238 Cabinet Submission by Mr W. M. Hughes, Minister for External Affairs
17 August 1938
LEAGUE OF NATIONS ASSEMBLY, SEPTEMBER 1938: PROPOSALS OF UNITED KINGDOM GOVERNMENT REGARDING REFORM OF THE COVENANT
1. The Report of the Special Committee of Twentyeight appointed by the League Assembly, after the failure of the application of sanctions in the Italo-Abyssinian dispute, to consider proposals for the reform of the League Covenant, will come up for consideration at the next Meeting of the Assembly, which opens at Geneva on the 12th September. Australia was not represented on the Committee, and has had no share in its deliberations. Discussions at the final Meeting of the Committee, held at Geneva in January and February of this year, centred around a report submitted to the Committee by Viscount Cranborne  on the 8th September, 1937. In this report three possible types of Leagues of Nations were envisaged, viz., a 'coercive League', a 'non-coercive League', 'and a League of an 'intermediate' type. Members of a 'coercive League' would be bound to impose military or economic sanctions in certain circumstances, whereas Members of a 'non- coercive League' would be obliged merely to consult when an international crisis arose, and would endeavour to settle disputes by pacific means. Members of a League of the 'intermediate' type would have the 'faculty' but not the 'obligation' to use coercion.
They would consult when a crisis occurred, and might or might not agree to impose coercion on a recalcitrant State.
2. A telegram dated the 30th July (Annexure 'A')  has been received from the Secretary of State for Dominion Affairs stating that the United Kingdom Government is of opinion that the question of the reform of the Covenant is the most important item on the agenda of the Assembly, which 'will be faced with the necessity of coming to a decision affecting the whole of the future of the League'. The telegram sets out certain proposals of the United Kingdom Government for the reform of the Covenant and invites the Commonwealth Government and the respective Governments of the other Dominions to indicate how far their views are in agreement with those of the United Kingdom Government.
3 POLICY OF COMMONWEALTH GOVERNMENT, 29TH SEPTEMBER, 1936 The proposals of the Commonwealth Government concerning the reform of the Covenant were stated by the Attorney-General in the House of Representatives on the 29th September, 1936,  and may be summarised as follows:-
(i) Article XVI (Sanctions) Under Article XVI, military sanctions are permissive and not mandatory, as it is the duty of the League Council only to recommend to States Members what effective armed forces shall be contributed. The Commonwealth Government desires no change in the Covenant in this respect.
So far as financial and economic sanctions are concerned, the Commonwealth Government holds the view that, upon a Declaration by the Council that a Member State is an aggressor, the following sanctions should be automatic:-
(a) Prohibition of export of arms and munitions of war of all descriptions;
(b) Prohibition of export of raw materials used for military operations and manufacture of war material including metals and oil;
or alternatively to (a) and (b)- Prohibition of all exports to the aggressor State;
(c) Refusal of all loans and credits facilities;
(d) Prohibition of all imports from the aggressor State.
To meet the objection, however, that a Government in power might have to carry out an obligation which it had not itself accepted, the Commonwealth Government desires the incorporation into the Covenant of number 4 of the Interpretation Resolutions adopted by the League Assembly on the 4th October, 1921, viz.:-
It is the duty of each Member of the League to decide for itself whether a breach of the Covenant has been committed.
The fulfilment of their duties under Article XVI is required from Members of the League by the express terms of the Covenant, and they cannot neglect them without breach of their Treaty obligations.
(ii) Regional Pacts The Commonwealth Government supports the principle of the negotiation of regional pacts not inconsistent with the provisions of the Covenant.
(iii) Article XI (Threat of War affecting Members or non-Members) Article XI declares that any war or threat of war is a matter of concern to the whole League, and provides that 'the League shall take any action that shall be deemed wise and effectual to safeguard the peace of Nations'. The Commonwealth Government is of opinion that the unanimity rule should not apply to this Article, so that the Council may be able to make recommendations under Article XI without the consent of States which are parties to the dispute.
(iv) Article XIX (Re-consideration of Treaties, etc.) Article XIX was designed to facilitate peaceful re-consideration of Treaties, the provisions of which had become inapplicable, and also the consideration of international conditions whose continuance might endanger world peace. The Commonwealth Government believes that the Article is too uncertain, that it should be regarded as a specific Article for the remedying of grievances, and that provision should be made for the periodical investigation of, and report on, alleged grievances.
(v) Severance of the Covenant from the Peace Treaty The Commonwealth Government is of opinion that the Covenant should be revised in such a manner as to make possible the separation of the Covenant from the Treaty of Versailles.
(vi) Consultation with non-Member States The Commonwealth Government desires that proposed amendments to the Covenant shall be discussed with non-Member States in order to ascertain their views on the points in question.
4. IMPERIAL CONFERENCE 1937 The question of the reform of the Covenant was discussed confidentially at a Meeting of the Imperial Conference on the 4th June, 1937, when the views of the Commonwealth Government were stated by Mr Bruce.  Representatives of the United Kingdom, Canada, and South Africa in effect supported the view that the exercise by the League of Nations of its coercive functions was at present impracticable, and that attention should be concentrated on its consultative and conciliatory functions and on the work of its technical organisations. The representative of New Zealand, however, disagreed with this view, and advocated the strengthening of the provisions of the Covenant.
5. PROPOSALS OF THE UNITED KINGDOM GOVERNMENT The contents of the telegram of the 30th July, 1938, from the Secretary of State for Dominion Affairs may be summarised as follows:-
The United Kingdom Government is of opinion that- (a) Although the League, by reason of its reduced membership, its failure to give effect to Article VIII of the Covenant (Disarmament), and its divided counsels is not at present in a position to give effect to certain important provisions of the Covenant, the Covenant should be maintained substantially in its present form in the hope that eventually it may become possible to apply it in its entirety. In the meantime, as a temporary measure, the limits within which Member States are obliged to carry out the coercive clauses of the Covenant should be clearly defined, and the facilities available under the Covenant for remedying just grievances should be improved. These aids should, if possible, be given effect to by means of an Assembly Resolution.
(b) The Resolution of the Assembly should cover the following points:-
(i) Article XVI (Sanctions) It should be made clear that Members of the League are obliged to consult when a breach of the Covenant has been committed, but that they are not automatically obliged to apply either economic or military sanctions. Each dispute must be considered on its merits and each Member will be the judge of the extent to which its own position will allow it to participate in any measures which may be proposed.
(ii) Article XIX (Re-consideration of Treaties, etc.) The use of Article XIX should be encouraged. It might be of some assistance towards this end if the Assembly declared that an expression of opinion by a sufficient majority of the Assembly on any issue brought before it under Article XIX should be regarded as indicative of the probable attitude of League Members in considering any action that might subsequently be taken by the States concerned to give effect to that opinion.
(iii) Article XI (Threat of War affecting Members or non-Members) The unanimity rule should be modified so far as its application to paragraph 1 of Article XI is concerned.
(iv) Separation of the Covenant from the Peace Treaty Steps should be taken to separate the Covenant of the League from the Treaty of Versailles.
6. A comparison between the proposals now put forward by the United Kingdom Government, and the proposals of the Commonwealth Government announced by the Attorney-General in the House of Representatives on the 29th September, 1936, shows that the views of the two Governments coincide on several important points. The Commonwealth Government has already publicly declared that the Covenant of the League should be separated from the Peace Treaty, that the unanimity rule should not be applied in respect of Article XI and that greater use should be made of the procedure envisaged by Article XIX.
The most important suggestion made by the United Kingdom Government is, however, the proposal concerning Article XVI (Sanctions). In effect, the United Kingdom Government suggests that the League of Nations should be definitely recognised as a League of the 'intermediate' type, members of which may agree to employ, but are not bound to employ, military or economic sanctions.
This proposal of the United Kingdom Government involves a greater 'whittling-down' of Article XVI than the proposal announced by the Attorney-General to the House of Representatives on the 29th September, 1936. (Note: See, however, telegram of the 4th August from Mr Bruce-Annexure 'B' -in which the opinion is expressed that the proposals of the United Kingdom Government are 'in entire agreement with statement made on behalf of Australia at Assembly of League in 1936'.) On that occasion, the proposals of the Commonwealth Government concerning economic and financial sanctions were said to be as follows:-
Financial and economic sanctions should follow automatically upon- (a) a declaration by the Council that a State is an aggressor; and (b) a decision by the Commonwealth Government that a breach of the Covenant has been committed.
It should be noted that, during the Abyssinian dispute, there was in practice no automatic imposition of economic sanctions against Italy under Article XVI of the Covenant. The course of action adopted took account of certain interpretative Resolutions concerning the Economic Weapon, adopted by the Assembly on 4th October, 1921. Article 4 of these Resolutions states, inter alia, that it is the duty of each Member of the League to decide for itself whether a breach of the Covenant has been committed. Other Articles provide that the Council shall recommend the date on which the enforcement of economic pressure is to commence and enables special consideration to be given to the position of certain States which would suffer unduly by the application of sanctions. In other words, the automatic obligation under the Covenant to enforce economic sanctions in certain circumstances has been cut down in practice. Nevertheless, once a Member State has decided that a breach of the Covenant has been committed, it is still bound to impose sanctions on a specified date, unless it receives special permission to abstain from such a course of action.
The proposal now put forward by the United Kingdom Government cuts down still further the practical effect of Article XVI, since, if adopted, no Member State would be under any obligation whatever to apply sanctions of any kind, even though it agreed that a breach of the Covenant had been committed.
The arguments in favour of supporting the United Kingdom proposal with regard to Article XVI may be summarised as follows :-
(i) So far as the British Commonwealth of Nations is concerned, it would appear from the confidential record of proceedings of the last Imperial Conference that, broadly speaking, the United Kingdom, Canada and South Africa are of opinion that attention should be concentrated on the consultative and technical functions of the League of Nations, and not upon its coercive functions.
(ii) So far as foreign countries are concerned, Germany, Italy and Japan are no longer members of the League; Switzerland has recently been absolved from any obligation to impose economic sanctions; Belgium, Luxemburg, Holland, Norway, Sweden and Denmark have declared that they regard the system of sanctions under present conditions as of a non-obligatory character; Chile has given notice of withdrawal from the League because under the existing Covenant economic sanctions still remain technically obligatory.
(iii) It is widely believed that the imposition of full economic and financial sanctions in effect amounts to such pressure as may flow from a military sanction, and that nations which enforce full economic and financial sanctions must be prepared to face war. For instance, if during the Abyssinian crisis, an embargo had been placed upon the export of oil to Italy and the Suez Canal had been closed to the passage of Italian merchant shipping, it is probable that Italy would have resorted to military reprisals.
The arguments against supporting the United Kingdom proposal may be summarised as follows:-
(i) In recent years the smaller Powers have shown a disposition to free themselves from their obligations under the Covenant chiefly because, since the Ethiopian dispute, they have felt that they cannot rely upon the Great Powers to enforce sanctions effectively. If the Great Powers Members of the League made a definite declaration that they would enforce sanctions against an aggressor, this attitude of the smaller Powers may change. If the smaller Powers come to the conclusion that the League of Nations affords them no territorial protection whatever, they may well decide to make the best terms possible with the totalitarian States and withdraw from the League.
(ii) If the Assembly at its next meeting should adopt the proposal of the United Kingdom Government, there is a possibility that Soviet Russia, together with other States which favour a 'coercive' type of League, may withdraw from the League, or at least give it very lukewarm support.
(iii) The deterrent effect of prospective sanctions which are in no sense obligatory will be extremely small, and Germany, Italy or Japan (or all three countries) may feel able to ignore the possibility of the League acting as a restraining force upon the realisation of their plans for expansion.
7. The following questions will need to be decided by the Commonwealth Government:-
(a) (i) Whether the proposal of the United Kingdom Government concerning Article XVI (Sanctions), the adoption of which will have the effect of definitely recognising that each State may decide for itself whether or not to impose economic sanctions, even though it may have reached the conclusion that a breach of the Covenant has been committed, should be supported; or (ii) Whether the Commonwealth Government should adhere to its proposals announced on the 29th September, 1936, namely:-
(aa) that the imposition of financial and economic sanctions should follow automatically upon a declaration by the Council that a State is an aggressor and a decision by the Government of each individual State Member that a breach of the Covenant has been committed; and (ab) that Article 4 of the Resolutions concerning the Economic Weapon, adopted by the League Assembly on A October, 1921, should be incorporated in the Covenant to clarify the obligation of States Members.
(b) Whether the proposals of the United Kingdom Government concerning Article XI (Threat of War affecting Members or non- Members), and Article XIX (Re-consideration of Treaties) and concerning the separation of the Covenant from the Peace Treaty should be supported.
The proposals set out in (b), along with the arguments used, are fully in accord with the proposals already submitted to the League of Nations by the Commonwealth Government.