File No. 893.631/1.
Minister Reinsch to the Secretary of State.
Peking , March 24, 1914 .
Sir: I have the honor to enclose, for the information of the Department, copies46 of the Mining Enterprise Regulations issued by the Chinese Government on March 11, as well as an article46 from the Peking Gazette of even date containing a general criticism of the new regulations.
The essential provision of the regulations, with respect to the participation of foreigners in mining enterprise in China, are (Article 4) that foreigners will not be allowed to hold more than half of the total number of shares of the mining concern, and that they must, through a diplomatic officer or consul representing their respective Nation, make a formal statement that they are ready to submit to the mining laws and regulations of the Chinese Government; and (Article 93) that foreign partners in Chinese mining enterprises must submit to having any dispute in connection with mining affairs settled by the decision of the Director of the Mining Supervision Office.
The Mining Regulations have, from the point of view of foreigners, been criticized in two respects: (a) in that they restrict foreign participation to one half of the interest in any concern; and (b) in that, in the administration of these detailed regulations and others that may follow, it may be possible for the local mining officials to exert a vexatious control over mining enterprises if the regulations are not strictly carried out in good faith.
With regard to the first objection I would observe that while the regulations demand an equal share in the property rights in behalf of Chinese co-owners, they do not contain any provisions which would make it impossible for the foreign participants to secure administrative control of the enterprise: for instance, through having a majority on the board of directors.
With reference to the second objection it would seem that the position of the foreign participants who have placed themselves explicitly under Chinese law and regulations would not favor diplomatic interference in their behalf, unless, indeed, there should be a gross disregard of their property rights, in which case it is conceived that even such an undertaking as is required would not disentitle them to the protection of their national representatives. It should, however, be noted that Article 93 is drawn in terms which would appear broad enough to confer upon the Director of the Mining Supervision Office jurisdiction to deal not only administratively but judicially with all cases involving mining affairs, even where a defendant may be a citizen of a country enjoying extraterritorial rights under the treaties. In this connection I would suggest that the right [Page 134] of jurisdiction is one granted in favor of the treaty nation and not of individual citizens; and that in this view of the case the individual taking up mining rights in China is not competent to waive, even by an explicit undertaking to acquiesce in the mining regulations, the right of his own government to exercise the jurisdiction conceded to it by treaty. I would therefore recommend that in accepting these regulations as applicable to its citizens the United States should make explicit reservation of its established extraterritorial jurisdiction in the judicial determination of questions in which an American may be made defendant.
I have [etc.]