241 Mr J. A. Lyons, Prime Minister, to Mr S. M. Bruce, High Commissioner in London
Cablegram unnumbered 19 August 1938,
Desire following view of Commonwealth Government be communicated to Dominions Office reference telegram B.185 of 30th July.  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  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.