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These countries are about to negotiate for adherence to the General Agreement on Tariffs and Trie, and may be admitted to it before the summer is out.

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6. The English Law Officers consider that all the countries having most- favoured-nation rights in respect of the entry and residence of persons would be legally entage tomake 4aims to treatment in this respec agefavorable as that accorded in the United Kingdom to Indian nationals once India had ceased to acknowledge allegiance to the Crown. It is again possible, though by no means certain, that they would refrain from such claims if India remained a part of the Commonwealth; and in this event the continued extension to Indian nationals of treatment not accorded to the nationals of foreign countries could perhaps be plausibly justified politically by the use of arguments of the kind mentioned in paragraph 4. But if a claim were made which had to be settled judicially, the Law Officers do not think those arguments would prevail.

7. From what has been said above, it will be gathered that the risk of a challenge before the International Court on most-favoured-nation grounds involved in allowing a republican country to remain a member of the Common- wealth depends on the type of treaty clause at issue in each case. As regards the treatment of goods, there would be no appreciable direct risk in relation to countries parties to the General Agreement on Tariffs and Trade, and probably little in relation to the Scandinavian countries, in view of the fact that the definition of foreign country " in the 1933 trade agreements with them is by way of antithesis to countries members of the British Commonwealth of Nations".

In all other cases, whether in relation to goods or nationals, the anti- thesis is between "foreign country" and "His Majesty's dominions"

territories under His Majesty's sovereignty", &c. In these cases, the question whether the United Kingdom could legitimately grant preference to a country having a republican Constitution would seem, on any strict interpretation of the treaty clauses, to depend on whether or not the republican form of Constitution excluded His Majesty's sovereignty.

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8. Probable Lines of Attack.-A challenger might adopt one of two courses: (i) take the matter to The Hague Court or other international arbitration, or (ii) take action under the legal doctrine of reprisals.

As regards (i) the United Kingdom Government would be bound to go to The Hague Court or to some other tribunal under any treaty which provides for arbitration on disputes. They have such treaties with the countries listed in Annex 6. They would similarly be bound to go to arbitration if challenged by any of the countries which have subscribed to the Optional Clause of the Inter- national Court (listed in Annex 7). They might also be invited to go to inter- national arbitration by a country which had no treaty right to take them there. It would in such cases clearly be inexpedient to refuse. Such refusal would in effect be an admission that they had no case and an invitation to the country con- cerned to adopt course (ii), that of "legal reprisals".

9. As regards the countries from which a challenge would be likely to come, those having treaty rights to make a challenge have been listed above, in para- graph 3 as regards goods, and in paragraph 4 as regards nationals. It is difficult to forecast which of these countries would in practice be most likely to make a challenge. As regards goods, the challenge would be most likely to come from those which compete with India's products in the United Kingdom market- perhaps Argentina, Egypt, Siam or the Soviet Union. As regards nationals, the challenge might come from countries whose nationals come to the United Kingdom in appreciable numbers, e.g., France, Sweden, Switzerland, or the United States; or possibly some of the Iron Curtain" countries such as Czecho- slovakia, Hungary, Roumania or Yugoslavia might do so in order to raise political trouble. (The Soviet Union have no relevant rights as regards nationals.)

10. On the whole challenges in regard to the treatment of goods may be regarded as rather more probable than in regard to nationals, since the treaty pro- visions are more clear-cut in the former case and their observance or non-observance is probably easier to establish. The position which would arise in regard to the treatment of nationals cannot, however, be completely ignored. The rights of entry, residence and franchise are not without importance, although perhaps more so to individual foreigners than to foreign States. Apart from these rights, however, there are not many cases of significance where greater privileges are in practice given to British subjects than to foreigners.

11. It is of course possible that a challenge might be raised against India instead of the United Kingdom. Argentina, Switzerland and a number of other countries have most favoured nation treaty rights with Indip and the United States are negotiating for such a treaty. The form of these treaties is usually

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sudhage would fense the countries concerned to Pagi 1964-88voured-nation grounds treatment for their goods and nationals as favourable as that accorded in India to United Kingdom goods or nationals. Among these countries, those which are not parties to the General Agreement on Tariffs and Trade could lay claims in regard both to goods and nationals, while even those which are parties to the General Agreement could lay claim in regard to nationals. On the whole, it seems rather more probable that the attack might come in this form than in the form of a challenge to the United Kingdom.

12. Likely consequence of a successful attack. If the United Kingdom were taken to international arbitration either in respect of goods or of nationals (course (i) in paragraph 8) and lost her case, she would clearly have to cease giving India the preferential treatment in respect of which the challenge had arisen- and very possibly in all respects. If she were thus compelled to cease giving preference to India, she would almost certainly have to cease also giving it to Eire and Burma (which, unlike India, are not even parts of the Commonwealth) but her preferences to all other parts of the Commonwealth would be unaffected and could continue. It is also possible that the Court might award monetary damages in respect of the period of default. As regards this possibility, two cases fall to be considered-

(1) where the Court has compulsory jurisdiction, i.e., where the United Kingdom is obliged to go to the Court if the other party to the dispute requires her to do so (see (i) in paragraph 8, and Annexes 6 and 7); and

(2) where there is not compulsory jurisdiction and the United Kingdom can

only be taken to the Court with her consent.

In case (1), the complainant party could, at any rate as a matter of legal theory, ask for damages, though in practice it might well refrain from doing so, since a precedent might be set which could in due course recoil upon itself. It would be a matter of great complexity to assess the damages if they were claimed; their exact amount would have to be proved: this would be difficult, but the amounts might be very large. The risk is thus remote, but a big one.

In case (2), the United Kingdom would only go to the Court on agreed terms, and these terms could exclude the question of damages from the reference to the Court. (It is however possible that if a country won its case in principle against the United Kingdom under (2), other countries which are entitled to take her to the Court under (1) might then intervene with claims for damages.)

Where a country adopts the method of reprisals (course (ii) in paragraph 8) instead of resorting to arbitration, the extent of the damage to United Kingdom trade would depend on the nature and extent of the reprisals.

13. Possibilities of averting a challenge. As regards possibilities of averting a challenge, the United Kingdom could of course threaten any intending challenger that she would denounce her treaty with him if he pressed his challenge. That would, however, practically amount to an admission that the challenge was valid. Whether the threat would be effective or not would depend on the relative importance which the United Kingdom and the challenger respectively attached to retaining most-favoured-nation rights at the other's hands, and on the challenger's estimate of the relative loss he would incur on the one hand, by acquiescing in the United Kingdom preference as against his goods and on the other, by suffering the loss of his most-favoured-nation rights in the United Kingdom. Since the United Kingdom normally gives most-favoured- foreign-country treatment to all foreign countries, whether they have treaty rights or not, and does not, like some countries, have a general tariff" and minimum tariff", of which the higher is applicable to a country not possessing most-favoured-nation treaty rights, her threat to denounce the treaty might be something of a brutum fulmen. Even if she did denounce it, that would, so far as the legal consequences are concerned, only prevent a case against her being taken to arbitration in respect of any period after the treaty had lapsed: it would not protect her against an award of damages in respect of the period while the treaty still remained in force and she was in default on it. The term of notice of denunciation of different treaties varies commonly it is one year for commercial treaties and six months for trade agreements. In any case, if the treaty is denounced, the other party is freed from all the restrictions on its liberty of action which the treaty creates and would, therefore, be free to do all lige it would probably want to do by way of ageprisals Off 4the treaty were in force and the United Kingdom Government were infringing it. If the challenge

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came only from a small country whose trade was comparatively unimportant to the United Kingdomodr48&country whose market was less Pragatha tof Herd than her market was to it, she might be able to use the threat of denunciation effectively to induce it to drop its challenge. But the situation would differ from case to case.

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14. Short of terminating a treaty, it would also be possible to negotiate for its amendment so as 'to make it clearly sanction the disputed preference. The United Kingdom would, however, be in a disadvantageous position in undertaking such a negotiation; being in the position of the demander it is she who would have to pay the price, and the price asked would probably be heavy. Nor would there, in many cases, be much choice as regards the form which the price should take. The goods clauses of the full commercial treaties normally amount merely to reciprocal most-favoured-nation treatment on both sides, so that a derogation on one side could hardly be matched by anything except a parallel derogation on the other. In other words, the United Kingdom could probably only buy the other party's consent to the disputed preference by conceding him the right to make preferential arrangements with other countries.

15. Moreover, by embarking on one such negotiation the United Kingdom would expose herself to a whole series of similar negotiations with all other countries having similar treaties with her, in each one of which she should have to buy off the other party's objection to her preference. The procedure would, therefore, be highly disadvantageous to her. This would particularly be so as regards the full commercial treaties, which not only cover most-favoured- nation treatment for goods, but also deal with a wide range of other matters (persons, companies, shipping, industrial property, &c.), for many of which not only most-favoured-nation treatment but also national treatment (i.e., the same treatment as the nationals, companies, ships, &c., of the other party) is prescribed. All these rights would be put at issue in any re-negotiation on the goods preferences. Moreover these treaties are very numerous. Thus their wholesale re-negotiation would be a formidable and lengthy undertaking, and the net result in the end would almost certainly be to leave the United Kingdom in a less advantageous position than she enjoys at present-possibly not only as regards goods, but also as regards the other matters covered by the treaties,

as described above.

16. Arguments that could be used in resisting a challenge. As already seen, the most likely ground for a challenge would be that the territory concerned had ceased to be under His Majesty's sovereignty and had become foreign." In those cases ( (2) (a) in paragraph 1 and in Annex 2) in which the antithesis is "not a part of the British Commonwealth ", affirmation both by the United Kingdom and, e.g., India, that both regard it, e.g., India, as part of the British Common- wealth could be made. The effect of this would depend in part on whether the Court or Arbitrator held those words to refer to the British Commonwealth as constituted at the time of the Treaty. Even if it were held that the words pos- sessed a wider significance the Law Officers do not think that a Legal Tribunal would necessarily accept the ipse dixit of the two countries concerned to the pre- judice of third parties, and it might perhaps feel called upon to consider whether the British Commonwealth continued to exist as an internationally recognisable association, the members of which were not to be regarded by international law as foreign to each other.

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In cases where the test is His Majesty's sovereignty, it would be necessary to try to shift the argument off the strictly legal ground, and to argue that there had for long been a special relationship, which de facto still continues without interruption, and that the change in the constitutional status of the territory concerned did not affect this position in substance. The effectiveness of this argument would vary from case to case and according to the nature of the point in dispute. Thus, e.g., in the case of Eire, if the challenge related to the special treatment of Eire nationals in the United Kingdom, arguments about kinship might carry some weight; but this argument would not, of course, be available in relation to India.

As regards trade preferences, the length of time for which the preferences have been in effect might be a relevant consideration. (In India's case, the United Kingdom started to give preferences on such duties as she then had, from the end of the First World War: the wider accord of preferences generally duty-free entry-to her goods dates from the adoption of tragene tarif88nd the Ottawa Conference in 1932ge Imaƒ 488

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convenient at this point to summarise the analogies and differences between the cases of India, Life and Burma, in the circumstances contemplated. (a) None of the three would be acknowledging His Majesty's sovereignty. But (6) India would consider herself a part of the Commonwealth, whereas Eire and Burma do not. (However, the United Kingdom and Eire do not regard one another as "foreign countries in the full sense. The position in relation to Burma is different since the United Kingdom has continued preferences in her favour only on a temporary basis.)

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Consideration (b) would tell in India's favour in the matter of retaining preference it would possibly be decisive as regards possible claims by those countries in whose agreements with the United Kingdom "foreign country is defined as not a part of the British Commonwealth" (see paragraph 1 (2) (b)); and even in cases where His Majesty's sovereignty is the test (paragraph 1, (1) and 2 (b) and (c)) there will be a better argument in India's case than in those of Eire and Burma.

On the other hand, so far as reliance is placed on close de facto connections to justify the preferences, Eire would have a good case on grounds of kinship, proximity, &c., which neither India nor Burma could claim. The United Kingdom's connections with Eire are necessarily close; they are not so with India or Burma.

Whether or not argument on these lines might be plausible politically, the Law Officers do not think it could be pressed successfully, if at all, before a Legal Tribunal.

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17. This paper is concerned primarily with the strictly legal aspects of the problem; but it may be worth noting in conclusion a view put forward by the Secretary of the External Relations Department of Eire in the course of the recent conversations between Eire and United Kingdom officials. suggested that in practice foreign countries are not very likely to concern them- selves with the constitutional niceties of the British Commonwealth; they would, he suggested, be disposed to regard whatever formula was used in a particular treaty as being merely descriptive of the countries covered at the time of its conclusion by the preferential system-and thus as having much the same effect as Annex A to the General Agreement on Tariffs and Trade. Their willingness or otherwise in practice to accept the United Kingdom view as to the countries properly covered by the preferences would depend in each particular case rather on the degree of anxiety of the country concerned to have most-favoured-nation guarantees from the United Kingdom and on the degree of her bargaining strength in relation to it. There may be considerable force in this view.

18. So far there have been no indications of a challenge from any quarter to the United Kingdom preferences to Eire (though of course the Republic of Ireland Act has not yet come into force). But some enquiries have been received from Siam, in the course of negotiations for the renewal and eventual revision of the 1937 treaty, about the United Kingdom preferences to Burma and Eire. It remains to be seen whether, in the light of the reply sent to these enquiries, Siam will be willing to continue to accept the preferences to these countries.

February, 1949