regards Articles XI and XIX and question of separation of
Covenant from Peace Treaty, Commonwealth Government has already
submitted to League Assembly 1936 substantially similar proposals
and supports views set out in your telegram.

As regards Article XVI, proposals of Commonwealth Government as
announced in Parliament on 29th September, 1936, were that
financial and economic sanctions should follow upon (a) a
declaration by the Council that a State is an aggressor, and (b) a
decision by the Government of each individual Member State that a
breach of the Covenant has been committed. In other words original
proposal of Commonwealth Government was that application of
economic sanctions should be quasi-automatic, effect being given
in practice (as during Italo-Abyssinian dispute) to interpretative
rules adopted by Assembly on 4th October, 1921.

Commonwealth Government interprets United Kingdom proposal
concerning Article XVI as involving recognition by Assembly that
League shall be of 'intermediate' type referred to in Viscount
Cranborne's [2] report to Committee of Twentyeight, that is to
say, economic sanctions will be merely permissive, and Member
States will not in any circumstances be under an obligation to
apply economic sanctions, but they will be committed to apply only
such sanctions as they agree on in co-operation with other
Members. The practical effect of this proposal does not differ
greatly from the previous view advanced by the Commonwealth
Government. Therefore in view of the existing circumstances and
further withdrawal of State Members during last year, Commonwealth
Government is prepared to support the proposal in regard to
Article XVI.

LYONS