be kept upon a strictly "noncommitment" basis for the purpose of avoiding the danger mentioned in paragraph (3) of the Department's 12, March 14, 4 p. m., to Nanking.

(3) Lawyers and interpreters. It is agreed by the Department that there should be a provision entitling Americans to employ any foreign attorney, irrespective of nationality, whom the Chinese Government has recognized for practice before the Chinese courts.

(4) Special Chambers. For the convenience of the large number of foreigners, including Americans, who reside in Peiping, the Department would like to see this city added to the list of places where Special Chambers are to be established.

The Department would not object to this article being placed in an annex to the treaty rather than in the treaty itself.

(5) Taxation. The Department perceives no objection to having the provisions of the October 28 proposals, sections (e) and (f) of article 3 placed in either the preamble or an annex, or an exchange of notes, or the treaty article enumerating the rights of Americans in parts of China where there is a complete surrender of extraterritorial rights. In case of continued objection in this connection by the Chinese, because of such a provision being derogatory to the dignity of their courts, the wording might be altered to require "the Government of China" instead of "the Chinese courts" rendering protection and security to American persons and property in China, this being the customary treaty form of this provision.

(6) Arbitration. The Department concurs in the view that the ambiguous phrase "in accordance with Chinese law" should be clarified. It is believed also that the principle of rejecting awards because they are contrary to the general principles of law may be interpreted so broadly as to defeat the purpose of having this clause included in the treaty. The Department suggests as a possible solution to these two questions that the phrase "in accordance with Chinese law" be deleted and that the last part of this article be worded as follows: "unless the award is contrary to public order or good morals or is based on grounds which are contrary to specific provisions of Chinese law"."

(7) Rights in immovable property and expropriation. As to the expropriation of property, it is the feeling of the Department that agreement is imperative upon some formula providing for compensation, no matter whether Chinese law so provides or not in the case of Chinese citizens. The Department believes that, in view of the complex conditions in China, the plea of "grave emergencies" will occur with irritating frequency if there is no provision for payment of compensation. By reference to the Extraterritoriality Commission's 1926 report, paragraph 106, it will be seen that in 1915 China had a law which provided for compensation, even if this law was not being en

587122-46-VOL. III-56

forced. The Commission, moreover, recommended, inter alia, that China promulgate a land expropriation law. After a hasty study of United States treaty relations, the Department believes American citizens to be entitled everywhere to compensation upon the expropriation of their property by foreign governments, whether resulting from laws in force in foreign countries with which the United States has treaties. or resulting from specific treaty provision. As to the latter, since 1920 the United States has negotiated with Germany, Estonia, Hungary, Honduras, Latvia, and El Salvador treaties containing the following provision: "their property shall not be taken without due process of law and without payment of just compensation". The provisions of article 14 of the United States Constitution assure Chinese in the United States that they cannot be deprived of property without due process of law, and this includes compensation.

The Department believes, regarding the provision which invalidates rights in immovable property on "legal grounds as a result of a decision rendered by a modern Chinese court", that it would be desirable if possible to add a provision in the following sense: "in reaching their decisions these courts shall take into consideration the treaty provisions and laws, customs and practices in various parts of China which existed at the time when the property rights were acquired". (8) Immunities of premises, etc. Regarding the form of warrants for arrest or search, for Federal practice in the United States, see "the code of laws of the United States of America in force December 6, 1926" (a copy of which is known to be at the Shanghai Consulate General and another is believed to be at Nanking), paragraph 602, page 507, and paragraph 616, page 508.

(9) Treatment of companies. Although there prevails in the United States among the States thereof the general rule that by "the law of comity among nations, a corporation created by one sovereign is permitted to make contracts in another and to sue and be sued in its courts", alien corporations must comply with both Federal and state laws, the latter varying in a number of respects, before these corporations have the right to carry on business with the same rights and privileges as domestic corporations. No objection is seen by the Department to the text of this article as telegraphed, except that as a result of the phrase "subject to reciprocity of treatment for Chinese companies", some restrictions respecting matters in which the United States may be unable, under existing or future laws, to extend reciprocal treatment, may be imposed upon American companies which do business in China. See Moore's Digest, volume 4, page 19.

(10) Pending cases. A provision is noted in the second sentence of the telegraphed text that pending cases "shall continue until judgment is pronounced", while there is a provision in the third sentence

that such cases "shall be finally disposed of and wound up within a period of 6 months". It would seem that these two provisions may be subjected to conflicting interpretations, and the Department feels there should be a deletion of the provision in the third sentence requiring that all pending cases be wound up within a specified time. Unnecessary hardships might be imposed upon litigants by a time limit to wind up pending cases, especially by a short period of 6 months. Should the Chinese Government entertain a fear lest the docket be "padded", it might be given an assurance on this point through agreement for the submission of a list of pending cases at the time jurisdiction is transferred.

(11) Nondiscriminatory treatment. For the purpose of the SinoAmerican negotiations, it is, in the Department's opinion, practically imperative to avoid using in this article the phrase "subject to reciprocity of treatment for China" because it will be impossible, on account of some American state laws, to extend reciprocal treatment regarding rights in immovable property and perhaps regarding other matters, one such having been mentioned above in connection with the rights and privileges of alien juridical persons. Although the British cannot well be asked to eliminate this phrase, if the British Government is in fact prepared to extend reciprocity of treatment in all the matters the proposed treaty covers, the adoption in the Sino-British text of this phrase will make our negotiations more difficult. The phraseology appearing in the American draft of January 19 is preferred by the Department. Should the Chinese insist upon reciprocity of treatment, this point probably will require some very delicate discussion pending agreement upon a satisfactory formula.

CARR

793.003/569a: Telegram

The Acting Secretary of State to the Consul General at Nanking

(Peck)

[Paraphrase]

16. For Minister Johnson:

80

WASHINGTON, March 24, 1931-3 p. m.

(1) The British Foreign Office has informed the Department, through the British Embassy here and the American Embassy in London, of the progress of the British negotiations. Among other things, they say: "The first concession which Lampson made was in fact not evocation but co-judges. He had contemplated giving up co-judges last, but seems to have been influenced by the wording of the latest

American draft (i. e., the draft of January 19)." Furthermore: "Lampson expects that the negotiations will shortly reach a stage when, all other points having been disposed of, he will be in a position to offer to surrender criminal jurisdiction in return for the exclusion of certain areas." Likewise: "The position reached in our negotiations appears to render unnecessary the adoption of the procedure proposed by the State Department for dissolving a possible deadlock.” The Department feels that the Foreign Office is optimistic.

(2) On March 23 the Chinese Minister called at the Department and asked for a reply to his March 14 memorandum. (This memorandum was telegraphed you in the Department's 14, March 16, 5 p. m.) Dr. Wu was referred to the March 11 statement by the Department to him and was informed that the Department sees no process by which the three points which the Chinese statement of February 20 raised can be discussed without antecedent and simultaneous discussion of other points; that the Department has felt and still feels it to be desirable, in view of the limitations apparently placed by the Chinese Government upon the Minister's authority to discuss these points, for the subject to be discussed at Nanking by you with the Chinese Minister for Foreign Affairs; and that the Department perceives no reason for Dr. C. T. Wang's not carrying on the discussion with you concurrently with those discussions Wang has with the representatives of other powers.

The Chinese Minister stated that Dr. Wang had laid before the British Minister the same three vital points which had been presented to the Department and that, when Sir Miles Lampson said he was unable to concede these points, an arrangement had been made to begin discussion with Hsu Mo of other points, without committing the Foreign Minister. Wu said Wang could not make any concession as to the vital points.

The Minister was informed that, since the Chinese Foreign Office was discussing other points, the Department's opinion was confirmed that to proceed as suggested by us at Nanking was more practicable for the present than to indulge here in further discussion until such time as the revision of the Minister's instructions would make possible such negotiation in Washington as is apparently proceeding in Nanking. Wu was told the desire of the Department is to reach an agreement which is mutually satisfactory, and the Department has no preference regarding the place to conclude the negotiations and to sign the treaty. He was told also that the Department's view is that matters would be expedited by Dr. Wang's discussing with you just the kind of points he is discussing with the British Minister. Wu said he would "think the matter over".

Then he inquired whether we would be ready to concede the three vital points in the event a satisfactory agreement on safeguards had been reached. The reply was that this Government would be glad to have any balanced project discussed, but the three vital points could be discussed only concurrently with or following discussion of the other points.

(3) We have the impression that the effort of the Chinese is in the direction of evoking a disclosure of the concessions which the Department may be prepared to make, with no commitment on the part of the Chinese to anything other than what they proposed last December. You will perceive the Department desires (a) to avoid being committed in any one-sided fashion, (b) to give the Chinese no occasion or opportunity to declare the negotiations deadlocked, and (c) to inject no factor which might involve the British negotiations in difficulty. (4) In the light of the foregoing, you should confer with the Foreign Minister and continue your cooperation with the British Minister.

CARR

793.003/576: Telegram

The Minister in China (Johnson) to the Secretary of State

[Paraphrase]

NANKING, March 27, 1931-11 a. m.

[Received 11:25 a. m.]

Department's 16, March 24, 3 p. m., to Nanking.

(1) The British Minister returned on March 23 to Nanking and on March 25 resumed negotiations with Dr. C. T. Wang concerning guarantees. At that time Lampson presented redrafts of certain articles previously discussed and also a redraft of the first part of article 1 on the transfer of jurisdiction. Lampson proposed also that by an unpublished, informal exchange of notes regarding the registration of lawyers the possession of diplomas from Chinese law schools or the qualifying through Chinese legal examinations should not be required of British lawyers. On March 26 Teichman conferred further with Hsu Mo as to all of the legal guarantees. Copies of the various discussed articles have been promised me as soon as they have been confirmed. I understand that, among the accomplished things, there has been dropped as of doubtful value the final sentence of the draft on "rights in immovable property and expropriation", namely, "the use of the property of British subjects shall not be denied to them even temporarily". As it stood, this clause seemed to legalize a system of seizing foreign property temporarily with or without compensation,