File No. 4002/249a.

Note verbale to the Russian Embassy.

The Russian chargé d’affaires called at the Department of State on October 21 and communicated the views of his Government respecting the future negotiation with China of loan contracts for railway building and other purposes, expressing the desire of the Imperial Russian Government to have Russian capital represented in such loans.

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The Assistant Secretary assured the chargé d’affaires that the American Government, being deeply interested in the maintenance of the policy assuring the “open door” in China and the preservation of its territorial integrity, could have no objection to the participation in such future loans by the nationals of any interested Government which is committed to the support of this policy, as is true in the case of Russia.

In this connection, however, it seems important to the Government of the United States that the unfortunate situation growing out of the claim by or on behalf of the Chinese Eastern Railway to the possession of municipal powers in the cities and towns built upon its leased lands should be cleared up without further delay.

The Russian foreign office has recently sent to the American Embassy at St. Petersburg an aide-mémoire1 upon this subject, which shows a misunderstanding of the attitude of the American Government in relation to this question and which mistakingly assumes that the objections of the United States are based upon the supposed existence of an international settlement at Harbin. It seems necessary, therefore, to restate briefly the view which this Government takes of the situation.

The claim of the Chinese Eastern Railway Co. that China has granted to it the municipal power necessary to the government of all cities and towns built upon the railway’s leased land is not considered by the Government of the United States to be justified by the language of the original contract of 1896 between the Chinese Government and the Russo-Chinese Bank, which is the concession under which the Chinese Eastern Railway was built and exists to-day. The administration by the railway company of its leased lands provided for in Article VI of the contract can refer only to such business administration as may be necessary to the “construction, exploitation, and protection” of the railway, these being the objects expressly mentioned in the article for which these lands were granted by China.

This was, without doubt, the understanding of China as evidenced by the Chinese translation of Article VI and by the protest of the Chinese Government against the attempts by the railway company to administer the municipal government of Harbin.

Adverting to the French text of the contract, it is to be observed that the land which is the subject of the provisions of Article VI thereof is precisely:

Les terrains réelement nécessaires pour la construction, exploitation et protection de la ligne, ainsique les terrains aux environs de la ligne, nécessaires pour se procurer des sables, pierres, chaux, etc.

The second paragraph of Article VI reads:

La Société aura le droit absolu et exclusif de l’administration de ses terrains.

As to the meaning of this word “administration,” it seems very worthy of remark that in English the word “administration” is quite commonly used of all sorts of business administration, while the same word in French and the equivalent word in the Chinese version of the contract are still more commonly used of business and nongovernmental administration. Indeed, the French word “administration” is so very commonly used of business management [Page 220] that its absolute meaning in a given case would be wholly determined by the context.

A reading of the whole contract deprives the second paragraph of Article VI of all semblance of referring to a political administration.

While the first paragraph of Article V says:

Le Gouvernement Chinois prendra des mesures pour assurer le sécurité du chemin de fer et des personnes a son service contre toute attaque.

More suggestive is the third paragraph of the same article, which says:

Cas criminels, procès, etc., sur le territoire du chemin de fer devront être réglés par les autorités locales d’après les stipulations des traités.

It is thus clear that this contract was for the establishment of a business enterprise, and it is impossible to read into it any context from which the use of the word in a political sense could be inferred.

The position of the United States, therefore, briefly stated, is that the claims of the Russian Government on behalf of the Chinese Eastern Railway are out of harmony with the natural interpretation of the text of the agreements referred to, as well as inconsistent with the treaty rights of residence and jurisdiction granted by China to other powers. It is as impossible for this Government to recognize the right of a private corporation to exercise municipal powers as it would be to construe a railway contract into a bestowal of such powers upon a foreign government.

Moreover, the granting by China of such municipal powers as the Chinese Eastern Railway claims to possess would place that railway in position to control all industrial enterprise at the cities and towns along this line and would constitute a breach of the pledges already given by China in various treaties that no monopoly would be allowed to impede the free transaction of business.

The American Government has relied upon the support of the Imperial Russian Government in its efforts to secure the several international agreements giving adherence to the policy of the open door in China, and has been gratified to receive the hearty assurances which the Imperial Russian Government has given at various times in relation to this subject. Article III of the Treaty of Portsmouth states that “the Imperial Government of Russia declare that they have not in Manchuria any territorial advantages or preferential exclusive concessions in impairment of Chinese sovereignty or inconsistent with the principle of equal opportunity.”

  1. See inclosure to No. 560, Oct. 9, 1909, from Russia, p. 216.