893.51/2852
The Chinese Minister of Communications (Tsang Yuh Tscun) to Mr. Thomas W. Lamont99
Dear Sir: I am in receipt of your letter of April 20th and highly appreciate your kind advice and information it conveyed. In reply I regret to inform you that from our point of view there are numerous difficulties preventing the Ministry from complying with your request.
First of all, the Ministry has sent to the different foreign Ministers residing in Peking two circular letters under the dates of June 11th (vide Appendix I) and December 30th 1919 (vide Appendix II) respectively.1 The first letter was in the form of a war order notifying the countries concerned of the stoppage of the payment of all the bonds issued by the Deutsche Asiatische Bank under the Tientsin-Pukow and the Hukuang Railway Loan Agreements, whose coupons had not been cashed at the Hongkong and Shanghai Banking Corporation in London between the Fourteenth of August 1917 and the Second of April 1919. The second letter contained the same information in brief, and in addition a few arguments to support this action, and to this letter the Ministry has received no answer from any country up to date. Later, the Ministry also requested the Hongkong and Shanghai Banking Corporation to publish in the London daily papers the numbers of the bonds [Page 645] whose coupons had been cashed during the aforesaid period for the information of those who had the intention to purchase the railway bonds. If these letters and notification should be considered insufficient, we can hardly find a better way to notify the countries concerned of our decision in the matter.
It may also be observed that the length of the period set for the cashing of the coupons is not unreasonable. The holders were allowed an ample time (almost two years) to secure payment for their coupons. Nor were there insufficient facilities for cashing their coupons. The holders could get their coupons cashed anywhere besides London as is shown in the case of refunding to the French and American banking groups by the Hongkong and Shanghai Banking Corporation the interest they had paid for the Ministry. On account of this lengthy time-limit and good facilities for cashing coupons, it is hardly conceivable that there should be persons who have failed to act promptly in protecting their own interests. In view of this, the Ministry finds it difficult to resist the temptation of coming to the conclusion that the bonds other than those whose coupons had been cashed during the aforesaid period had been secured by direct or indirect means from the enemy’s subjects.
For additional protection of the interests of the non-enemy subjects who might have failed to cash their coupons either owing [to] the War or their being not acquainted with the rules of cashing coupons in London, the Ministry undertakes to see to it that they shall not suffer provided that they can successfully rebut the prima facie evidence of fraud.
A bona fide purchaser is one acting in good faith. When the first Circular letter was issued, it was, legally speaking, immediately attached to the bonds in question and anyone who buys them after the circulation of the said letter buys them at his own risk. A man who purchased the bonds after the notice had been issued cannot be considered a bona fide purchaser. This is the law of the American Government. It is also the law of the Chinese Government.
It frequently happens that after the War some German and other enemy subjects have sold their bonds. On November 15th, 1919, the London Times, for instance, published an account of the sale of bonds by German nationals at Paris, Sweden and Holland. Are not these sales illegal? A fraudulent sale as intimated in your letter will protect bona fide purchasers, but an illegal sale never will. Though the Chinese Government has no jurisdiction over the purchasers, it can exercise control over the bonds they possess.
Lastly, Germany, according to Article 298, Annex 10, of the Treaty of Peace with Germany, is obliged “to deliver to each Allied or Associated Power all securities, certificates, etc. … held by its nationals … including any shares, stocks, debentures, debenture [Page 646] stock, or other obligations of any company incorporated in accordance with the laws of that Power.” It is true that China is not a party to the Treaty on account of the Shantung question and that that provision does not apply to China. The same provision is however applicable to the settlement of our enemy property. The world is aware of the fact that with the exception of the Shantung provision China approves of the Treaty in whole.
In conclusion, allow me to send you for your information copies of the two circular letters and list of the numbers of the bonds whose coupons had been cashed at the Hongkong and Shanghai Banking Corporation in London during the aforesaid period,2 all of such bonds having been recognized by the Chinese Government as being held by subjects of Allied or Neutral Countries.
Yours faithfully,