CO129-557-9 British protection of companies in China 26-3-1936 - 27-2-1937 — Page 55

Enclosure in Bhanghai despatch to Peking No.351

of November 4th 1936.

Extract from "North China Daily News"

of November 4th 1936.

AN IMPORTANT DICTUM

in

Judge Penrhyn Grant Jones has rendered a

valuable service drawing pointed attention to the unsatisfactory state of the law elating to the registration of British Companies. It will be remembered that last year the Registrar of Companies prosecuted a certain company under Article 194 (2) of the China Order-in- Council 1925, for what appeared. cccording to Counsel, to be "an cbvious abuse of the judicial and diplomatic protection accorded to British persons in China." The argument was that as the bulk of the shares were in non-British hands the British control prescribed by the Order-in-Council for British registration was non-existent. The case was heard in H.M. Police Court and the Magistrate, in giving a reserved judgment, acquitted the accused on the ground that the non-British ownership of the majority of the shares was not sufficient to prove that the law as it stood had been broken. No appeal against this judgment was lodged a testimony to the cogency of the learned Magistrate's ruling and, in the circumstances admitted in Court, to the unsatisfactory draft- ing of the Order-in-Council. This journal took the view that the law required amendment for apart from other considerations, the existence of the system of extraterritorial jurisdiction made it damaging to legitimate rights under that system if a practice could grow up

to permit the nationals of Utopia, by assuming the status of Laputans, to do certain things impossible to them as Utopians.

Later this plea for amendment of the Order-in-Council was rein- forced at some length in a leading article which reviewed the facts of that particular case and urged that the necessary amendment should not be very difficult to effect. Although it was recognized that such action might cause hard- ship in certain special cases, it was pointed out that the existence of a loophole which permitted other concerns to obtain the cover of law for activities meriting no approval whatsoever, was the real issue at stake. Elimination of that loophole was therefore highly desirable.

In the Newmilks case which came before Judge Grant Jones the British character of the company was not in dispute. Nor were the circumstances generally comparable with those of the case heard by Mr. C. H. Haines last year in the Police Court. The Judge had to deal with a claim by an employee for the balance of his salary. The 1wo cases find common ground in that the Magistrate held that the non-British ownership of the majority of a company's shares was not necessarily a bar to registration as a British company. The Judge, in eliciting the fact that of 10,065 shares air save theodd 65 were held by non-British interests, expressed the view that it was an encroach- ment on the "privileges granted to British subjects by treaty with the authorities of this country" that such a company should be allowed to "masquerade as British.

The

Judge was, of course, not impugn- ing the action of the Registrar of

in Companies

the exercise of functions whereby the "masquerad- ing" company was registered, for obviously the Magistrate's judg- ment had shown that the Registrar had no other course, as the Order- in-Council stood. The importance of the Judge's forceful obiter dictum lies in the fact that it authoritatively draws the British Government's at- tention to an abuse of the law which the local British authorities them- selves, as shown by the unsuccess- ful prosecution last year, considered to be in need of redress.

It is preposterous that the time cf British officials should be oc- cupied in settling often intricate points of law and hearing voluble arguments, at the expense of the British taxpayer when the company concerned derives its right to those benefits by what cannot be described more fittingly than by Judge Grant Jones when he called it a masquerade. It raises, too, other no less serious issues. The privilege of extraterritoriality which British subjects enjoy by treaty between their Government and the Govern- ment of China is highly esteemed. British policy, especially in recent years, has

to been

scrutinize severely the exercise of that privilege lest it should, unwittingly or deliberately, be used as a cover to the operations of other nationals for whose personal actions it is im- possible for the British Government to take responsibility. It is com- mon knowledge that steps have from time to time been taken to tamp out such abuses when brought to light. Happily for the good name of Great Britain they are not frequent. Yet it is obvious that when a company, whose British registration is a mere "masquerade" or camouflage made possible by a loosely drafted Order-in-Council, can 50 avail itself of British services, the opportunity for abuses derogatory to British honour is wide open. This of course does not convey any criticism of the opera- tions of either of the two com- panies involved in the cases which have brought the anomaly to light. It merely seeks to emphasize the extremely proper objections which the Court has raised to the looseness of the law governing British reg- istration. Judge Grant Jones would be quite as justified to cavil at the obligation to investigate the delinquencies of some other com- pany registered in such terms, as he was, in the case under mention, to resent the encroachment on British privileges involved in his being called upon to settle a civil dispute between an employee and company which was British in ownership by virtue of 65 shares of a total of 10,065 allotted to its hareholders. It is greatly to be huped that the judicial criticism. will be brought to the notice of the authorities competent to make the requisite redrafting.

With compliments from the

"North-China Daily News"

Λον. 4. 1936.

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