Cablegram from Seán T. O'Ceallaigh to Eamon de Valera (Dublin)
(Copy)

Following for President from Vice-President begins:- Further to our telephone conversation, following is British proposal as set out in letter to me. At closing of general session Bennett supported by Bruce and Havenga offer that each would nominate their Chief Justice or other judges of their Supreme Court to examine validity of financial agreements which are cause of present dispute and make a report therein to both Governments which either could accept or not, it being understood pending receipt of their recommendations we should revert to status quo as it existed before recent Tariff legislation on both sides. We have proposed alteration in terms of reference quote to examine financial agreements existing between us which are cause of present dispute, having regard to terms of Treaty and to all relevant circumstances end quote. We believe that we could get this alteration accepted by British. We believe also that a more satisfactory settlement is possible at Ottawa than later in London. British obviously wish to be able to announce settlement for close of Conference. If Conference should close without announcement of settlement British attitude may change. Thomas is annoyed at proposals being submitted in London and might wreck them for motive of personal vanity. Proposals should, therefore, be submitted here. In any case it is essential that we should know what your proposals are. Vague [word indecipherable]² have been given us by British and our lack of information is embarrassing us. Thomas stated that he desired an excuse to end Tariff war but he stresses difficulty of obtaining his colleagues' agreement to any proposals acceptable to us. Our information is that Hailsham and Cunliffe Lister most hostile Baldwin on the contrary friendly. On proposed Committee of Enquiry Thomas stated if findings were against British payment would end, if against us then we could raise the question of inability as Germany did and ask Britain to reopen agreement. We recommend proposal should not be flatly turned down. Remember the importance of Preferential Trade Agreements with British which will be completed here. The other members of the Commonwealth are diffident in making definite agreements with us while deadlock continues through fear of offending Britain. Wire definite decision but we stress the importance of not terminating negotiations in progress. We fear formal exclusion of Irish Free State from Trade Agreements now certain to be concluded here and resulting complete failure of Conference from our point of view may have double effect of creating bad atmosphere of further negotiations and stiffening British attitude. British proposal is not arbitration and is quite clearly intended to provide breathing space for resumption of direct negotiations. Thomas said in effect that he did not give a damn if Committee never reported as settlement could be meantime negotiated.