Shanghai, 24th June, 1897.
Sm,—I desire to bring to the notice of your Chamber the recent decisions of the Chinese Courts in the matter of calls due
i Secsice. to the bearing of those ina and Jay and especially to paliye sharebolae of the Bank of decisions upon the general interests of the foreign community of Shanghai.
Proveedings were recently instituted in the Shanghai Mixed Court inst two Chinese for the recovery of calls made in the liquidation of the Bank. The persons proceeded against had signed the usual forms of Transfer, their names had been duly entered on the Register, and not only had all the conditions of 1 liability been fully satisfied, but the defendants had, in addition, signed special agreements undertaking to pay calls on their shares and also agreeing that all questions between them and the Bank should be decided in accordance with the law of England. Nevertheless, both: the Magistrate of the Mixed Court and the Taotai of Fasopea declined to hear the cases, and the Bank has been obliged to have recourse to H.B.M. Minister. I may add that Sir Claude Macdonald has satisfied himself of the justice of the Bank's claims and has promised that he will do what he can to obtain their enforcement. The enclosed Memoranda (2) show clearly the history and present position of the matter.
Ttave already mentioned that each of the Chinese against whom suits have been commenced, has signed one or more special ereements with regard to his shares, and thins not, therefore, been necessary for the Bank in these two cases to insist upon the undoubtedly binding character of the ordinary instruments of transfer. It would seem, however, that if special Agreements, such as those above referred to, are not enforceable, little it any weight is to be attached to the provisions contained in ordinary Application or Transfer forms, so far as they Fereos, and the conclusion apparently follows rport to bind native applicants or trans-that Foreign Companies have no security for the mance by Chinese shareholders of the obligations incident to their position.
Under these circumstances it can hardly be necessary for me to urge upon your Chamber the adoption of measures calculated to protect the interests which are so seriously menaced.
The deci of the Taotai, based upon the construction of the Treaty between Great Britain and China, stands at preseat unreversed, and, if my view is correct, can be used as a precedent for relieving Chinese of their liability, not only to the numerous Foreign Companies of which they are reistered Shareholders, but to private in-Sividuals under transactions relating to purchases of Shares, such transactions bein, presumably tainted with the illegality whicl attaches to actual membership.
The same decision viewed broadly asa refusal to enforce a written agreement is capable of even a wider application, and it fs hardly too much to say that it throws 2 doubt on the validity of all written agreements between Foreigners and Chinese, with the possible exception of those which relate to matters specifically mentioned in Treaties.
The position taken up by the Taotai of Shanghai (vide his despatch—Appendix E. of Memorandum No 2) is clearly untenable, and I venture to hope that your Chamber, regarding the possible effect of his decision upon commercial interests generally, will protest against it in the proper quarter.
beg to enclose 8 additional copies each of he two Memoranda above referred to for the information of your Committee in case of need, and remain, Sir, Your obedient Servant, S. L. Darby, Acting Manager. The Chairman of the General Chamber of
Text read from the printed page and cleaned; old type leaves the occasional error.