Mr. Buck to Mr. Hay.

No. 526.]

Sir: Referring to my dispatches of December 24 last, of April 7 last, and of July 6 last, Nos. 392, 417, and 450 respectively, concerning the various questions which have arisen as to registration and taxation of property held under leases in perpetuity in the former foreign settlements by American citizens in Japan, as also of the buildings erected thereon, I have the honor to invite attention to imperial ordinance No. 458, accompanying my dispatch No. 392, and especially to that paragraph of Article I which reads as follows:

If a right in an immovable other than that mentioned under paragraph 1, which might be set up against third persons, has been duly acquired by an alien or a foreign juridical person before the time fixed in imperial ordinance No. 251 of the thirty-second year of Meiji (viz, the time of the operation of the new treaties), but has not been registered before that time, it can not be set up against third persons unless it is registered before the 31st of December, 1900.

Also to the inclosed copy of a note from the Japanese minister for foreign affairs, of date the 10th instant, addressed to the British minister [Page 340]in answer to formal representations made by the British chargé d’affaires ad interim, and furnished me as a reply also to similar representations informally made by me upon the same subject.

In view of my interpretation of the above-transcribed paragraph, and in view of the fact that doubt on the part of the property holders whether they should be required to pay the 2½ per cent registration fee on registration of buildings, few if any registrations of buildings were being made; and the time being short in which compliance with the ordinance respecting registration would afford protection to property rights, I was on the point, October 1, of preparing a note to the minister for foreign affairs asking an extension of time for registration beyond December 31 of this year, when, incidentally discussing the subject at the foreign office, I was informed than an extension of six months was to be granted in which to perfect registration. Hence I made no formal request.

It now appears from the answer of the minister for foreign affairs that it has been discovered that no right of registration is to be lost and no property right is to be jeopardized in consequence of failure to register property on or before the 31st instant, and that no necessity exists for the extension of the time for registration as provided in ordinance No. 458. The reasoning seems to be somewhat involved and I am not entirely convinced that the conclusion reached is not a questionable one. While the Japanese Government’s own interpretation of their ordinances is supposed to govern, it is difficult in this instance to reconcile the text of the paragraph of ordinance 458 in question with the interpretation given by the minister for foreign affairs, and it remains to be seen whether the Japanese courts will give effect to the views of the Japanese Government as expressed in his excellency’s note.

In this connection I am glad to be able to say that I am informed at the foreign office that a bill will be introduced and doubtless passed by the diet very soon to be convened providing for the registration of perpetual leases as such, leaving out the word “superficies,” as now provided for by ordinance No. 458, and thus eliminating any question as to change of form or character of leases in perpetuity by registration.

This, I understand, could have been done by ordinance No. 458, and would now be done by ordinance but for the reason that there is no authority to change a law by ordinance. Perpetual leases not being known to the law, the ordinance could only couple the term “superficies “with “perpetual lease,” the latter in brackets, which at the time was supposed to give recognition of such leases and protection of all rights otherwise guaranteed by treaty, but which has not proved satisfactory to leaseholders.

I understand that the proposed bill is also to provide for registration of buildings constructed prior to the date of the operation of the new treaties on property held under perpetual leases and not since transferred without payment of the 2½ per cent on value now chargeable under the registration law. This will afford great relief, as heretofore registration of such leases at the consulate made no reference to buildings, since under foreign jurisdiction the buildings were supposed to be included with the land in any transfer without special mention, while by Japanese law they are not so included as a matter of course, and buildings must be registered separately.

I have, etc.,

A. E. Buck.
[Page 341]
[Inclosure.—Translation.]

Mr. Takaaki, Japanese minister for foreign affairs, to Sir Claude Macdonald, British minister.

No. 40.]

Sir: I have the honor to acknowledge the receipt of the note No. 52 of October 4 of this year, addressed by Mr. Whitehead, Her Majesty’s chargé d’affaires, to my predecessor, Viscount Aoki, in which he states that the imperial ordinance No. 458 of 1899 provides in the first clause of Article I that the transfer of a perpetual lease established in the former foreign settlements may be set up against third persons by having the fact indorsed on the title deed by the chihō-chō, but that the last paragraph of the said article provides that “if a right in an immovable other than that mentioned under paragraph 1, which might be set up against third persons, has been duly acquired by an alien or a foreign juridical person before the time fixed in imperial ordinance No. 251 of the thirty-second year of Meiji (1899), but has not been registered before the said time, it can not be set up against third persons unless it is registered before the 31st of December, 1900.”

The British subjects who own perpetual leaseholds in the former foreign settlements, it appears, not only know that Her Majesty’s Government and other treaty powers have objections to the separation of land and houses as regards immovables therein, but as they would have to pay no small registration fee if they registered their houses separately from their lands, they have hitherto hesitated to obtain registration of the immovables owned by them within the settlements. Mr. Whitehead is therefore desirous that the Imperial Government should, if possible, until the question of perpetual leases is settled, extend the limit of time for registration, which is fixed by the above imperial ordinance as the 31st of December of this year.

The Imperial Government have given careful consideration to the question of whether or not they ought to extend the limit of time fixed by the above imperial ordinance, as requested by Mr. Whitehead, and they have unavoidably been compelled to come to the conclusion that there is no reason for extending it. I have accordingly the honor to inform you that their reasons are as follows:

The rights determined by the last clause of Article I of the said imperial ordinance, which are able to be set up against third persons if registration is effected by the 31st of December of this year, are special rights of priority pledges, mortgages, and leases, etc., established on the perpetual leases, as well as rights of ownership, special rights of priority, pledges, and leases, etc., of buildings such as were acquired by foreigners or foreign juridical persons prior to the date fixed by the imperial ordinance No. 251 of 1899—that is to say, the time of the coming into operation of the new treaties— and are limited to such as can be set up against third parties in accordance with the laws governing the act of establishment of the said rights. In other words, rights in immovables acquired by foreigners or foreign juridical persons prior to the coming into operation of the new treaties (with the exception of perpetual lease) which could be set up against third persons without being registered in accordance with the laws governing the act of their acquirement could up to the time of the operation of the treaties be set up against third persons without registration being necessary; yet, as from the time of the coming into operation of the treaties they came under the control of the laws of Japan, they could not, according to article 177 of the civil code, without the special regulations of this imperial ordinance, be set up against third persons unless registered on the day of the coming into operation of the treaties. (Translator’s note: Article 177 reads as follows: “Where an immovable is concerned the acquisition or loss or any change in the nature of a right in rem can not be set up against, a third person unless registration has taken place in accordance with the provisions of the law of registration.”) The last clause of Article I referred to therefore extended the limit of time during which the preferential order of rights in immovables duly acquired by foreigners or foreign juridical persons (with the exception of perpetual lease) prior to the operation of the new treaties should follow the order of the act of their establishment and not the order of registration till the 31st of December this year.

Such being the meaning of the last clause of Article I of that imperial ordinance, the limit of time for the registration of rights acquired by foreigners prior to the operation of the new treaties is not absolutely determined by the last day of this year, and rights in immovables acquired by foreigners prior to the operation of the new treaties may be registered at any time. But if they are registered in or after January next year the order of the preferential rights in them will follow the order of registration and not the order of the acts establishing them.

I am of opinion that, in deciding whether proper reasons exist for again extending the time during which preferential rights could be contended for according to the [Page 342]order of the act establishing them, and not according to the order of registration, it is necessary to examine the difference or similarity of the protection which they enjoy by a comparison of the rights established prior to the operation of the treaties and the rights subsequently established.

It goes without saying that persons who have acquired, subsequent to the operation of the new treaties, rights, such as mortgages established upon perpetual leases within the former foreign settlements, as well as ownership of buildings erected on such properties, and other rights in the buildings, such as mortgages, leases, etc., can not set them up against third persons without registering them. That is, these rights from the first are in order preferential according to the order of registration, and do not follow the order of their establishment; and leaving for the time out of the question the propriety or otherwise of the Imperial Government having applied the term “superficies” to perpetual leases within the foreign settlements, and of the contention of the Imperial Government that the guaranty in the fourth clause of Article XVIII of the Anglo-Japanese treaty simply refers to land on perpetual lease, and does not extend to houses erected thereon, without reference to the propriety or otherwise of these things, the acquirement or loss and change in the nature of rights in rem with regard to immovables after the operation of the treaties, with the exception of the case of the transfer of perpetual leases, can for the first time be set up against third parties by registration; and the Imperial Government has so far neither determined nor seen reason to determine special regulations providing that the order of preference with regard to these rights should follow the order of establishment and not the order of registration.

In a word, if we compare the rights in immovables acquired prior to the operation of the new treaties and the rights subsequently acquired, and the different degree of protection they enjoy, we see that the former have the privilege up till the 31st day of December this year of contending for preference in accordance with the order of their establishment, while the latter have not from the first enjoyed this privilege, but have from the date of the establishment of such rights at once obtained order of preference in accordance with the order of registration.

If we inquire into the origin of the time specified in the last clause of Article I of the imperial ordinance No. 458 of 1899; that is to say, of the period of grace during which preference can be contended for in accordance with the order of the establishment of the rights, we find in the first article of imperial ordinance No. 329 of July 6, 1899, which was amended by that imperial ordinance, “If a right in an immovable which might be set up against third persons has been duly acquired by an alien or a foreign juridical person before the time fixed in imperial ordinance No. 251 of the thirty-second of Meiji (1899), but has not been registered before the said time, it can not be set up against third persons unless it is registered within one year from such time.” However, according to the text of the title deeds by which perpetual leases have been established, in cases of transfer of perpetual leases they can be set up against third persons if the fact has been indorsed on the title deed by the chihōchō having jurisdiction over the place where the land is situated. Imperial ordinance No. 458, therefore omitted from the provisions of the first article quoted above the case of the transfer of a perpetual lease, and so provided that rights other than rights of perpetual lease acquired by foreigners in immovables which had not undergone registration prior to the date of the operation of the new treaties could not, unless registration was effected within a fixed period of grace, be set up against third persons; and it extended such period of grace, which, according to the previous imperial ordinance was one year, altering it to reach to the 31st of December this year.

The questions of the propriety or otherwise of the Imperial Government applying the term “superficies” (perpetual lease) to perpetual leases, and of whether or no any conditions other than those written on the title deeds should or should not under the fourth clause of Article XVIII be attached to houses erected on properties held on perpetual lease, have not yet been settled; but I do not consider that there is any reason on this account to extend the time during which rights acquired by foreigners in immovables, with the exception of perpetual leases, prior to the operation of the new treaties, can be claimed in accordance with the order of their establishment. For rights acquired by foreigners in immovables, excepting perpetual leases, after the coming into operation of the treaties have preference in order in accordance with the order of registration, notwithstanding that the above two questions have not yet been settled. That is to say, rights acquired prior to the operation, of the treaties as compared with rights acquired subsequent to the operation of the treaties enjoy special privileges, as a result of the above imperial ordinance, up to December 31 of this year, but they lose these privileges on the 1st of January next year, and thus for the first time occupy an equal position with rights acquired after the operation of [Page 343]the treaties; and I therefore see no reason that the nonextension of this time should, as Mr. Whitehead fears in his note of October 4, cause very great inconvenience to British subjects holding perpetual leases, or occasion loss to them.

The Imperial Government therefore regret to be unable to consider the question of extension of the above period, in spite of Her Majesty’s chargé d’affaires’ request to that effect. Again, the construction placed upon the last clause of the first paragraph of imperial ordinance No. 458 seems to me, from Mr. Whitehead’s note, to be that when the time mentioned therein has elapsed rights in immovables acquired by foreigners prior to the operation of the treaties can not be registered. But, as I have already had the honor to state, there is no objection to the registration after the 1st of January next year of rights acquired by foreigners in immovables prior to the operation of the treaties. The only thing is simply that preference for rights registered after that date can not be contended for in accordance with the order of their establishment. I have no doubt, therefore, that your excellency will agree with the view of the Imperial Government that there is no reason for extending the time mentioned in the last clause of Article I of the above imperial ordinance.

In conclusion, there is a matter to which I wish to call your excellency’s attention, namely, that the case of the attempted transfer of a perpetual lease and the buildings erected on the property between Mr. T. R. Brewer and Mr. C. K. M. Martin, cited in Mr. Whitehead’s note, seems to be considered (by Her Majesty’s chargé d’affaires) as a case not within the limits of the application of the last clause of Article I of the imperial ordinance No. 458. I do not know for certain the date of that transaction, but I believe, to judge from the terms of the above note, that it was after the operation of the new treaties. If this is really so, that transaction would not be affected, even if the time fixed in the said imperial ordinance were extended by such extension. That is to say, as I have had the honor to state at length above, the last paragraph of the said first article refers only to rights in immovables acquired by foreigners prior to the operation of the new treaties, with the exception of perpetual leases, and no rights acquired after the operation of the treaties, with the sole exception of cases of the transfer of perpetual leases, can be set up against third persons without registration being effected, notwithstanding the time mentioned in the clause of the article mentioned.

I take, etc.,

Kato Takaaki,
Minister for Foreign Affairs.