Inclosure 4 in No. 1.
Mr. Bourne to Consul-General Sir P. Warren.
Dear Sir Pelham,
Supreme Court, Shanghae, May 27, 1907. IN December last Mr. Rose, Vice-Consul, in charge of the shipping office, asked my advice about the transfer of a ship into the name of a Hong Kong-registered Company, the shareholders in which he believed to be all or nearly all Chinese, bringing to my notice Lord Salisbury's despatch, dated the 13th October, 1898, instructing His Majesty's Consul-General, Canton, that he should satisfy himself, before according protection to any Company registered in Hong Kong, that a majority of the share- holders as well as of the managing Board of Directors were British subjects and that the greater part of the capital employed in the business was also British, and bringing also to my notice the Merchant Shipping Act of 1894, section 1 (d), and asking which direction you ought to follow.
I explained that while, generally speaking, protection is correlative to jurisdiction, protection is given under the prerogative, and that therefore the extent of protection can be regulated by order of the Secretary of State; but that an Act of Parliament cannot be overridden by an executive order given in virtue of the prerogative. Therefore the Merchant Shipping Act must be followed, section 1 of which authorizes the registration of a ship owned by a Company registered in Hong Kong. No details were given me, nor was the question whether the Company had its principal place of business in Hong Kong raised by Mr. Rose or considered by me. between the despatch and the Act of Parliament.
I merely decided What passed was by word of mouth.
I am, &c. (Signed) F. S. A. BOURNE, Assistant Judge of His Majesty's Supreme Court.
I have shown this to Mr. Rose, who agrees.
Inclosure 5 in No. 1.
Memorandum re Case of Steam-ship “ Canton."
Question re Status of Companies registered in Hong Kong as owners of British ships.
THIS is a case in which the Canton Steam-ship Company, a Limited Liability Company, British in nationality, by virtue of its registration in Hong Kong, but with a known preponderance of foreign capital, applied to be registered as the owner of a British ship at Shanghae.
In a despatch from Lord Salisbury, dated the 13th October, 1898, it was pointed out that "the fact that a Company was registered in Hong Kong does not ipso facto entitle it to British Consular protection.
The Consul should satisfy
himself that a majority of the shareholders, as well as the managing Board of Directors, are British subjects, and that the greater part of the capital employed is also British."
In view of these instructions, His Majesty's Consul-General hesitated to recognize the Canton Steam-ship Company as the owner of a British ship, although, by the Merchant Shipping Act of 1894, section 1 (d), it appeared that the Company was legally entitled to demand such recognition.
In considering the application of the instructions, Mr. Bourne, Assistant Judge of His Majesty's Supreme Court, expressed the opinion that the "extent of protection" is a matter which can be regulated by order of the Secretary of State, but that an Act of Parliament cannot be overridden by an executive order given in virtue of the prerogative.
It appeared to His Majesty's Consul-General, therefore, that difficulties might arise if a vessel was accepted under the Merchant Shipping Act as a British ship entitled by law to certain rights, whilst the owners might be excluded from some, at least, of these rights by the official prerogative. The advisability of recognizing ships owned by bodies corporate registered in Hong Kong, but with a known preponderance of foreign capital, was therefore referred to His Majesty's Minister, and instructions were asked as to future procedure, the decision of this question being of importance in view of the trequency of similar applications in Shanghae.
On the 8th May, 1907, His Majesty's Minister forwarded to Shanghae, in despatch
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No. 25, copies of certain correspondence dealing with this question which had been received by him from the Foreign Office. Whilst expressing with great clearness the views of the legal authorities in England as to the general status of Companies registered in Hong Kong, the decisions contained in these papers are chiefly based on the locality of the "head office" of the Company for the purposes of the application of the Merchant Shipping Act, section 1 (d). This question was never actually raised by His Majesty's Consul-General in the case of the "Canton," owing to the fact that the Company concerned was known to have a bona fide office in Hong Kong, and that the ship had its head-quarters in and was trading from the Colony. The point at issue was whether the Company was entitled to be the owner of a British ship by virtue of its registration in the Colony.
With regard to the "principal place of business" or "head office," there is much difficulty in deciding the rights and restrictions which are covered by section 1 (d) of the Act. The correspondence from the Foreign Office makes it clear that Companies not having their principal place of business in a British possession have no right to claim recognition as the owners of British ships. This point of view was maintained also by Sir Havilland de Sausmarez in the case of the steam-ship "Culmore" (copy of Judge's remarks inclosed).
Whilst of great value to the Registrar of Shipping when refusing to recognize undesirable ships which are really the property of non-British owners, this clause may prove an unfair restriction on the Shipping Companies of good repute, which are registered in Hong Kong, but which carry on all their business in Shanghae. It is clear that a British Company carrying on business under foreign laws, such, for instance, as one established in France or in the United States, would be unable to claim British Consular protection or recognition for its ships under section 1 (d) of the Merchant Shipping Act. At the same time it would appear that Companies trading in Shanghae are on an entirely different footing. By virtue of their extra-territorial rights they are subject to Courts whose "jurisdiction is. exercised as far as circumstances permit on the principles of, and in conformity with, English law for the time being in force (Order in Council of 1904, section 89). Is it placing too broad a construction on these extra-territorial rights to interpret them as including Shanghae for the purposes of the Merchant Shipping Act as part of the United Kingdom? spirit of ex-territoriality can be construed in this manner, it will make the position of British shipping in China waters very much clearer and more satisfactory than is at present the case.
If the
The fact that Shanghae is a port of registry and that it is the head-quarters of a prosperous and steadily-increasing British shipping community makes it very desirable that a clear understanding of the privileges and obligations of British ship-owners should be clearly formulated.
Shanghae, May 31, 1907.
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