File No. 893.77/1708
The Minister in China (
Reinsch) to
the Secretary of State
No. 2379
Peking,
December 3, 1918.
Sir: Supplementing my despatch No. 2142 of
June 29, 1918, on the subject of the protest of the British
Government against the proposed construction by an American
corporation of certain railways
[Page 206]
in the Provinces of Hupeh, Hunan and Chekiang,
I have the honor to enclose copies of the translation of the Chinese
text1 of a note addressed to the Chinese Ministry
for Foreign Affairs by the British Minister and of the reply of the
Ministry thereto.
The Legation fully agrees with the position taken by the Chinese
Government in this matter, both as regards the claim that the line
contemplated between Hangchow and Wenchow cannot be considered as a
branch of the British railway connecting Shanghai. Hangchow and
Ningpo, and as regards the second claim of the Chinese Government
that the letter from the Viceroy of Hukuang can properly be
considered to have been merely an addendum to the main agreement to
which the letter refers, and hence has now no force by the
termination of the agreement itself.
I have [etc.]
[Enclosure 1—Translation]
The British Minister (
Jordan) to the Chinese Minister for Foreign Affairs (
Lu Cheng-hsiang)
Excellency: I have the honour to
acknowledge the receipt of your note of June 21 on the subject
of the loan contract for the construction of railways, entered
into between the Chinese Government and the American firm known
as the American International Corporation.
I cannot but express my surprise that, after over a year of
deliberation, in the course of which a settlement was arrived at
with regard to the former rights appertaining to British
merchants, on the strength of the arguments advanced by the
Ministry of Communications, thus casually annul those
rights.
With regard to the question of a railway line from Wenchow to
Hangchow, it is the same sort of argument to say that such a
railway would constitute a branch of the
Shanghai-Hangchow-Ningpo Railway as to say that it would not be
a branch line. As the agreement was entered into by two parties,
one of the parties cannot independently decide such a question,
as to whether such a railway would or would not be a branch
line, and on the strength of its own ex
parte decision grant the right to build such a road to
a third party.
As to your statement that the force of the note from the former
Viceroy of Hukuang to the British Consul General at Hankow, of
September 9, 1909 [1905]2 was limited to the period during which the
loan agreement with the Hongkong Government had force, I cannot
admit that you have shown proof of this. Neither the note in
question nor the loan agreement contain phraseology that would
support the contention of the Ministry of Communications. Should
you desire further proof of the entire lack of foundation for
the contention of that Ministry, I would refer to the
correspondence which took place in October and December 1916,
between this Legation and your Ministry on the occasion of the
repayment of the capital and interest on the loan in question,
with regard to the question of the cancellation of the documents
involved. From that correspondence you will see the
circumstances surrounding the urgent request of the Ministry of
Communications for the return of the agreement papers. It seems
hardly believable that if the note from the Viceroy became of no
effect equally with the agreement itself, the Ministry of
Communications would have neglected to ask for the return of the
note when the agreement was returned. In short, the repayment of
the loan and the validity of the Viceroy’s note have absolutely
no relationship.
I therefore have the honour to inform you that my Government
wishes to enquire with regard to these undertakings whereby the
Chinese Government
[Page 207]
turns over to others rights for the construction of railways in
the three Provinces of Chekiang, Hupeh and Hunan which belong to
British financial interests.
A necessary despatch, etc.
[File copy not signed]
[Enclosure 1—British official
text]
Sir: I have the honour to acknowledge
the receipt of your excellency’s note of the 21st ultimo on the
subject of the railway loan agreements concluded with the
American firm of Messrs. Siems, Carey & Co. and to express
my surprise that, after a year’s consideration of this question,
the Chinese Government should have come to the conclusion that
rights formally granted to British subjects can be arbitrarily
extinguished by means of arguments such as those now put forward
by the Ministry of Communications.
As regards the line from Hangchow to Wenchow this may just as
reasonably be held to be a branch of the
Shanghai-Hangchow-Ningpo line as not and it is certainly not
open to one party to an agreement to decide arbitrarily and
without any reference to the other party that it is not a branch
and proceed to give the right of construction to a third
party.
The statement that the note addressed by the Viceroy of Hukuang
on the 9th September 1905, to His Majesty’s consul general at
Hankow was only effective during the currency of the Hongkong
Government loan agreement is even more unfounded. There is not a
word either in the note or in the loan agreement to support the
statement of the Ministry of Communications, and if further
proof is necessary of complete inaccuracy of their contention, I
have only to invite your excellency’s attention to the
correspondence which took place between the Wai-chiao Pu and
this Legation, between October and December 1915, on the subject
of the cancellation of the documents relating to this loan on
payment of the final instalment thereof.
In view of the insistence shown by the Ministry of Communications
at that time, it is inconceivable that they should have omitted
to ask for the return of the Viceroy’s note if they really
believed it to have become of no effect with the extinguishment
of the loan agreement.
In short, the validity of the note in question is in no way
affected by the repayment of the loan, and I accordingly have
the honour to inform your excellency that His Majesty’s
Government maintain their protest against the action of the
Chinese Government in granting to other parties rights of
railway construction in the provinces of Chekiang, Hupeh, and
Hunan, already reserved for British enterprise.
I avail [etc.]
[Enclosure 2—Translation]
The Chinese Minister for Foreign Affairs
(
Lu Cheng-hsiang) to the British Minister (
Jordan)
Excellency: I have the honor to
acknowledge the receipt of your note of July 16 on the subject
of the loan contract for the construction of railways entered
into between the Chinese Government and the American firm known
as the American International Corporation. Your note was
referred to the Ministry of Communications asking that it
carefully investigate the matter and reply. That Ministry has
now replied as follows:
Sir: Your note “Ho” No. 451
has been duly received and carefully perused. This
Ministry has to observe that the Wenchow-Hangchow
Railway, which has a length of four or five hundred
Chinese miles and passes through an important region of
China, cannot but be recognized as a main-line railway.
The British Minister, however, states in his note that
inasmuch as the contract has been entered into by two
parties, one party cannot arbitrarily decide that the
railway is not a branch-line railway. We would observe
that the agreement in question does not state that the
determination of railway routes must be based on the
agreement of both parties. There is no such stipulation.
This Ministry has complete authority in matters
connected with communications.
[Page 208]
The note of the former Viceroy of Hupeh to the British
Consul General at Hankow written in 1905 states:
I regard the method suggested through your office
for the making of a loan for the purpose of
redeeming the Canton-Hankow Railway to be just. In
future, if China herself does not provide funds
for the construction of such a railway, should a
loan be needed from outside sources, application
therefor shall be first made to Great Britain.
It is evident that the privilege granted by this note
arose out of and concerned the Canton-Hankow Railway
loan. The agreement and the note were signed on the same
day. Hence this Ministry regards the note in question as
a supplementary document attached to the agreement.
There is sufficient ground for such a position.
Now, at the time of making the Hukuang Railway loan the
United States, France and Germany were included as
parties to the agreement. At that time Great Britain
offered no objection to their inclusion, thus admitting
that the note referred to above was null and void. As to
the query of the British Minister as to why, in the
fourth year of the Republic (1915) when the capital and
interest of the original loan were returned, and when
the Ministry of Communications asked for the return of
the loan agreement so that it might be canceled, it did
not ask for the return of the note under discussion,
this Ministry recalls that the British Minister, with
reference to the matter of the request of the Ministry
for the return of the agreement, remarked, in a note
dated December 20, 1915, that “Any contract naturally
became null and void at the end of the period of
validity.” It is apparent from this that the British
Minister did not consider our action at the time in
requesting the return and cancelation of the agreement
as a matter of any importance. Hence, whether we fail to
ask for the cancelation of the note in question (which
is nothing more than a supplementary article of the
agreement) or not, ought not to give rise to any
question whatsoever.
The opinion of this Ministry being as indicated above, it
is requested that your excellency reply in this sense to
the British Minister.
The above note from the Ministry of Communications is brought to
your excellency’s esteemed attention.1
A necessary despatch, etc.
[File copy not signed]
[Page 209]
[Enclosure 2—British official
translation]
Sir: I have the honour to acknowledge
receipt of your excellency’s note of the 16th July on the
subject of the railway loan agreements concluded between the
Chinese Government and the firm of Messrs. Siems, Carey &
Co.
Your excellency’s note was referred by this Ministry to the
Ministry of Communications, which has now replied in the
following terms:
The Hangchow-Wenchow line is 400 or 500 li in length, and
lies in an important district of China. In view of these
facts this Ministry cannot do otherwise than regard it
as a main line. As regards the statement in the British
Minister’s note, that it is not open to one party to an
agreement to decide arbitrarily that a line is not a
branch, it is to be noted that the agreement contains no
stipulation that the consent of both parties is required
to decisions regarding routes, and, in the absence of
any such provision, this Ministry, being charged with
the control of the communications of the country, has
the full right of making such decisions.
With regard to the note addressed by the former Viceroy
of Wuchang to the British consul general at Hankow in
1905, that note contains the following words: “In view
of your services in obtaining for me the present loan
for the resumption of the Canton-Hankow Railway, and the
very fair terms on which it has been arranged … as
regards funds for the future construction of the
Canton-Hankow Railway, in case it is necessary to borrow
abroad in addition to the amount China may herself
provide, the first application shall be made to
England.” From this it is clear that rights conferred
arose out of the Hongkong Government loan agreement; the
note was, moreover, signed on the same day as the
agreement. Accordingly, the view always hitherto held by
this office, that the note was an annex to the
agreement, is entirely reasonable. Again, on the
occasion of the negotiation of the
Canton-Hankow-Szechuan Railway loan, the United States
of America, France, and Germany all took part, but Great
Britain raised no protest, whence it may be inferred
that she tacitly admitted that the note had ceased to be
effective.
The British Minister observes also that at the time of
the repayment of the loan in 1915, this office show[ed]
insistence in demanding the return of the loan agreement
for cancellation; and he asks how it is possible that we
failed to ask for the return of the note. It may,
however, further be recalled that, in connection with
this Ministry’s demand for the return of the agreement,
Sir John Jordan addressed a note to the Wai-chiao Pu on
the 20th December 1915, containing the remark that “when
an agreement terminates, it is ipso
facto cancelled.” This shows that he attached
no significance to the omission. The point as to whether
or not this Ministry omitted to ask for the cancellation
of the note (which was nothing more than an annex to the
agreement) should not, however, give rise to any legal
question whatever.
I have the honour to reply accordingly to your excellency’s
note.
I avail [etc.]
[File copy not signed]
