365 Note by McIntyre

CANBERRA, 16 September 1949

JAPANESE GOLD FOR THAILAND AND INDO-CHINA

Monsieur Priestley (French Charge d'Affaires) has recently asked to see the Minister for the purpose of discussing with him the matter of the French share of the gold which the United States wants to release from Japan to Thailand and Indo-China.

I telephoned Priestley yesterday and suggested that he might come along and discuss it in the Department first of all, after which he could if necessary see the Minister. This he agreed to do, and he saw me yesterday morning.

He pointed out that the French Government regarded the gold earmarked in Japan as French property beyond any question, and therefore not in any way subject to the jurisdiction of the Far Eastern Commission. The French accordingly considered that they were quite correct in asking the head of the occupation in Japan, who at present has physical custody of the gold, to return it to them. The United States was quite satisfied that the gold belonged to France. Priestley understood that the bulk of it (he did not know exactly what proportion) had accrued to France before the beginning of the Japanese war, at a time when not only France, but the rest of the Allies, were continuing to carry on normal trading operations with the Japanese.

The French Government was accordingly disturbed that Australia should have apparently taken the lead in the FEC in resisting the United States proposal to release the gold. The French felt that Australian influence in these matters might have the effect of stirring up opposition among other FEC countries which might perhaps be less capable than Australia of deciding a matter of this sort objectively on its merits and might tend to judge it rather on political considerations. The French hoped that Australia might see its way to withdraw its resistance.

I explained to Priestley first of all that we had been given to understand by the United States that the gold had been earmarked for Thailand and Indo-China as a result of transactions carried on with the Japanese during the war and not before. It was this consideration, among others, which had led us to entertain doubts whether France and Thailand possessed clear legal tide. As long as these doubts existed-and they were shared by the United Kingdom and other FEC countries-we felt that the matter was clearly within the competence of the Far Eastern Commission. Until it was absolutely clear that the gold belonged to France and Thailand, the FEC could rightly claim that it could be regarded as part of Japan's assets, and these were clearly subject to FEC jurisdiction until their disposal could be determined at the peace conference.

I explained to Priestley the recent history of FEC and of the continual efforts made by the United States to by-pass it and undermine its jurisdiction. We had tried hard from the beginning to maintain the authority of FEC, which was after all the only means open not only to us, but to France, of impressing our views on the occupation authorities. We were disappointed that there had been so much delay in making peace with Japan, but we did not regard this as an excuse for allowing the FEC to become impotent.

This particular question was clearly one on which we felt that FEC's rightful jurisdiction must be upheld on principle. It was significant that the United States Government, even though it proposed to act unilaterally outside the FEC, had itself acknowledged FEC's competence by filing with the Commission its proposed directive to SCAP and by acknowledging the Commission's right to discuss it.

I made it clear to Priestley, however, that we were less concerned with France getting its share of the gold than with the Thai aspect of the matter. If the FEC were able to decide that legal title to the gold rested with France and Thailand, we would not raise any further opposition to the release of the French share.

With Thailand the case was different; we had been at war with Thailand, and we, together with the United Kingdom, India, New Zealand and Burma, still had outstanding claims against the Thai Government arising out of the war. We did not consider that any Thai assets held overseas should be released to Thailand until all Allied claims had been satisfactorily settled. We would accordingly continue to resist release of the Thai gold, but not the French gold if we could be satisfied on the matter of title. I added that we would like to see the FEC try to decide the question on its merits at its next meeting.

Priestley said he saw the picture clearly, and would inform his Government of our attitude and the reasons for it. It was clear that the main point of conflict between us was the question of the initial competence of the FEC.

Priestley observed that the French Government apparently attached a good deal of importance to this matter, and for this reason had instructed him to discuss it with the Minister. He wondered whether, now that I had explained it to him, it would be necessary for him to see the Minister. I said that this was of course ultimately a matter for him to decide in the light of his instructions, but that I personally did not feel it would be necessary. The Minister had taken a direct personal interest in the matter, and I was confident I had expressed his views accurately. Priestley agreed that he need not see Dr. Evatt.

[AA:A1838/278, 461/3/1/1]