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365 Note by McIntyre

CANBERRA, 16 September 1949


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]
Last Updated: 11 September 2013
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