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Appendix IX.

AWARD OF THE ARBITRATOR

IN THE MATTER OF THE

CONTRIBUTIONS OF CEYLON, THE STRAITS SETTLEMENTS, AND HONGKONG.

LORD BALFOUR OF BURLEIGH TO TREASURY.

December 21st, 1904.

SIR,

Adverting to the letters which I received from the Treasury in March and April of this year, and of date October 27th, with relative enclosures, and to the letter of November 14th, with enclosure, of which the reference number is given above, I have now to say that I have carefully considered all the documents referred to, and on the 21st ultimo, and again on the 19th instant, I had the advantage of having interviews with Mr. Johnson of the Colonial Office, and Mr. King of the Post Office.

2. I note with satisfaction that in no case is the accuracy of the facts and figures laid before me the subject of any difference of opinion.

3. The question submitted to me concerns the division of the subsidy of £330,000 paid to the Peninsular and Oriental Company for the postal service to Australia, India, and the Eastern Colonies. Of this sum £85,000 has been taken as representing the Australian service, the apportionment being based on the fact that the Orient Company offered a corresponding Australian service for £85,000, and that the contract with the Peninsular and Oriental Company for the separate Australian service was also for that amount. The Indian Post Office, however, 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:-

"(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. (6) That, as regards the sections between Colombo and Shanghai,

India should not continue to be made liable for

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.

EX

66

any

(e) 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.

of the

"(d) That, subject to the above-mentioned conditions, the apportion- ment 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 an present case), with this exception that the Indian; should bear the whole expense of sea-sorting on the/ which, by Article 35 of the contract, is fixed at £7,

viment line,