The Secretary of State to the Ambassador in China (Stuart)
The Secretary of State refers to despatch no. 341 of December 22, 1947 from Shanghai,13 concerning Standard-Vacuum’s difficulties in registering the purchase of land from a former employee. Reference is also made to subsequent exchanges of telegrams with Shanghai concerning this case.
After careful study of the Treaty of 1943 and the legal implications of the land authorities’ insistence on prior application to the Government by Standard-Vacuum and vendor for approval of this transaction, the Department concludes that the manner in which the Land Bureau, Shanghai, is attempting to enforce Article 20 of the Land Law in this case is in contravention of treaty rights of Americans under Article IV of the Treaty of 1943. That Article of the Treaty [Page 733]specifically requires prior express consent of the Chinese Government for transfer of land by American nationals only in case of transfers to third nationals. Record of negotiations indicates that the intention of inserting this provision, which was inserted at the request of the Chinese, was to enable the Chinese Government to prevent transfers to third nationals without Chinese consent. Further, by Article IV the Chinese Government agreed that new deeds should protect owners without diminution of prior rights and interests, including right of alienation. It follows that Americans possessing land acquired prior to the effective date of the Treaty are free to transfer to persons of their choice without securing prior consent of the Chinese Government, except in the case of transfer to third nationals.
Article 20 of the Land Law, on the other hand, requires all foreigners purchasing land to apply, together with vendor, to the Chinese Government for prior “consideration and approval”, which clearly implies a right of the Chinese Government to disapprove. This is a requirement which the Land Bureau is attempting to enforce in the Standard-Vacuum case, and the Department therefore concludes that the procedure insisted on by the Land Bureau is in violation of treaty rights.
The Embassy is instructed to take up the case with the Foreign Office and other appropriate officials,14 pointing out the inconsistency of strict application of Article 20 of the Land Law with the Treaty in such cases, and requesting them to instruct the Land Bureau at Shanghai to waive this requirement in such cases. The Embassy should make clear that we have no objection to any procedure intended merely to ascertain the nationality of parties to the transaction and the fact that the land in question is actually protected by the Treaty, but that we cannot admit any right of the Chinese Government to refuse approval of such cases. Approval of such transfers should be automatic and immediate, and the normal procedure of applying to the Land Bureau for registration of transfer and issuance of a new deed in the name of the purchaser allows sufficient opportunity to check the facts of the case. Should the Chinese believe that pro forma compliance with the law is necessary, the Embassy might point out that appropriate authorities could instruct the Land Office to approve such transfers immediately upon application for registration without requiring applicants first to go through the cumbersome and dilatory process of prior application to municipal or district authorities for approval.