(1) The position of His Majesty's Government in the United Kingdom
resulting from their accession in 1931 to the General Act for the
Pacific Settlement of International Disputes, has recently been
examined by a Sub-committee of the Committee of Imperial Defence
taking into account the existing situation as regards Article 16
of the Covenant of the League of Nations. Following is substance
of Sub-committee's Report.

(2) At the time of accession there appears to have been a general
feeling that, while the desirability in principle of machinery for
the pacific settlement of international disputes could not be
denied, the General Act itself, which had been framed in the main
by Continental European legal experts, was not a very satisfactory
instrument from the point of view of His Majesty's Governments. It
was felt in a good many quarters that the procedures which the Act
provided for the settlement of disputes, in so far as these did
not duplicate those provided in other instruments (e.g. the
Optional Clause in the case of justiciable disputes) were
excessively complicated and that the Act did not in reality
provide any means of settling disputes which could not be dealt
with under already existing and simpler methods. In this connexion
the Subcommittee draws attention to the fact that only a limited
number of States have accepted the General Act as compared with
the number of those which accepted the Optional Clause and that it
has never been invoked by any State at any time since it was first
concluded.

(3) Apart from these general considerations the Sub-committee feel
that the provisions of the General Act might in certain
circumstances prove a source of grave difficulty to His Majesty's
Government in the United Kingdom. At the time of their accession,
considerable doubt was expressed whether acceptance of such
obligations might not unduly hamper His Majesty's Government in
the United Kingdom, in the event of war, in taking certain
measures, especially as regards the exercise of belligerent rights
at sea. It was then decided that such a risk might safely be
neglected since the obligations were accepted in respect only of
disputes with Members of the League of Nations and it was assumed
that, in the event of the United Kingdom being involved in a major
war, all the other Members of the League would be bound to act in
accordance with Article 16 of the Covenant of the League and could
not claim the rights of neutrals and that no occasion should arise
therefore for a dispute between the United Kingdom and any other
Member of the League resulting from the exercise by the former of
belligerent rights. At the time of signature of the Optional
Clause the decision of His Majesty's Government in the United
Kingdom not to make a reservation in respect of disputes arising
out of the exercise of belligerent rights at sea was publicly
justified on the ground of the new situation arising from Article
16 (see for example pages 8 to 11 of Cmd. 3452 [1]) and the same
considerations were held to apply to the General Act to which His
Majesty's Government in the United Kingdom acceded a year later.

Subsequent developments in connexion with Article 16 now make it
exceedingly doubtful whether, if the contingency contemplated were
to arise, such considerations would still hold good. If a
situation such as is contemplated in Article 16 were to arise it
would no doubt be the desire of His Majesty's Government in the
United Kingdom that consultation among the Members of the League
as to the possibility of action by them under the Article should
be arranged immediately, in the hope that the result of such
consultation might be to secure such agreement among the Members
of the League as would enable His Majesty's Government in the
United Kingdom to exercise belligerent rights at sea and other war
measures without the risk of there arising from such measures
disputes which might be referred to arbitration or any other
procedure contemplated in the General Act. It is however probable
that in fact some Members of the League, and especially the
Scandinavian States having regard to their attitude towards
Article 16 would not be willing to agree to such a course. If
thereafter a dispute were to arise with some such State as a
result of belligerent action by His Majesty's Government in the
United Kingdom, the latter could not resist a demand, if made,
that the dispute should be referred to a tribunal as contemplated
under the General Act. In that event, if an award were eventually
given against His Majesty's Government in the United Kingdom not
only would this involve the possibility of heavy damages (which
might run into millions of pounds) but it would be necessary to
abandon measures considered vital to the successful prosecution of
the war. It is indeed conceivable that the Tribunal might, on the
opening of proceedings before it, make an order for the immediate
suspension of the action complained of In the circumstances the
Sub-committee feel that in the event of His Majesty's Government
in the United Kingdom becoming at any time involved in war they
should not enter upon hostilities bound by the obligations of the
General Act in their present form.

(4) The Sub-committee observe that the General Act under the terms
of Article 45 runs for successive periods of 5 years from the 16th
August 1929 and a contracting party can only relieve itself of its
obligations under the Act by denouncing it at least six months
before the expiration of the current period. If therefore any
action is to be taken by His Majesty's Government in the United
Kingdom this must be taken not later than the 15th February, 1939,
or they will continue to be bound by the Act in its present form
for another 5 years.

(5) In the circumstances the Sub-committee reach the conclusion
that the best course would be to give notice of denunciation of
the General Act before the 15th February 1939 this action being
accompanied by a statement to the effect that
(i) in view of the existing position as to Article 16 of the
Covenant His Majesty's Government in the United Kingdom desire to
consider whether they can in future be bound to arbitrate disputes
arising out of action taken in war time;

(ii) they observe that the General Act has never been invoked and
that doubts have been expressed whether its procedures, so far as
they differ from those already existing in other instruments,
afford a really satisfactory means of settling international
disputes;

(iii) under the terms of the General Act denunciation must be
effected in February 1939 if its provisions are not to be binding
for another five years;

(iv) they are willing to consider whether and, if so, on what
terms reacceptance could be effected.

(6) The Sub-committee recommend that consideration should be given
to the advisability, if any such statement were made, of including
in it a suggestion for a review of the General Act by the League
having regard to the failure to employ it hitherto.

(7) The Sub-committee point out that the considerations mentioned
in paragraph (3) would apply also (as regards justiciable
disputes) to the Optional Clause which was accepted by all His
Majesty's Governments with effect from various dates in 1930.

Acceptance of the Optional Clause by His Majesty's Government in
the United Kingdom was for a period of ten years and it would not
be possible legally to withdraw from it before February 1940
though thereafter withdrawal could take place at any time with
immediate effect. The general considerations mentioned in
paragraph (2) above do not in the Sub-committee's view apply in
the case of the Optional Clause and in all the circumstances they
suggest that it is unnecessary at present to take any action in
relation to the Optional Clause. They point out that the position
in relation to the Optional Clause can be further considered in
February 1940, though it seems doubtful whether any action would
be necessary or desirable unless and until this country were in
fact involved in war, in which event (if it occurred after
February 1940) it would be possible to withdraw immediately from
the Optional Clause if this were thought advisable. If His
Majesty's Government in the United Kingdom were to become involved
in war before February 1940, although legally it would not be
possible to withdraw from the Optional Clause, the Sub-committee
consider that it would be possible, if the League. procedure
described in paragraph (3) had shown that Members of the League
were not prepared to apply Article 16 of the Covenant, to notify
that we no longer regarded ourselves as bound by the Optional
Clause in respect of disputes arising out of belligerent action
and to base our attitude on the fact that the procedure under
Article 16 had broken down. In that event the position could if
necessary be regularized by formal denunciation in February 1940.

(8) The Sub-committee have expressed the view that it would be
highly desirable that on a matter of this nature similar action
should, if possible, be taken by all the British Commonwealth
Governments concerned.

(9) It will be seen from the above that the question raises
important issues, and it will be remembered that accession to the
General Act in 1931 was effected after considerable discussion
between the Governments of the British Commonwealth (see my
telegram Circular B. No. 7 of the 8th January, 1930, and
subsequent correspondence). In all the circumstances we feel that
the consideration mentioned in paragraph (8) above is very
important and before examining the matter further we should be
grateful if we could receive any observations which the other
British Commonwealth Governments who are parties to the General
Act may feel able to make both on the subject generally, and in
particular on the Sub-committee's suggestions mentioned in
paragraphs (5) (6) and (7) above as to possible future action. We
are also taking steps to sound the French Government. In view of
the position as described in paragraph (4) we should appreciate a
reply at an early opportunity.