CO129-622-6 Claims of War Supplies to Eastern Group Supply Council 21-1-1949 - 23-12-1949 — Page 28

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formulation of such impressions, but I should be able to put a better face on the settlement if the "deficit" shown in the balance sheet could be reduced. It would be possible to do this if I were able to state that all legal claims by the commercial community and by the Hong Kong Government against the War Supplies Board will be met before the middle of next year.

5.

It was only in an endeavour to obtain speedy settlements that this Government negotiated directly (as I think you would have wished) with other Governments and Departments of Governments rather than through you with the Ministry of Supply. This policy has in general met with a measure of success as will be apparent from the balance sheet. However, in the case of Burma it has produced no more than an acceptance of liability in June, 1947, from the Accountant-General of Burma, dependent on the sanction of his Government; since then in spite of frequent reminders there has been no further development and there seems little doubt that the Burma Government will ultimately deny liability. In the case of the Government of India, there has been a complete denial of liability for any equitable claim on the grounds that the "Government of India functioned in these matters as Agent of His Majesty's Government." As might be expected, the Accountant-General, Hong Kong, in correspondence with the Accountant-General, Indian Central Revenues, has met with the same denial of liability for legal claims, on the grounds that "they relate to a period when the 'Defence Expenditure Plan' was in force and thus according to the Sterling Balance Agreement concluded on 9th July, 1948, between the Governments of India and Pakistan on the one hand, and the United Kingdom Government on the other, the responsibility for the settlement of outstanding claims of Foreign Governments against the Government of India devolves upon the United Kingdom Government. 11

6.

In these circumstances, there seems to be no alternative but for. this Government to prefer its claims and those of the commercial community against the Ministry of Supply as the heirs to the Far astern Group Supply Council, in the hope that the Ministry will agree to accepting immediately, with a view to recovery later from the Governments concerned, liability for:

7.

(a)

all legal War Supplies Board claims against the Governments of India and Burma; and

(16) the Hong Kong and Shanghai Bank claim against the

Hong Kong Government (paragraph 5 of your despatch No. 87 of 21st April, 1949), which is really a claim against the Government of India.

The Ministry of Supply will certainly be in a much stronger position than this Government to press its claims against the Governments of India and Burma, but in the meantime I shall continue my efforts to reach agreement with these countries at least on the authenticity and amounts of the claims against them. Most of the War Supplies Board's other debtors have not questioned the validity of the post-war claims against them, and it is reasonable to suppose that the claims against India and Burma must also be accurate.