Mr. Wilson to Mr. Hay.

No. 539.]

Sir: I have the honor to confirm your telegraphic instructiona of the 28th ultimo.

On the 31st ultimo I handed to the minister for foreign affairs a signed memorandum, copy of which is herewith inclosed, embodying the contents of the above instruction. I also inclose a copy of Mr. Kato’s reply, in which he expresses his preparedness to enter into an examination of the questions indicated when a detailed expression of the views of the Government of the United States shall have been received.

Viscount Aoki’s note of January 15 to the British minister (quoted in inclosure with Mr. Buck’s No. 398, of February 5, 1900), and his note to the French minister, dated February 26, 1900 (inclosure with Mr. Buck’s No. 417, of April 17, 1900), seem to contain in effect such an authoritative interpretation. I apprehend that the minister for foreign affairs would willingly give a still more emphatic and unequivocal interpretation, which, whatever might be the future rulings of law courts, would protect leaseholders from damage by making the Government of Japan responsible. However, it is probable that, to end the great dissatisfaction on this score, exact registration of perpetual leases in terms as such and only such will be provided for by law.

I believe that the Japanese Government will not concede that buildings which stand on land held under perpetual lease should for that reason be exempted from the house tax or from any other charges to which buildings in general are liable.

I have the honor to confirm also your telegraphic instructiona received the 2d instant.

Accordingly, in a note dated the 5th, copy of which is herewith, I made the above request to the Japanese Government.

In reference to Mr. Buck’s No. 532, no reply has yet been received to his note to Mr. Kato dated January 1, designed to hold the Japanese Government to the foreign office’s interpretation of the last clause of article 1 of ordinance No. 458, which interpretation (in inclosure with Mr. Buck’s No. 526, of December 14) appears to be authoritative.

[Page 352]

Shortly before January 1 the British, French, and German ministers sent three practically identical, notes on the same subject, but further strongly protesting against the Japanese Government’s refusal to prolong the time beyond December 31. Day before yesterday they received Mr. Kato’s replies. That to the British minister, which I have read, points out that the clause objected to was inserted as an act of grace, upon the written request of Sir Ernest Satow, for the purpose of allowing ample time for absentees to secure by registration the priority of such rights as subleases, mortgages, etc., already held.

The Japanese Government are now engaged in preparing for presentation to the present session of the Diet (which terminates on March 24) a bill whose object is said to be to clear up, so far as possible, those points in all matters connected with the immunities and obligations of holders of perpetual leases in the former settlements, which, under the new treaties, are now uncertain or disputed. What the bill will decide—which it will concede by its provisions and which it will refuse by silence—of all the changes asked for by the foreigners is not shown, since the authorities insist that the bill remain secret until actually laid before the Diet.

* * * * * * *

Many months ago the French, German, and British representatives, under instructions from their Governments, claimed, as well as immunity from all charges against lands held under perpetual leases, immunity from the house tax and from all other charges against buildings standing on such lands. Their position remains unchanged. They contend that the buildings are “part and parcel of the lands.”

The present French position differs from the British and German in that the French minister goes so far as to claim that income tax may not be levied on income derived from property held under the perpetual leases, probably meaning the houses included.

In the German position there is a point not dwelt upon by others, based on the fifth paragraph of Article XVIII of the German treaty. It is: That the perpetual leaseholds may now be sold to Japanese without becoming, by the process, titles in fee simple (as well as to any foreigners). If the German treaty secures this right contrary to the conditions of the original leases, then Imperial ordinance No. 333, of July 7, 1899, appears to conflict with that treaty. It seems that this right would widen the market for selling the leases and would prevent the settlement properties from getting irrevocably out of the hands of foreigners, who could not own them in fee simple.

The Germans rely upon paragraph 4 of Baron von Marschall’s note of April 4, 1896, to secure forever, irrespective of the lapse of their treaty, any rights acquired before or during its operation.

Neither the British, French, nor German representative has yet received a definite reply to his representations.

An unfortunate misunderstanding, by which it has been widely believed that buildings must always be registered, has been brought about by a mistake in Dr. Loenholm’s translation of the law of registration and by the fact that there are separate registry books for land and for buildings. I have the honor to inclose herewith the translation of lawa referred to, with the mistake indicated. From that [Page 353]law—particularly from article 106, for example—it appears that the holder of a perpetual lease to a lot who owns the house thereon is quite safe in the ownership of his house without registering it. I may here add that the Japanese themselves ordinarily do not register their houses if they own the land upon which those houses stand.

The best support of the argument that the houses and lands are regarded by the treaties as one is thought to be contained in Article XXI of the French treaty. But as the houses were not in existence when the leases were made, and never belonged to the Japanese Government, it is difficult to understand how they can be considered as properties held under (en vertu de) leases in which the Japanese Government is the lessor.

Since under the old system the foreign communities assessed themselves for keeping the streets in order and for lighting, policing, etc., it may be claimed that with the transfer of that duty to the Japanese authorities there goes also a certain right to tax; and since the necessity of such expenditure depends upon the buildings, house taxes may perhaps be regarded to some extent as moneys to meet those expenditures. It is certain that the foreign quarters cost the authorities much more than the Japanese quarters do.

It is of interest to note that, even with the present taxable valuation, shrunk by the settlement properties increase in value to only about one-sixth of the actual value, the land tax alone would be much greater than the ground rent. I hope soon to be able to give some statistics on this point.

Then, if it should be decided that the land only is referred to in the treaties, it is to be subject to no imposts, etc., further than those expressly stipulated in the leases, i. e., than the annual rent.

Under ordinance No. 458 transfers of property held under perpetual leases are registered without charge.

It is understood that transfers of such property by bequest are likewise registered free. As the title deeds were granted to those who originally received them, and to their heirs and assigns, this seems to be secured by the terms of the leases.

It may possibly be questioned, on the ground that registration is part of the general municipal system under which foreigners have come, whether the registration of mortgages upon and of subleases of property held under perpetual leases should be free. Under the old treaties equitable mortgages were mostly made use of, but ordinary mortgages could be registered at the consulate, the parties thus acquiring a secondary protection in case the original documents could not be produced. As a satisfactory degree of safety was obtained in the old way, although the new way, involving, like all Japanese registration, which is after the Torrens system of Australia, the courts affirming the validity of the right registered, provides the greatest degree of safety, yet the imposition of taxes upon any registrations in which property held under perpetual leases is alone concerned seems to be an additional burden on such property and to be contrary to the treaties.

From what I hear I think that the Japanese Government will exempt lands held under perpetual leases from all charges of every kind; but that they will not admit that houses standing upon such lands are for that reason to be exempted from the various charges to which any other houses are liable.

I have, etc.,

Huntington Wilson.
[Page 354]
[Inclosure 1.]

Mr. Wilson to Mr. Koto, Japanese minister for foreign affairs.

[Memorandum.]

Pending the receipt of fuller expression of the views of his Government, the undersigned chargé d’affaires ad interim of the United States, has the honor to hand this memorandum to his excellency His Imperial Japanese Majesty’s minister for foreign affairs.

The registration as superficies of title to perpetual leases is not acceptable to the Government of the United States without some authoritative interpretation of the Japanese Government that the title under that style is not inferior to that of the perpetual lease.

The Government of the United States are not now prepared to concede that buildings on perpetual lease are subject to taxation not specified in the original lease.

Huntington Wilson.
[Inclosure 2.]

Mr. Kato to Mr. Wilson.

The minister for foreign affairs has the honor to acknowledge the receipt of a memorandum which the chargé d’affaires of the United States was good enough to hand to him on the 31st ultimo, in anticipation of a fuller expression of the views of the United States Government on the subject of the registration of perpetual leases and the taxation of buildings on perpetual lease.

Upon the receipt of such detailed expression of views, the minister for foreign affairs will be prepared to enter into an examination of the questions which are briefly described in the memorandum under acknowledgement.

[Inclosure 3.]

Mr. Wilson to Mr. Kato.

Monsieur le Ministre: Under telegraphic instructions from the Secretary of State, I have the honor to request, through your excellency, on behalf of the Government of the United States, that the Imperial Japanese Government be so good as to further withhold their decision on the questions of property leases, their registration, etc., until the Department of State can have time to prepare and forward its views.

Trusting that I shall soon be able to make to your excellency more detailed communication of my Government’s position on all the allied questions indicated above,

I avail, etc.,

Huntington Wilson.
  1. Printed ante.
  2. Printed ante.
  3. Not printed.