Your telegrams Nos. 205 27th July and 209 1st August  have been fully and carefully considered here.
We entirely recognise Australia's right to be consulted as fully as practicable on all matters affecting the conclusion of peace treaties both in relation to Europe and also in relation to Japan and are anxious to do whatever we can to meet Australia's wishes as to the mode of such consultation. But what must be remembered is that the United Kingdom Government have not a free hand in this matter. It is necessary to take into account the views and wishes of other powers and in particular of the United States and Russia and conclusions reached on any subject must necessarily represent the greatest common measure of agreement.
In your telegram No. 205 you quote statements made by Mr.
Churchill at the British Commonwealth Meeting in April this year regarding the holding of a peace conference at which only those countries which had taken an active share in the war would be represented. The situation as it now appears is somewhat different from that envisaged at the time of Mr. Churchill's statement. The whole conception on which we are now working is that it is no use bringing forward matters which will have to be settled at a peace conference unless and until the issues in question have been worked out before hand in a smaller body and the body which it is contemplated shall do this work is the Council of Foreign Ministers now set up as a result of the Berlin Conference.
You will see from paragraph[s] 4(i) [and] (ii) of the text of the Berlin Agreement set out in my telegram D.1335  that the procedure provides for the holding of a special conference to consider particular problems in which countries directly interested would participate. It seems to us (although this is of course a matter on which it will be necessary to secure agreement with the other permanent members of the Council) that there can be no doubt that Australia and New Zealand are countries 'directly interested' in the settlement of affairs in the Pacific and that therefore at any meeting of the Council at which such matters are considered those two countries should be invited to participate in the discussions. At any rate this is what we for our part will use every endeavour to secure.
The position is however different as concerns the European settlement. We do not see how it would be possible to extend an invitation to Australia to participate in meetings of the Council when the peace treaties with the Axis satellites are under consideration without also issuing an invitation not only to Canada and the Dominions but also to a substantial number of the lesser European Allies. But this would result in a very serious enlargement of the Council which, on grounds of businesslike procedure, it is essential to avoid and there would be no hope of securing the agreement of other permanent members of the Council to such an arrangement.
It seems to us however that apart from this there would be adequate opportunity for Australian views to be expressed and given full weight to in the settlement of these questions. The procedure as we see it would follow the following stages- (a) A decision in principle to conclude a peace treaty.
(b) The preparation of the first draft of the terms of peace. This draft would be communicated textually to Australia and to other Dominion Governments as has been done in the case of the proposed treaty with Italy and any comments which other Governments wish to make would be fully taken into account.
(c) The draft terms would then be discussed at the Council of Foreign Ministers, when the United Kingdom representative would of course fully bear in mind the views which the Dominions had expressed. For the reasons given above we do not see that it would be practicable to secure the actual participation of an Australian representative in the deliberations of the Council on European peace treaties generally though there might be special matters in respect of which such participation could be secured. But in any case it would be our object to keep Dominion Governments fully informed of any changes which the other members of the Council wished to make and to see that full consideration was given to any comments received on the proposed changes.
(d) The actual conclusion of the treaty. We would do our best to ensure that such treaties would be open to separate signature on behalf of Australia and the other Dominion Governments.
We have noted the account of your general views as regards the future of Japan as set out in paragraph 6 of your telegram No. 209 and shall be glad to have your full comments as promised at your earliest convenience.