Mr. Wilson to Mr. Hay.

No. 540.]

Sir: Referring to my dispatch No. 539, dated the 8th instant, on the subject of the settlement property questions, I have the honor to inclose herewith a copy of the reply to Mr. Buck’s note of January 1, relating chiefly to imperial ordinance No. 458.

A copy of the reply to my note of the 5th instant, conveying the Department’s request that the decision of the questions about the leases, [Page 355]etc., be withheld until they shall have had time to forward their views, is also inclosed. While all these questions may be now under consideration by the Japanese Government, internally, yet as they say, technically, perhaps, or at least officially, no decision is pending. It appears that several Governments are making representations which must be answered in turn; and that a bill is to be sent to this Diet.

A memorandum prepared in the legation chancery is likewise inclosed. It is an effort to set down concisely some points as to what was the condition of settlement property before the new treaties, what is its present condition, and what may still be desired.

I have, etc.,

Huntington Wilson.
[Inclosure 1.—Translation.]

Mr. Kato to Mr. Wilson.

Sir: In a note which his excellency the minister of the United States has done me the honor to address tome under date of January 1, 1901, he refers to his correspondence with my predecessor, Viscount Aoki, and the conversation which he subsequently had with me, on the subject of the property rights held by citizens of the United States in the former foreign settlements, and states that he has been informed that according to a note addressed by me to the minister of Great Britain the interpretation put by the Imperial Government upon the provision of the last clause of Article I of the Imperial ordinance No. 458 of the thirty-second year of Meiji (1899) is, as he had already been informed by me personally, to the effect that the limit of time for the registration of rights therein mentioned is not absolutely determined by the aforesaid article, but that the only question involved is that if such rights are registered before such limit of time their order of priority will be in accordance with the order of their establishment, whereas if they are registered after the expiration of the term fixed in that article they rank in accordance with the order of their registration. Mr. Buck provisionally accepts the construction placed upon the ordinance in question by the Imperial Government, but he has nevertheless deemed it proper to make reservation on behalf of citizens of the United States respecting the rights involved, should, perchance, a different construction be put upon the same ordinance by a Japanese court of law.

In reply to the above-mentioned note of the minister of the United States, I have the honor to confirm the interpretation of the last clause of Article I of the said ordinance, and to declare that there is nothing to prevent registration being made after the period fixed in that ordinance.

The grace in question was solely for the purpose of allowing all rights other than perpetual leases, which had been acquired by foreigners in immovables before the date the revised treaties went into operation, the exceptional privilege of taking the order of priority in accordance with the order of their creation and not of their registration.

In regard to the reservation which Mr. Buck makes on behalf of the citizens of the United States respecting the rights involved, having in view the contingency of a construction different from the one declared by me being placed by a Japanese court of law upon the said ordinance, I beg to say that while, on the one hand, I am unable to admit the necessity of Mr. Buck’s reservation, I do not feel, on the other, that I can properly enter upon an examination of the question of the value to be assigned to interpretations placed by the Imperial Government on the laws and ordinances of the Empire.

Accept, etc.,

Kato Takaaki,
[Page 356]
[Inclosure 2.—Translation.]

Mr. Kato to Mr. Wilson.

Sir: I beg to acknowledge the receipt of your note No. 263, dated the 5th instant, in which you inform me that you have been instructed by telegraph by the honorable the Secretary of State to request the Imperial Government “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.”

While it is not clear what kinds of leases are referred to by the words “property leases,” assuming them to refer to perpetual leases of land in the former foreign settlement, I may at once state that when the Imperial ordinances Nos. 329 and 458 of the thirty-second year of Meiji (1899) were promulgated in aid of the treaty stipulations bearing on the subject of such perpetual leases, the Imperial Government were well satisfied that nothing contained in those ordinances were out of harmony with the terms of the revised treaties. This decision having been arrived at at the time those ordinances were promulgated, there is now no decision pending on the part of the Imperial Government, although further consideration of the questions involved may possibly at any time lead to an alteration or modification of the views which have been entertained by the Imperial Government. Nevertheless, I have no hesitation in assuring you that any expression of the views which the Government of the United States may see fit to formulate in reference to those questions will at all times receive that careful consideration which the Imperial Government have always been ready to extend to the representations of your Government.

Accept, etc.

Kato Takaaki.
[Inclosure 3.]

A memorandum relating to:

(1)
The conditions under which property in the foreign settlements was formerly held;
(2)
Japan’s new treaty obligations in respect thereto;
(3)
The steps already taken by the Japanese Government to meet their treaty obligations; and
(4)
Points still requiring attention.

memorandum.

I. What was.—The Japanese Government set aside and rented to foreigners, for building purposes, certain lots of ground on leases in perpetuity. These lots were leased to bona fide residents only, and the leaseholders were required in some cases, under penalty of forfeiture of their titles, to erect within a fixed period of time buildings of a substantial character.

The proprietorship of the soil was expressly reserved to the Japanese Government. The leases specified certain “lots of land,” and the chief condition was the payment of a stipulated annual ground rent, in consideration of which the Japanese authorities engaged to keep the streets, roads, sewers, etc., in good repair without additional charge, the “ground rent” thus being in lieu of the ordinary Japanese land and municipal taxes. Provision was made for further assessments for special purposes, if required, either by the leaseholders themselves or by the authorities with their consent.

The rate of annual ground rent varied with different places, and was fixed at times, as in Nagasaki and Yokohama, in terms of Mexican dollars; and elsewhere, as in Hiogo, Osaka, and Tokyo, in terms of the native coin “bu.” The-value of the latter was variously determined, sometimes “weight for weight” with foreign coins, and sometimes by convention (as in the tariff convention of 1866 and the Austro-Hungarian trade regulations). Both these forms of currency fluctuated considerably in value with the rate of silver, but specially the “bu,” which was also subject to deterioration in recoinage. Thus the actual amount of ground rent was variously reckoned in different places, and even in the same locality the rent might be fixed at a different rate at different times, according to the value of the “bu” when the leases were issued.

[Page 357]

On the lots so leased foreigners erected buildings for residence and business. “They had absolutely nothing to show for their title to the houses but their deeds to the land,” and this, under consular jurisdiction, was considered a sufficient showing. Transfers of the land generally included the buildings, unless there was a special agreement showing a contrary purpose. Transfers were indorsed on the title deed by the kencho and registered at the respective consulates without any charge other than notarial fees. Such registration was simply notarial and not ex officio.

Transfers of title to a Japanese subject had to be sanctioned officially by the consular and Japanese authorities jointly.

In case of forfeiture of a lease the lot reverted to the Japanese Government, and in some cases the buildings thereon also became the property of the Japanese Government.

Provision was made for the enlargement of the districts occupied by foreigners, when necessary. Such extra settlement properties might be let at a fixed rate, as the Bluff property in Yokohama, or be subject to the ordinary Japanese Imperial and municipal taxes, as in Tokyo, and in Kobe until 1888, or be charged a fixed rental based upon the average of the ordinary Japanese taxes for a few years previous— including also taxes on the buildings—as was the case with the Kobe Hill lots after 1888.

II. The new treaty provisions.—The United States treaty provides (Article XVII):

(1)
That the several foreign settlements in Japan shall * * * be incorporated with the respective Japanese communes and shall thenceforth form part of the general municipal system of Japan. * * *
(2)
That existing leases in perpetuity upon which property is now held in the said settlements shall be confirmed, and no conditions whatever other than those contained in such existing leases shall be imposed in respect of such property. * * *
By Article XVIII:
(3)
That the present treaty shall * * * be substituted in place of all former treaties and conventions, and all arrangements and agreements subsidiary thereto, which shall cease to be binding; and in consequence,
(4)
That the jurisdiction exercised by courts of the United States in Japan, and all the exceptional privileges, exemptions, and immunities enjoyed by citizens of the United States as a part of, or appurtenant to, such jurisdiction shall absolutely and without notice cease and determine.

(Note.—It would seem from the provisions of Article XVIII of the United States treaty, and the corresponding articles of the other treaties, that property rights in the former foreign settlements, e. g., buildings on lands held under perpetual lease, in so far as they are based on previous arrangements or upon the application of foreign law under consular jurisdiction, definitely terminate with the old treaties, and that the property rights in question are now determined solely by the terms of the original leases themselves, as provided in the new treaties, and by the application of Japanese law.)

The French treaty stipulates (Article XXI) that:

Leases in perpetuity in virtue of which foreigners actually possess property in the settlements shall be confirmed, and property of that nature shall not be subject to any imposts, etc., or conditions whatever other than those expressly stipulated in the leases in question.

The German treaty provides further (Article XVIII) that:

Leases to lands in the settlements may in the future, as in some cases in the past, be transferred freely, either to a Japanese or a foreigner, without the consent of the consular or Japanese authorities.

The German note of April 4, 1896, provides that—

(1)
As the ownership of the soil is vested in the Japanese Government, neither the holder of the lease nor his successors shall be required to pay any charges on the said land other than the stipulated ground rent.
(2)
Rights acquired before or under the present treaty shall be valid after the expiration of the said treaty.

III. What the Japanese Government has done.—By law No. 71 of March 18, 1899: Provided that matters relating to the registration of rights of foreigners in immovables and ships, acquired before the operation of the new treaties, should be determined by imperial ordinance.

Imperial ordinance No. 329, of July, 1899:

(1)
A right in an immovable acquired by an alien or foreign juridical before the operation of the new treaties, if not registered before the date of the operation of the said treaties, can not be set up against third persons unless registered within one year thereafter. (Amended by imperial ordinance No. 458, which see.)
(2)
Special registry books for such rights were opened and a copy of the registry [Page 358]book of a foreign consulate relating to such rights given the same effect as a Japanese registry book. The provisions of the law of registration of immovables are applied to such registrations.

(Note.—The effect of this last provision is to give the consular registrations so taken over the value, not only of claims of title, as before, but of the titles themselves; and, moreover, under the Japanese law (and practice) of registration, the title to the land carries with it presumptively the title to the buildings thereon as well unless there is a specific agreement to the contrary, very much as was formerly the case under consular jurisdiction.)

Imperial ordinance No. 333, of July, 1899:

Rights of perpetual lease, when acquired by a Japanese or a Japanese juridical person, are converted into holdings in fee simple or ordinary superficies.

Imperial ordinance No. 458, of December, 1899 (amending ordinance No. 329):

(1)
The leases are termed “superficies (perpetual lease).”
(2)
Transfers of title must be indorsed on the title deed by the chihocho (kencho), which office must report the fact of such transfer to the registry office. (This provision removes the one-year limit of ordinance No. 329, as respects the registration of these leases.)
(3)
On receipt of the above notice the registry office must register such transfers ex officio (i. e., without charge).
(4)
The term for registration of existing real rights other than perpetual leases is extended to December 31, 1900, and entries of previous transfers by the kencho or consulates are confirmed.

Viscount Aoki’s notes of January and March, 1900, to the British and French ministers, respectively, give an authoritative assurance that the interpretation of the Japanese Government is that the said leases (in perpetuity) would still have the same validity as before after their registration under ordinance No. 329, and that the words “perpetual lease” inserted in brackets in ordinance No. 458 make it clear that the right is a perpetual lease and not a superficies under the provisions of the civil code. (See article 45 of the law for the operation of the civil code.)

Mr. Kato’s notes of December, 1900, and thereafter give an official assurance that the terms of ordinance No. 458 do not cut off the right to register existing rights in realty, other than perpetual leases, after December 31, 1900; that such rights may be registered at any time, only that when registered after the said date they follow the order of their registration and not of their establishment as regards priority of rights.

IV. Points still requiring attention.—(1) That titles to settlement properties be confirmed as “perpetual leases” without qualification or change of form.

(2) That imperial ordinance No. 458 be amended to harmonize with the interpretation given by the Imperial Government and to avoid a possible difference of interpretation by the Japanese courts.

(3) That ordinance No. 333 conform to the terms of the German treaty.

(4) That mortgages and subleases of property held on perpetual leases be registered without charge, as their security was satisfactorily guaranteed in the past by their registry or authentication at the consulates.

(5) That the value of the “bu” be again fixed by international agreement and the rate of exchange of the Mexican dollar be determined in the same manner.

(6) That the meaning of the words “property in the former foreign settlements” as used in the treaties be defined. As a matter of fact, a considerable portion of the property in Japan held by foreigners under perpetual leases lies wholly outside the limits of the foreign settlements, properly so called—e. g., the Bluff lots in Yokohama, the Hill lots in Kobe, and some lots at Nagasaki. Such outlying properties, though in reality constituting what might be called “mixed zones,” have been treated by the local authorities as if within the settlements, but acting under instructions from the central Government and not wholly without question.

(It is interesting to note in this connection that the rental of the Hill lots in Kobe, fixed by agreement in 1888, was determined on the basis of the amount of taxes, imperial and municipal, the property would have paid were it owned by Japanese, including taxes upon the buildings erected on the lots, and that it is understood that the Japanese Government has no intention of charging house tax on such buildings.)

(7) In one or two places the rent which has regularly been collected and which is now well established by custom is considerably less than that which, according to the terms of the leases, could be claimed for example in Tokyo. It seems desirable that the customary rate in such places be definitely guaranteed for the future.