The Acting Secretary of State to the Chargé in China ( Perkins )

No. 1467

Sir: The Department refers to the Legation’s telegram No. 930 of October 26, 1929,16 relating to the adjustment of debts owed by the Chinese Government to American citizens and organizations and to the presentation of claims by American citizens against that Government. In this telegram the Legation stated that it did not consider that circumstances were then advantageous for the presentation of American claims, but requested that the Department inform the Legation of the nature of the survey of outstanding accounts and claims which had been made by the Department.

The failure of the Department to receive any further advice in this connection from the Legation leads to the inference that the Legation is still of the opinion that circumstances do not favor an attempt to take up with the Chinese Government the adjustment of these outstanding debts and claims. However, the Department believes that it would be desirable that Mr. Nelson T. Johnson, American Minister, as soon after his assumption of office as may be practicable, give the matter his attention, with a view to possible early negotiations with the Chinese Government on this subject. The Department considers the matter pressing, not only because of certain rights in law and equity enjoyed by the American citizens involved, but also because in the course of any further delay the Chinese Government may hypothecate for other purposes revenues that might be devoted to the service of obligations to American citizens.

As of probable assistance to the American Minister in his consideration of the matter, the Department transmits herewith in duplicate a suggested protocol of agreement between the two Governments and a survey of the claims and complaints filed with it by American citizens.

It will be observed that the suggested protocol of agreement between the two Governments provides for the establishment of a tribunal for the examination and the adjudication of outstanding claims. This [Page 582] arrangement, which contemplates a single judge, or commissioner, to pass upon the claims, would, if adopted, conduce not only to economy of operation but would tend to the early completion of the work. It is not anticipated that any difficulty would be experienced in obtaining a commissioner thoroughly acceptable to both Governments.

The enclosed report of the survey made by the Department covering the period January 1, 1912, to January 10, 1929, inclusive,17 shows that there have been disclosed claims and complaints which might possibly contain elements upon which claims could be based, to the total number of 1,398, involving alleged damages or losses in the aggregate amount of $38,062,000. In this number, however, are 231 cases in which no amounts are given as to losses suffered. The amounts claimed, although in various currencies, have been reduced to the equivalent of the American dollar and where interest was not stated, that item has been omitted.

Doubtless there has been some duplication of cases in this report, but this has been unavoidable owing to the inability of the Department upon the basis of the records examined, to make a positive recheck of the cases. There are indications, also, of two or more sets of correspondence relating to the same case. Reports have been received since the completion of the survey as to further claims, and other cases will doubtless be reported.

In regard to the sufficiency of the survey, as that point might come up for consideration in connection with the negotiations with the Chinese Government for the working out of a satisfactory plan whereby the whole body of outstanding claims might be adjusted to the satisfaction of the two Governments and the claimants, the American Government, of course, would not contend that the survey has developed definitive bases as to the number and amount of bona fide claims, since a critical examination of the cases must disclose duplication, overlapping and, possibly, payments having been made in the case of certain claims. Moreover, some of the incidents have been regarded as possibly constituting a basis for claims which on development may prove to be insufficient.

The examination that has been made of the papers in the Department’s files in connection with this survey indicates that some of the claims would be based upon debts of the Chinese Government for supplies and materials furnished, some others grow out of alleged breach of contractual obligations of the Chinese Government, while still others are predicated upon some alleged tortious action of the Chinese Government. In a number of cases liability has been admitted by the Chinese Government and in some cases partial payments have been made. The debt claims alone amount approximately to $30,000,000. [Page 583] In the circumstances it might be contended that the liquidated claims, the debt claims, and the claims where liability has been admitted should preferably be disposed of through some debt funding arrangement, but the Department considers that even in such cases the settlement would better be made by the agency (preferably a commission) that is established to examine and adjudicate the tort claims. There would necessarily be some justiciable question in each case, and moreover, the settlement arrived at would be definitive.

If it should be discovered that the Chinese Government has itself prepared machinery for handling its outstanding debts and claims, such as the commission which was referred to in the Legation’s telegram No. 893 of October 16, 1929,18 the Department desires that the American Minister discuss the relative advisability of adopting the procedure devised by the Chinese Government and of making to the Chinese Government the proposal represented by the enclosed draft protocol of agreement. The Department would likewise be interested to learn whether other governments have taken or are seriously considering measures for the adjustment of the debts and claims of their citizens against the Chinese Government.

I am [etc.]

J. P. Cotton

Suggested Protocol of Agreement Regarding American Claims Against China

Protocol of Agreement Between the United States and China for the Examination and Adjudication of Claims Against China of American Nationals, Signed at . . . . . . . . . . . 1930.

The United States of America and the Republic of China desiring to settle and adjust amicably unsettled claims of American nationals against China arising since December 31, 1911, and which have been or may be presented to the Government of the United States for its interposition, have resolved to submit the claims for examination and adjudication to a Commissioner and have appointed as their plenipotentiaries to sign an agreement for that purpose:

The President of the United States of America, Mr. . . . . . . . . . . . . . . . American Minister,

The President of the Republic of China, Mr. . . . . . . . . . . . . .

Who, having communicated to each other their full powers, found to be in good and due form, have agreed as follows:

Article I

The two governments shall agree upon the selection of a Commissioner who shall pass upon all claims against China of nationals of [Page 584] the United States, whether corporations, companies, associations, societies, partnerships or individuals, resulting from acts or omissions of the Chinese Government or of agents, officials, or others acting for the Chinese Government, or of any local authority, embraced in the following categories:

Claims for injuries to or death of persons, nationals of the United States.
Claims for loss of or damage to property, rights and interests and for breach of contract.
Debts owing to American nationals by the Government of China, or its agencies, or by the local authorities.

The Commissioner shall determine the amounts to be paid in satisfaction of all such claims including the amount of interest to be allowed on each adjudicated claim and the time from which the interest shall begin to run.

If the two Governments shall not agree within two months from the exchange of ratifications of this Agreement in naming the Commissioner, he shall be designated by the President of the Permanent Administrative Council of the Permanent Court of Arbitration at The Hague described in Article XLIX of the Convention for the pacific settlement of international disputes concluded at The Hague on October 18, 1907.19 In case of the death or incapacity of the Commissioner, or in the event of his omitting or ceasing to act as such, the same procedure shall be followed for filling the vacancy as was followed in appointing him.

Article II

The Commissioner shall hold a session at a place selected by him within two months after he has been designated. He may fix the time and place of subsequent sessions according to convenience. All claims shall be notified to the Commissioner within one year from the date on which he holds his first session.

Article III

The Commissioner shall cause to be kept an accurate record of the questions and cases submitted and correct minutes of proceedings. To this end each of the governments may appoint a secretary, and these secretaries shall act together as joint secretaries and shall be subject to the direction of the Commissioner.

Article IV

The two governments may designate agents and counsel who may present oral or written arguments to the Commissioner.

[Page 585]

The Commissioner shall receive and consider all written statements or documents which may be presented to him, in accordance with rules which he may prescribe, by or on behalf of the respective governments in support of or in answer to any claim. The Government of China shall be notified of all claims filed with the Commissioner and shall be given such period of time as the Commissioner shall by rule determine in which to answer any claim filed. The Commissioner before entering upon his duties shall make and subscribe a solemn declaration stating that he will carefully and impartially examine and decide, according to the best of his judgment and in accordance with the principles of international law, justice and equity, all claims presented for decision, and such declaration shall be entered upon the record of the proceedings of the Commission. It is agreed by the High Contracting Parties that no claim shall be disallowed or rejected by the Commissioner by the application of the general principle of international law that the legal remedies must be exhausted as a condition precedent to the validity or allowance of any claim.

The decisions of the Commissioner shall be accepted as final and binding upon the two governments.

Article V

The amounts awarded to claimants shall be paid in United States gold coin or its equivalent by the Chinese Government to the Government of the United States.

Article VI

Each government shall pay its own expenses, including the compensation of the secretary appointed by it and that of its agents and counsel. All other expenses which by their nature are a charge on the two governments, including the compensation of the Commissioner and such employees as he may appoint to assist him in the performance of his duties, shall be borne one-half by the Government of the United States and one-half by the Government of China.

Article VII

This agreement shall be ratified in accordance with the constitutional forms of the High Contracting Parties and shall come into force on the date of the exchange of ratifications.

In Faith Whereof, the above named plenipotentiaries have signed the present agreement and have hereunto affixed their seals.

Done in duplicate at . . . . . . . . this . . . . . day of . . . . . . . . 1930.