CO882-(6-8) — Page 437

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PUBLIC RECORD OFFICE

Reference :-

C.O. 882

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PUBLIC RECORD OFFICE, LONDON

ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH-NOT TO

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challenged this division, "and at its request the Peninsular and Oriental Company were asked to say what part of the subsidy of £330,000 was assigned to the Australian service, and how the balance was sub-divided among the sections of the Eastern service. In reply, the Directors stated that it would be impossible to separate the sections as desired, but that they had always had in view that they should obtain the sum of £85,000 for the Australian portion of the work, and that out of the total subsidy the sum of £245,000 was for the Eastern Mail Service." (Post Office Case, paragraph 7.)

4. This matter was referred to the Earl of Morley, and his award was given in the following terms:—

"After a careful consideration of the two cases, and of the arguments used in support of them, I have arrived at the following conclusions:-

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(a) That, as regards the Australian service, the arrangement proposed by the Post Office should be adopted during the continuance of the contract, and that £85,000 should be appropriated to that service. When the present contract expires, it appears to me that it would be desirable to enter into separate contracts for the two services. (b) That, as regards the sections between Colombo and Shanghai, India should not continue to be made liable for any loss which may be incurred on these sections, but that she should pay transit rates for any use she may make of this portion of the mail route, the receipts from such transit rates being credited to the sections.

"(c) That the postage collected in the two countries, and the receipts from other administrations for land and sea transit on mails sent over the line should be pooled, and the balance of the united collections after deducting the cost of continental transit and rates paid to other countries, should be equally divided.

"(d) That, subject to the above-mentioned conditions, the apportionment of the subsidy, £245,000 should be regulated in accordance with the principles laid down in paragraphs 23 and 24 of the case of the Post Office (now embodied in paragraphs 26 and 27 of the present case), with this exception that the Indian Government should bear the whole expense of sea-sorting on the Bombay line, which, by Article 35 of the contract, is fixed at £7,500.

Under this Article the Postmaster-General may give notice to the Company that he no longer requires provision to be made for sea- sorting, and may deduct £7,500 from the subsidy. I understand that he would be willing to give this notice if the Indian Government desires him to do so.

"(e) That an account should be prepared by the Imperial Post Office and audited by the India Office, and that the amounts thus ascertained shall be payable by the contributing countries to the end of the contract."

5. The result of this award has been to assess to India a sum of £59,330, and the question submitted to me is what proportion of the balance should be paid respectively by the Imperial Post Office and the Eastern Colonies.

6. The figures stand thus: The total subsidy under the existing contract is £330,000; the share placed to the account of the Australian service is £85,000, leaving a balance of £245,000, from which sum, after deducting the sum of £59,330 assessed to India, there remains a balance of £185,670, which falls to be found between the Imperial Post Office and the Eastern Colonies.

7. The Secretary of State for the Colonies (paragraph 8 of the Colonial case), states that he is not prepared to agree without qualification to the extension of the principles of Lord Morley's award to the Eastern Colonies, as he maintains that their case is different from, and their interest in some measure in conflict with, those of India, and he states that the matter is submitted to arbitration on the under, standing that the Colonies are not to be prejudiced by the assumption that £85,000 is the proper amount to be assessed to the Australian portion of the contract, or that India's share is fairly assessed under Lord Morley's award; while the Post Office (paragraph 32 of their case) "submits that the principles of Lord Morley's award should be regarded as applicable to the whole service. As shown in

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Appendix C. the application of these principles in the case of the Eastern Colonies would result in a total annual payment of £6,055 by Ceylon, £7,719 by the Straits Settlements, and £12,893 by Hong Kong." Taking only the cost of the sections as shown in the same table gives the following figures: *

Ceylon £6,633, Straits Settlements £7,611, Hong Kong £13,131.

8. Other calculations worked out in figures are shown in Appendix F. and Appendix G. of the Statement put before me on behalf of the Eastern Colonies. Appendix F. is based on a division in accordance with the principles embodied in the award of Lord Morley, but including Australia; Appendix G. in accordance with the same principles, but with a different calculation of the question of speed, which is taken specially into consideration, as explained in paragraphs 14 and 15 of their statement.

9. It will be convenient, for purposes of reference, to put these three figures in the form of a table:-

India.

Ceylon,

Straite Settlements. Hong Kong.

£

£

£

ㄓ

57,830

2,940

5,550

11,010

Appendix F.

63,200

3,030

5,085

9,605

Appendix G.

60,693

6,633

7.611

13,131

General Post Office.

10. To some extent the questions submitted to me have arisen out of certain new features and methods of calculation introduced by Lord Morley's award :—

1.

India was practically relieved of all liability in respect of sections eastward

of Colombo.

2.

To provide for any disparity between the volume of outward and homeward

3.

mails, the pooling of postage receipts was instituted.

The United Kingdom was relieved of all liability for the cost of sea-

sorting.

Number 2 was, however, simply a renewal of principles affirmed on a former occasion by Lord Halifax (G.P.O. case, paragraph 16).

11. The difficulty of deciding the question submitted to me arises in no small degree from the fact that, while the Colonial Office does not accept the justice of the principles by which the Australian contribution of £85,000 and the Indian contribution of £59,330 have been fixed, yet neither of these sums is open to argument before me, and it is obviously no part of my duty to express any opinion.

12. The Australian contribution has been settled on grounds only applicable to that particular part of the case, while the contribution of India has been mainly decided by an apportionment of cost in accordance with the volume of the traffic; it is thus not possible, in the position in which I am placed, to come to a decision which will apply the same principles all round in each case.

13. Tested by the principles applied to India under Lord Morley's award, the Australian contribution would be obviously much too small, and it is not surprising, under these circumstances, that the Eastern Colonies should demur to the justice of the principles adopted, although it seems to me that, in the argument of the Colonial Office, insufficient weight is given to the fact that the Australian service is subject to competition between two powerful companies, and is, therefore, likely to be done for them at lowest margin of cost, whereas the service to the Eastern Colonies is more or less the subject of a monopoly.

14. It is obvious that I must assume that the Australian contribution is fixed, and that the contribution of India is also settled, even although the Eastern Colonies were not represented before Lord Morley.

15. The difficulty involved was, however, clearly present to his mind because (paragraph 9, sub-section (a), of his award) he says that when the present contract expires "It appears to me that it would be desirable to enter into separate contracts for the two services."

16. Under the circumstances as they are put before me, I am not surprised that the suggestion should have been made to endeavour to find a principle of apportion-