493.11 Standard Oil Company-Chin Tsun, Yunnan/3

The Secretary of State to the Minister in China (Johnson)

No. 118

Sir: The Department refers to your despatch No. 100 of March 24, 1930, in which you request an expression of its views in connection with despatch No. 135 of February 18, 1930, from the Consul at Yunnanfu,41 entitled “Claim of the Standard Oil Company of New York against the Yunnan Provincial Government for Looting of Agency by Military”.

In reply to the request made by the American Consul at Yunnanfu on behalf of the Standard Oil Company that that Company be indemnified for merchandise looted by soldiers from the premises of a Chinese agent, the Chinese authorities at Yunnanfu rely principally on two contentions viz. (1) that in the case of the robbing of foreign merchants the Chinese Government is required by the treaties merely to apprehend offenders and to endeavor to recover the lost property and, (2) that the treaties prohibit foreigners from establishing places of business or warehouses in the interior.

The Legation’s despatch under acknowledgment refers to the Department’s instruction No. 1138, of March 11, 1929, wherein it was stated that the Department does not acquiesce in the position taken by the Chinese authorities of disclaiming responsibility for goods lost or destroyed while in the hands of Chinese agents of American citizens or concerns, when it can be established that the title to the goods continues in American ownership. The Department sees no reason to recede from this position. In such cases it must, of course, be conclusively shown that title to the goods, for the loss of which indemnity may be sought, was at the time of loss vested in the American company and not in the Chinese agent.

[Page 596]

In regard to the right of American citizens to enter into agency contracts with Chinese persons or firms in the interior, you are referred to the Department’s instruction No. 295 of September 7, 1921,43 which contained the following paragraphs:

“While the treaties generally limit to the treaty ports the right of alien business men, resorting to China for purposes of trade, to establish business houses, they have specifically removed all restrictions upon the extent to which such business men may establish business relations with the citizens of China. It is the opinion of the Department that Article XV of the treaty of 1844, between the United States and China44 is sufficient authority for an American firm or business man in China to establish whatsoever business relations he may deem proper with ‘any and all subjects of China without distinction’. Such relations, however, would not be deemed to change the status of such a Chinese in so far as Chinese law and regulations are concerned.

“Attention is also invited to Article IX of the British Treaty of June 26, 1858 (Treaties, Conventions, etc., between China and Foreign States, Customs Edition, Volume I, page 215) which permits British subjects to travel ‘for purposes of trade, to all parts of the Interior, under passports, which will be issued by the Consuls’, etc. This privilege is also enjoyed by citizens of the United States by reason of the most favored nation section of Article III of our treaty of 1903 with China. (Malloy’s Treaties, Volume 1, page 263).”

The Department has examined the correspondence which has passed between Mr. Chamberlain, American Consul at Yunnanfu, and the Chinese authorities in regard to the claim made by the Standard Oil Company for compensation in the case under review. The Department commends Mr. Chamberlain for the energy and ability displayed by him on behalf of the American interests involved. However, the Department refers to page 3 of the communication of March 14, 1929, addressed by Mr. Chamberlain to the Bureau of Foreign Affairs at Yunnanfu43 on which page Mr. Chamberlain stated that he agreed that Article XIII of the Sino-American Treaty of 185845 might be considered entirely applicable to the case under discussion. The Article in question specifically refers to the loss of merchandise on merchant vessels of the United States and it does not, therefore, seem to the Department that its stipulations can be held to apply in the case of a robbery which has taken place on land. In another passage on the same page of the communication Mr. Chamberlain stated most emphatically that neither the Standard Oil Company nor the American Consulate would “expect the Chinese authorities to make compensation for loss of property due to the acts of brigands.” The Department believes that this assertion, so far as it might be held to involve [Page 597] this Government is not entirely consistent with the position taken by the Department in some previous instances, see for example the Legation’s despatch No. 250 of June 1, 1914,46 in regard to the losses of American citizens at Laohokow, Hupeh, due to action by bandits in 1913, and the Department’s reply of July 1, 1914.46 In this case the American Government authorized for presentation to the Chinese local authorities on behalf of American citizens a request for the indemnification of losses arising from the action of bandits. The Department believes that in certain circumstances, the failure of the Chinese authorities to take measures for the protection of American property from bandit depredations might afford to the American owners grounds upon which to base a demand on the Chinese Government for indemnification.

The Department is gratified at the announcement of your intention to take up with the Minister for Foreign Affairs the matter of agreeing upon a procedure for adjusting outstanding claims of American citizens against the Chinese Government.

A copy of this instruction is enclosed for transmission to the American Consul at Yunnanfu.

I am [etc.]

For the Secretary of State:
Francis White
  1. Despatch No. 135 not printed.
  2. Not printed.
  3. Miller, Treaties, vol. 4, p. 559.
  4. Not printed.
  5. Malloy, Treaties, 1776–1909, vol. i, p. 211.
  6. Not printed.
  7. Not printed.