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majority of the shareholders and managing directors were British subjects and the greater part of the capital subscribed also British.
On the 27th June Mr. Forbes wrote to me enclosing a letter from Messrs. Deacon Looker and Deacon, the legal advisers of Messrs. Jardine Matheson and Company, in which it is claimed that under the Merchant Shipping Act of 1894 the launches of a Company registered in a British Colony were entitled to fly the British Flag. I enclose a copy of this letter and of my reply.
On the 7th July I received a further letter from the firm in reply to which I reiterated the position I had taken up in my former letter, which, I stated, I was not prepared to recede from, except under instructions from you.
Even assuming that Messrs. Deacon and Company's contention was sound in law I was of opinion that the political aspect of the matter made it necessary for me to submit the question to you before admitting a principle under which any body of Chinese resident in China could acquire the privilege of flying the British Flag on Chinese inland waters, by the simple expedient of registering themselves as a Hong Kong Company combined with the mere colourable pretext of establishing an office in the Colony.
Messrs. Jardine and Company have not, as far as I am aware, appealed to you against my decision, but, as early in August I had reason to suspect that the question would be again brought before me in a manner in which I might find it difficult to treat otherwise than from a legal point of view, I wrote to His Majesty's Crown Advocate for his opinion. I enclose copy of his reply from which it appears that he considers the whole question turns on what constitutes the "principal place of business".
The Swatow Launch Company run on the inland waters in the neighbourhood of Swatow, and their head office in point of fact could not be otherwise than at this port. The launches never visit Hong Kong nor are they capable of doing so, and it could only be by a latitude of interpretation approaching to