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 [2] 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

H.S. GULLETT