The Secretary, Prime Minister's Department, has forwarded me the following memorandum for advice:

Subsequent to the receipt of Mr Mackenzie's report on Mr Alfred Kempfs claim to gold mining concessions in the Waria River district in New Guinea, forwarded with your [memorandum] of 7 July 1921, the French Ambassador in London was informed that the Commonwealth Government was ready to recognise Kempfs claims to the limited extent recommended by Mr Mackenzie. I have not an official copy of the communication made to the French Ambassador, but the attached copy, received from Kempfs solicitors, Messrs Blake & Riggall, is probably correct.

This copy was received from Messrs Blake & Riggall on 23 May, and they inquired, in view of the issue of the Mining Ordinance of New Guinea and of the special circumstances surrounding Mr Kempfs concession, what steps he should now take to secure his claims and to obtain valid titles in respect thereof.

They were informed in reply on 30 May that Mining Regulations were being drafted and that until the Ordinance and Regulations were brought into force there were no formalities to be complied with by Mr Kempf.

On 10 July I received information that a claim had been made to the Expropriation Board at Rabaul for recognition of rights under an agreement made between the German Government and H.R. Wahlen on 11-13 July 1914, of which I had received a copy subsequent to the reference of Kempfs matter to you in 1921, but which until receipt of this information, had been regarded as having lapsed. I enclose a copy of a translation of this agreement.

The agreement, it will be seen, gives to a syndicate represented by Wahlen the right 'to open up the Waria district and conduct mining operations in search of free minerals, excepting where third person or persons may have previously obtained such rights and privileges'.

The agreement contains a provision for cancellation by the Government if work under it were not commenced within twelve months. It is believed that no work was done under it; but no action to cancel the agreement was taken by the Military Administration.

Wahlen's concession comes within the statement of policy contained in the Secretary of State's telegram of 1 June 1921 (see your [memorandum] of 14 July 1921); and no work having been done under it nor any substantial expenditure incurred in connection with it, so far as is known, the Commonwealth Government might, in accordance with that policy, refuse to recognise it.

Administratively this would be the simplest course to follow; and I shall be glad to be advised whether you consider the Government, in view of a possible claim by Germany, might safely do so.

If you consider that the Government cannot safely refuse to recognise the concession, it will presumably be necessary to offer the concession for sale, if only for the purpose of obtaining some basis for a valuation.

In that case, I should be glad to be advised as to what steps can be taken to ascertain how Kempfs claims and the Wahlen concession affect one another, for this would be necessary both to enable the Government to decide what recognition can now be given to Kempfs claims and also what rights are to be offered if Wahlen's concession is to be put up for sale.

The Waria River cannot be opened to prospectors until a decision of this matter is reached; and as there is likely to be grave public dissatisfaction if prospectors are kept out of a district of which high expectations are entertained, it is urgent that an early decision be made. I shall therefore be glad to have your opinion at your earliest convenience.

The Wahlen concession is contained in an agreement executed on the one part on behalf of the German Government. The Governor of New Guinea gave to the syndicate represented by Wahlen exclusive permission to open up the Waria district and conduct mining operations in search of free minerals.

The syndicate agreed to commence prospecting on the spot within twelve months after the drawing up of the agreement. The agreement was liable to cancellation in the event of prospecting not being duly commenced or not being continued for six consecutive months without the Governor's permission.

So far as the Treaty of Versailles is concerned, I find no express provision to the effect that concessions, or contracts granting concessions, given or entered into by Germany in respect of territory ceded under the Treaty are binding upon the governing authority assuming control of that territory. The concessions referred to in clause 2 of the Annex to Section V are part of the exceptions to the rules laid down relating to contracts between enemies. The contract under consideration is not between enemies within the meaning of clause 1 of that Annex.

Article 260 authorises the Reparation Commission to demand inter alia that any concession in a mandated territory shall be put in the possession of the German Government, which in turn shall be required to transfer the concession to the Reparation Commission. As the powers of the Commission under Article 260 must be exercised before the expiration of twelve months from the date of the coming into force of the Treaty and as they were not so exercised as regards this concession, Article 260 has no application thereto.

I know of no settled rule of international law to the effect that a government to which the sovereignty over any territory passes by conquest annexation or cession assumes responsibility for the carrying out of contracts entered into by the preceding government. On the contrary there are cases in which the decision has been in the opposite direction (see report of Magoon J. on claim by the Manila Railway Company to recognition by the United States Government of a concession granted by the Spanish Government in the Island of Luzon⁽¹⁾).

In the judgment of the Court in West Rand Central Gold Mining Co. v. Rex [1905] 2 K.B. 391 at p. 411 it is stated that the obligations of conquering states with regard to private property of private individuals, particularly land as to which the title had already been perfected before the conquest or annexation, are altogether different from the obligations which arise in respect of personal rights by contract.

In a letter of 20 June 1922, the Attorney for Wahlen states the reasons for 'the work in the District, the concession has been granted for, not having been started yet'.

In a minute by Mr Piesse of 28 July 1922, reference is made to the work of T.W. Daly on behalf of the Waria River syndicate (assumed to be identical with Wahlen's syndicate) and it is stated inter alia that the prospecting work was stopped eight or ten months before the war. These circumstances go to show that the conditions of the agreement had not been observed.

No grant of mining rights in respect of the area referred to in the agreement was made.

In all the circumstances, I am of opinion that the syndicate has no vested rights under the agreement such as are by international usage required to be recognised by the present Government of New Guinea. There is at most a personal obligation under the agreement upon the German Government. Such obligation does not bind the Commonwealth Government.

From the Secretary of State's cablegram of 1 June 1921, it will be seen that His Majesty's Government reserves the right to decline to recognise any concession such as that under consideration and that in case of such non-recognition no claim for compensation will be admitted as of right.

I advise that the Commonwealth decline to recognise this concession and in that case no action is required under Article 297.

In view of the foregoing, the questions submitted regarding the claims of A. Kempf do not require answering.

[Vol. 19, p. 23]

(1) Reference to report not found