PRESENT:
UNITED KINGDOM	IRISH FREE STATE
The Rt. Hon. J.H. Thomas, M.P., Secretary of State for Dominion Affairs	Mr. Eamon de Valera, T.D., President of the Executive Council and Minister for External Affairs.
The Rt. Hon. Neville Chamberlain, M.P., Chancellor of the Exchequer.	Mr. Seán MacEntee, T.D., Minister for Finance.
The Rt. Hon. Viscount Hailsham, Secretary of State for War.	Mr. James Geoghegan, K.C., Minister for Finance.
The Rt. Hon. Sir Thomas Inskip, C.B.E., K.C., M.P., Attorney-General	Mr. Conor A. Maguire, K.C., T.D., Attorney-General.
THE FOLLOWING WERE ALSO PRESENT:
Sir Edward Harding, K.C.M.G., C.B., Permanent Under Secretary of State for Dominion Affairs.	Mr. J.W. Dulanty, High Commissioner in London.
Mr. S.D. Waley, M.C., Principal Assistant Secretary, Treasury.	Mr. J.J. McElligott, Secretary, Department of Finance.
	Mr. Seán Moynihan, Secretary of the Executive Council.
	Mr. J.P. Walshe, Secretary, Department of External Affairs.
	Mr. J. Leydon, Secretary, Department of Industry and Commerce.
Secretaries Mr. R.B. Howorth, C.B., C.M.G. Mr. J.E. Stephenson. Mr. H. Brittain. Mr. W.D. Wilkinson, D.S.O., M.C.

BASIS FOR LEGAL DISCUSSION

MR. THOMAS said that Sir Thomas Inskip had a point to raise arising out of the discussions at the morning meeting.

SIR THOMAS INSKIP said that he understood the position to be that they were dealing without prejudice with a number of claims put forward by the Irish Free State representatives. He had one question to ask which was - if the 1926 Agreement is binding, are not these claims thereby concluded?

MR. GEOGHEGAN could not say that every little matter of detail would be settled by the acceptance of the 1926 Agreement as binding; but generally speaking a vast difference would be made.

SIR THOMAS INSKIP suggested that there were only two ways by which this point could be settled, either by two reasonable people (say Mr. Geoghegan and himself) meeting to try to persuade one another, or by a third person as umpire. He understood that the ground relied upon to show that the Agreement was not binding was that it was suppressed and not brought to the knowledge of the Dáil.

The question which he wished to ask was - what rule of law was to be regarded as applicable in considering the matter? Was it the rule of international law, or was it the ordinary municipal law of contract? This was a question which would have to be answered whether the settlement was to be by discussion or by arbitration, whether by a foreign arbitrator or otherwise.

MR. DE VALERA said that for his part he would try to get behind law and appeal to fair play and natural justice.

MR. GEOGHEGAN said that he thought it could clearly be understood that he could not give a definite answer to which he would be committed in all respects. Speaking offhand, he thought that to some extent the municipal law of the Irish Free State would have to be considered - for example the Article of the Constitution as to the formalities required to be fulfilled before money leaves the Exchequer. There might also be points of international law. There might also be a question of a fundamental mistake which would render the Agreement void or at any rate voidable. Assuming that the arguments which the Irish Free State representatives had put forward in the morning were sound and that the Irish Free State negotiators of 1923, 1925 and 1926 had not adverted to those points there might be such a fundamental mistake as would amount to more than a mistake of law, and would render the whole Agreement invalid.

SIR THOMAS INSKIP suggested that it would not be possible to say that the Agreement was void merely because of certain rules made by municipal law.

MR. GEOGHEGAN referred to Article 61 of the Constitution and observed that this was not Irish Free State Law only; it was an Imperial Act, and must, therefore, be taken into consideration. He explained that he could not attempt to give an exhaustive answer to Sir Thomas Inskip's questions without further consideration.

SIR THOMAS INSKIP said that his object was only to suggest a point which would require further consideration.

LORD HAILSHAM pointed out that the reference to a fundamental mistake and to principles of equity again raised the question what system of law would be applied, as in different systems of law different rules existed with regard to the effect of error, and also different rules of equity.

COUNTERCLAIM IN RESPECT OF OVERTAXATION AND SHARE OF ASSETS

MR. THOMAS said that in turning to the consideration of Mr. de Valera's second document,¹ he would like to say that apart from the fact that the United Kingdom representatives had not had full time to examine the document, it did not appear to him that it contained any specific claims. He gathered that it was intended to convey that the Irish Free State representatives believed that under the respective Heads there was some money due to the Irish Free State. He gathered that in their view this was not separate from the general question of the financial relationship between the two countries.

MR. DE VALERA said that what he had had in mind was something analogous to a dissolution of partnership. The assets and liabilities of the former United Kingdom ought to be fairly divided. Under the first Head his claim was for over-taxation and also for a share of the assets. As regards the latter, a claim could be drawn up, but it could not be done in a very short time.

As regards over-taxation a number of Commissions had reported and estimates had been made which reached amounts inclusive of interest almost of ￿astronomical' size.

The actual amount without interest of the claim which he had in mind was £400,000,000. The claim was on the basis of over-taxation in violation of the Act of Union from the years 1801-1921. The basis of the claim was on the Reports of the Childers Commission and the Primrose Commission.² The figure given by the Childers Commission was two and three-quarter million pounds for the year 1893-4 (adjusted by Mr. Childers to two and one-quarter millions). He pointed out that the claim on this Head would far outweigh any claim based on the value of land handed over to tenants in the Irish Free State.

MR. THOMAS asked whether this issue was in the minds of those who agreed to the Treaty.

MR. DE VALERA replied that it was so clearly in their minds that definite provision was made for such a counter-claim by Article 5 of the Treaty.

In reply to a further question by Mr. Thomas about the Agreement of 1925, Mr. de Valera observed that the financial settlement then made had relation to the boundary, and was on the footing that an ultimate financial settlement was still to follow. This was the point which he suggested should be dealt with in any financial settlement now reached.

ABANDONMENT OF THE GOLD STANDARD

MR. DE VALERA said that this matter had been discussed at the Meeting that morning,³ and he agreed that the question did not arise under the Treaty.

MR. THOMAS said that it was not admitted that there had been any loss to the Free State, and even if there had been a loss the United Kingdom could not admit that any claim could be justified. The Gold Standard Act was domestic legislation which the United Kingdom was entitled to amend as found necessary.

ROAD FUND

MR. MacENTEE said that the Government of the Irish Free State claimed to be entitled to a share in the assets of the Road Fund of the United Kingdom.

MR. CHAMBERLAIN observed that this was a question which was the subject of discussion between the two Governments. There was a dispute as to the method of apportionment and he understood that the Irish Free State had agreed to refer the point to arbitration. Was it now suggested that the matter should be dealt with otherwise than by recourse to arbitration?

MR. DE VALERA said that the Irish Free State Government had included all the outstanding items in the Memorandum. They would be quite prepared to consider bringing this particular item into a comprehensive settlement.

COINAGE

MR. DE VALERA said that the Irish Free State claimed that the British Government should redeem all their Token Coinage rendered redundant in the Irish Free State by the issue of the national coinage there.

MR. CHAMBERLAIN pointed out that this matter had been settled by an agreement between the Irish Free State and the British Government by which the latter Government had agreed, as a generous and ex gratia concession, to redeem United Kingdom silver at the rate of £60,000 a year over a period of 10 years. MR. DE VALERA said that there was a sense of grievance in the Irish Free State with reference to this particular agreement.

MR. CHAMBERLAIN asked how the United Kingdom Government could satisfy themselves that if a new agreement was made now on the subject, some future Government in the Irish Free State would not come forward with the plea that there was a sense of grievance with regard to any new terms which might now be agreed.

MR. DE VALERA urged that agreements could always be varied by the parties to them if they were found to be unsatisfactory. If a new agreement was now reached, the United Kingdom would have the important safeguard that that agreement would have been ratified by the Parliament of the Irish Free State, and possibly also by the Irish people themselves.

MR. MacENTEE explained that from the Irish point of view the existing agreement was a very unsatisfactory one, and in reply to a question by LORD HAILSHAM he stated that the present claim was not merely for monies under the Coinage Agreement, but for something more. It was desired to re-open the Coinage Agreement itself.

CURRENCY

MR. MacENTEE said that this claim was for the full amount of the profits derived by the British Government between the 1st April, 1922, and the 9th September, 1928, inclusive from the circulation of British Treasury Notes in the Irish Free State and from the Treasury Notes or Certificates required to be held by the Irish Banks to cover their note circulation appertaining to the area of the Irish Free State.

MR. THOMAS suggested that the British Treasury Notes had been issued because the Irish Free State were unable to make their own issue, and that the arrangement had been a most convenient and economical one for the Irish Free State. He doubted whether anything would have been heard of the matter if there had been a loss on the circulation of the notes.

MR. MacENTEE urged that the arrangement had been mutually advantageous and convenient, both to the United Kingdom and the Irish Free State and that some share of the profits ought in equity to be paid over to the latter.

MR. CHAMBERLAIN pointed out that the claim was for the whole amount of the profits.

LORD HAILSHAM said that there were two separate claims, and asked with regard to the second claim what was the authority which, since the Treaty, had required the Irish Banks to cover their note circulation in the Irish Free State by Treasury Notes and Certificates.

MR. MacENTEE said that the authority in question was statutory. The Irish Free State Delegates asked that during the very difficult transitional period when this special and mutually advantageous arrangement was made the profits of the note issue should be divided, adding that he meant by this that the Irish Free State should be entitled to the profits on the notes which circulated in Ireland.

MR. THOMAS observed that in this matter the Irish Free State were claiming a financial benefit in respect of a transaction for which it took no responsibility whatever.

MR. DE VALERA thought that Mr. MacEntee's point about the transitional period was a strong one, and urged that a fair share of the profits of the note issue should be given to the Irish Free State.

NATIONAL TEACHERS: PENSION FUND DEFICIT

MR. THOMAS enquired whether this particular matter had been raised during the discussions 10 years ago.

MR. MacENTEE did not think that there had been any discussion, and he could recollect no agreement on the point.

MR. THOMAS pointed out that the assets of the Pension Fund were divided between the Irish Free State and Northern Ireland in 1922, and on the transfer of the Pension Fund the Irish Free State took over, not only the assets in question, but the corresponding liabilities, namely payments of future pensions to teachers.

MR. McELLIGOTT said that there was an actual deficit on the Fund when it was handed over in 1922. That deficit was, in the main, due to the great increase in Teachers' salaries which had taken place some years earlier and to the failure of the Treasury to increase their own or the teachers' contributions to the Fund.

MR. CHAMBERLAIN remarked that this claim appeared to be somewhat different from the other claims. The Irish Free State Delegates represented that when the Pension Fund was transferred in 1922, the amount of the deficit was not appreciated and that there was a moral claim on the United Kingdom to rectify the matter.

MR. MacENTEE agreed, and urged that the claim was greatly strengthened by the fact that the deficit was mainly due to action taken by the United Kingdom prior to the change of Government. MR. CHAMBERLAIN repeated that this seemed to be a moral and not a legal claim.

OTHER CLAIMS AND ITEMS

(a) National Health Insurance (Women's Equalisation) Fund. This item was not discussed.

(b) Receipts under Articles 296 and 297 of the Treaty of Versailles, and the corresponding Articles of the Treaty of St. Germain.

MR. MacENTEE said that the Free State's claim under this head was definitely related to specific Irish persons residing in the Irish Free State, and was on account of pre-war debts due on balance to Free State Nationals from Nationals of Germany and the other ex-enemy countries. There was also the Free State's claim to a share in the profits made by the Enemy Debts Clearing Office.

The total Free State claim under this head was between seven and eight thousand pounds.

(c) Quit Rents.

MR. MacENTEE explained that this claim related to Crown Lands and other sources of Crown revenue. The United Kingdom Government had, since 1896, been in process of realising these assets and reinvesting the capital. The proceeds had, in practice, almost all been reinvested in London. The Irish contention was that the proceeds in respect of Irish lands etc: should have been reinvested in Ireland; and that, wherever reinvested, they should have been earmarked as the property of the Crown of Ireland and handed over to the Free State at the time of the Treaty.

From 1923 onwards the Free State had been collecting Quit Rents for its own Exchequer.

The Free State claim which, as explained above, dated from 1896 and which amounted to some £750,000, had not yet been forwarded to the British Treasury. Its investigation had involved considerable research which had only just been completed.

(d) Dead Notes.

MR. MacENTEE explained that this claim related to the note issues of the various Irish Joint-Stock Banks. The dead notes were those which, when the Free State introduced their own currency notes in 1928, had been outstanding for so long that they might be regarded as lost. The proper course was for the banks to write off the notes and to pay their value to the two Governments. The Free State's notion was that some 80% of the amount recovered should come to them and the remaining 20% to the United Kingdom Exchequer.

The matter had been under discussion between the Free State Ministry of Finance and the British Treasury for some years, and proposals had been provisionally agreed which involved the writing off of the dead notes in three stages: at the first stage the two Treasuries might hope, between them, to recover some £400,000.

(e) The Irish Free State's share of the assets of the Post Office Savings Bank held against dormant accounts located in the Irish Free State.

MR. MacENTEE said that the Free State share of these assets amounted to some £19,000, and there had been correspondence on the matter with the British Treasury.

MR. WALEY said that the correspondence had taken place eight years ago.

SIR THOMAS INSKIP pointed out that, in any case, it would not be right to transfer these assets to the Free State without a guarantee from that Government that they would reimburse the dormant claimants if they came to life.

MR. McELLIGOTT agreed that the British Treasury had refused to transfer any part of the balances without the consent of the depositors or their legal representatives.

(f) Proposals for the settlement of future Estate Duty Cases on the basis of domicile instead of by way of double taxation relief.

MR. MacENTEE said that these were proposals for a revision of the arrangements regarding double taxation which had been in force between the United Kingdom and the Free State since 1926. The Free State estimate was that they were losing from £250,000 to £300,000 a year through the operation of this arrangement, and they wished for a more equitable settlement. His pre-decessor had written to Lord Snowden⁴ when he was Chancellor of the Exchequer, asking his consent to this very technical problem being examined afresh by the Revenue Officials on both sides. Lord Snowden had expressed sympathy, but had deferred the re-examination.

MR. CHAMBERLAIN said that, with his authority, the Board of Inland Revenue had written to the Revenue Commissioners in Dublin this year suggesting a discussion. The Revenue Commissioners had said they would consider the matter and communicate further with Somerset House. Nothing more had happened. It could not be said, therefore, that we were to blame for the delay.

MR. MacENTEE said that he did not suggest this.

FINANCIAL CLAIMS IN GENERAL

MR. THOMAS enquired whether the items which had been discussed that morning and that afternoon broadly represented the factors which in the Free State's view must be taken into account in the negotiations.

MR. DE VALERA said that they were a rough indication of the points which would have to be considered if there was to be a comprehensive financial settlement. Over and above these detailed points, however, he wished to call attention to the strong sense of grievance which existed in Ireland, where it was universally thought that they had not received fair treatment. The United Kingdom Government should remember that these sums were much more to Ireland than to them. A million pounds in the Free State Budget was equivalent to 66 million pounds in the United Kingdom budget.

MR. THOMAS enquired whether Mr. de Valera's attitude was based on (a) the ground that the Treaty did not sufficiently take into consideration the general financial factors which had been mentioned, or - (b) that the economic position of the Free State was now such that reconsideration was necessary.

MR. DE VALERA said that he would certainly base his claim on both arguments as regards financial agreements made since the Treaty of 1921. There was no doubt in his mind that the financial burden imposed upon the Free State was greater now than at the time of making these agreements, and if the matter were taken to arbitration and the case went against the Free State they would be now quite unable to pay without economic ruin.

In general the post-Treaty arrangements had worked out inequitably for the Free State. These later agreements on which the United Kingdom case rested had been made in such a way that in his view they were neither morally nor legally binding. That part of Article 5 of the Treaty,⁵ which gave the Free State power to make financial counter claims, had been completely ignored. MR. MAGUIRE said that the Free State's right to make counter-claims was implied in Article 10 of the Financial Settlement of 1926.

MR. DE VALERA, referring to Article 5 of the Treaty, said that he was informed that a set-off was, in law, a different matter from a counter-claim.

LORD HAILSHAM agreed.

MR. GEOGHEGAN wished to go further into the question of the exact meaning of Article 5 of the Treaty. In his view the words 'having regard to any just claims on the part of Ireland by way of set-off or counter-claim' by no means ruled out the possibility of the total of the Irish counter-claims being greatly in excess of the British claim.

LORD HAILSHAM said that he saw no reference in the Article to any British claim. What was referred to was the proportion of the public debt of the United Kingdom for which the Free State were to assume liability - an entirely different matter. It was ridiculous to suggest that the authors of the Article had it in mind that this could be exceeded by the Irish counter-claim, or that there could be any question of Great Britain's having to make an excess payment in cash.

MR. GEOGHEGAN said that this could not have been so, unless the figures of the over-taxation of Ireland as worked out by the Childers Commission had been forgotten.

LORD HAILSHAM said that he was quite clear that the purpose of the Article was the ascertainment of what Ireland was to pay. It was fundamental in the Article that there could be no question of Ireland's receiving money under it. MR. GEOGHEGAN again called attention to Article 10 of the Agreement of 1926, which, in his view, by reducing the amount of the Irish counter-claims, definitely recognised their existence.

LORD HAILSHAM drew the opposite inference from the Article which dealt with the assets of the Consolidated Fund of the United Kingdom and said that Ireland was to make no claims in respect of them.

MR. GEOGHEGAN asked, if it was necessary to go to Parliament in 1925 to ratify the agreement to waive the Free State liability for the public debt, why it was not also necessary to get the ratification of Parliament to Head No. 10 of the Ultimate Financial Settlement.

LORD HAILSHAM replied that the two matters were not on the same footing since it was obviously necessary that Parliament should be given an opportunity of expressing its views on a matter of a territorial boundary with all the controversial questions which that involved.

MR. CHAMBERLAIN observed that it had likewise not been regarded as necessary to go to Parliament in connection with the waiver under Head No. 6 of any claim to payment for British Government property handed over to the Free State Government.

MR. MacENTEE said that Head No. 10 dealt with a set-off within the meaning of Article 5 of the Treaty. If it was necessary to deal, in the Ultimate Financial Settlement, with such a set-off, why was it not necessary to deal also with a counter-claim? Under Article 5, the Irish Free State had two rights, a set-off and a counter-claim, and these rights were left to them even though the Treaty relieved them of their debt liability.

SIR THOMAS INSKIP thought that the claim to assets dealt with in Head No. 10 might equally well be regarded as a counter-claim rather than a set-off. Personally, he did not think that the drafters of the Treaty were thinking of two separate categories in 1921.

MR. MacENTEE thought that a counter-claim would relate, for example, to over-taxation, whereas a set-off would be of the nature of a share in certain assets.

MR. GEOGHEGAN asked whether some significance did not attach to the fact that the 1925 Agreement was signed by Lords Birkenhead and Brentford.⁶ Surely such men were fully alive to the importance of cancelling the Free State counter-claim if such had been intended by the Agreement, to which LORD HAILSHAM replied that, according to the construction of Article 5 which he had already described, there was no need for any special provision regarding counter-claims in the Boundary Agreement. At the same time he could understand that Ministers in 1926 felt that, in the Ultimate Financial Settlement, it should be made doubly sure that all counter-claims were regarded as having been waived.

MR. GEOGHEGAN asked whether Lord Hailsham would agree that his (Lord Hailsham's) suggestion was that Head No. 10 had been introduced into the Ultimate Financial Settlement simply for greater caution, and LORD HAILSHAM replied that he did so agree.

MR. THOMAS said that the Irish Free State Delegation would obviously not expect a full answer that afternoon to the second document which had only just been received.⁷ Such comments as the British Delegates had made had been rather in the form of inquiries. They would give a considered answer to the document the next morning, although they could not of course undertake that such an answer would be acceptable to the Irish Free State Delegation.

Both sides, approaching the question in all sincerity and honesty, might draw different conclusions from the same sets of facts. It was difficult for either of them to make up their minds that their legal advisers were wrong; but, even when political aspects were considered, the British delegates found themselves unable to accept the contentions of the Irish Free State on various points. They would argue indeed that not only had the Irish Free State got off very well under the Treaty Settlement, but that something might be regarded as still due to the British Government. Their views would, however, be fully made known the next day.

After some discussion, it was agreed -

That the Conference should meet again at 11.00 a.m. on Saturday morning, the 15th October, and that the British Government would send a written reply to the first Memorandum of the Irish Free State Government as early as possible before the time of the meeting.
The British Delegates would also make oral statements at the meeting, in reply to the second Free State Memorandum.

It was also agreed -

That a communiqué in the following terms should be issued to the Press by the British Government, and that the Free State Delegation should, if they thought fit, issue a communiqué in similar terms with any slight changes in phraseology that might be necessary:-

'The negotiations with the Irish Free State Delegation were begun at 2, Whitehall Gardens, S.W.1., at 10.30 a.m., this morning and continued this afternoon at 3 p.m. The Irish Free State Delegation was composed of:- The President of the Executive Council and Minister for External Affairs, Mr. de Valera; Minister for Finance, Mr. Seán MacEntee; Minister for Justice, Mr. James Geoghegan and the Attorney General, Mr. Conor A. Maguire.

The Government of the United Kingdom was represented by:-

The Secretary of State for Dominion Affairs, Mr. Thomas; The Chancellor of the Exchequer, Mr. Chamberlain; The Secretary of State for War, Lord Hailsham and the Attorney-General, Sir Thomas Inskip.

The discussion will be continued tomorrow.'

The meeting adjourned at 5.0 p.m., until 11.0 a.m. on Saturday, the 15th October.