I am directed by the High Commissioner to refer to your letter of the 28th July (G.41/1/7) on the subject of the future constitutional position of Ceylon.
2. The views of the Commonwealth Government upon the draft agreement upon external relations and defence which it is proposed to conclude with the new Ceylon Government were communicated to the United Kingdom Government who desire to make the following observations in reply:-
(a) As regards the Australian Government's doubts about setting out obligations of this nature in regard to External Affairs in a contract form, the United Kingdom Government, too, in general feel that matters of the kind are best expressed more informally. The case of Ceylon is, however, a very special one. As the Australian Government know, the United Kingdom Government are anxious to get substantial agreement on this and other matters before the new Ceylon Government takes office in October and to have reasonable assurance that the necessary safeguards will then be immediately agreed to by the new Ceylon Government as a preliminary to any legislation in the United Kingdom to amend the Ceylon Constitution. Failing the immediate conclusion of such an agreement between the United Kingdom and the new Ceylon Government, it is doubtful how far progress can be made in the United Kingdom Parliament with any legislative steps to confer on Ceylon full responsibility status within the British Commonwealth.
(b) The procedure suggested by the Australian Government for a London meeting after the new Ceylon Government has been formed would lead to delay and would deprive the United Kingdom Government of the assurance which they hope to obtain in advance from Mr. Senanayake  that, if he is returned to power, he will recommend the draft agreements on Defence and External Affairs to his Cabinet for acceptance.
(c) The special procedure suggested by Australian Government for dealing with External Affairs might prejudice the possibility of obtaining advance acquiescence in the terms of the Defence Agreement also to be entered into-Mr. Senanayake might take the line that he would like the latter subject deferred to a conference also.
(d) The draft agreement as between the United Kingdom and Ceylon was purposely so worded as to involve no commitment, expressed or implied, on the part of members of the British Commonwealth other than the United Kingdom as to their relations with Ceylon in the field of external affairs. The United Kingdom Government is at present, and will remain until constitutional change is made, responsible for Ceylon's external affairs, and for this reason the United Kingdom Government feel that a bilateral agreement between the United Kingdom and Ceylon before that responsibility is surrendered is the appropriate method of procedure.
There is no reason to believe, however, that Ceylon would not be ready, if that were the desire, to enter into similar understandings with the other members of the British Commonwealth, and the conclusion of a bilateral agreement would not in the view of the United Kingdom Government preclude a later meeting on the lines and for the purpose suggested by the Australian Government if this should be agreeable to the other Commonwealth Governments concerned.
3. In these circumstances the United Kingdom Government hopes that in the light of the above comments the Australian Government will see no objection to them proceeding with the draft Agreement on external relations.
4. As regards the observations of the Australian Government on the draft Defence Agreement the arguments for the insertion of some time limit or provision for giving notice of termination were that the permanent obligation on the Ceylon Government to permit the United Kingdom Government to base naval, air and land forces in Ceylon might be regarded as some derogation from full independence and that there was a risk that the prospects of agreement might be prejudiced if too much were asked of the Ceylon Government. As against this the inclusion of such provisions might suggest that Ceylon's obligations under the agreement were expected to be brought to an end at some not necessarily too distant date and there were in fact precedents for agreements of the nature proposed e.g. the lease of bases to the United States Government in Bermuda and the West Indies, which were not held to imply any derogation from sovereignty. It was felt by United Kingdom Ministers that these latter considerations had the greater weight and it has therefore been agreed not to insert any time limit or provision for termination in the draft agreement.
5. The High Commissioner has also been asked to inform the Commonwealth Government that the draft agreements have been considered by United Kingdom Ministers and have been agreed subject to the following amendments:-
6. As indicated in paragraph 4 of the letter from this office of the 22nd July it is desirable that the Governor , who has just left for Ceylon, should be authorised to discuss the drafts in confidence with Mr. Senanayake as soon as possible. The Government of the Union of South Africa has indicated that they have no observations to offer and no comments have been received from the Governments of Canada or New Zealand. The United Kingdom Government is anxious to be able to give the Governor within the next fortnight the necessary authorisation to discuss the terms of the draft agreement with Mr. Senanayake and if the Commonwealth Government has any further comments the United Kingdom Government would be glad to receive them as early as possible within that period.