CO129-585-5 Sino-Japanese conflict- shipping on Pearl River 3-1-1940 - 25-8-1940 — Page 17

F3797/26/10

LIMITED DISTRIBUTION.

Decypher. Sir A. Clark Kerr (Shanghai).

D.

16th ugust, 1940. 16th.ugust,

16th August, 1940. 16th August, 1940.

R. 10.30 p.m.

No. 717.

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IMPORTANT.

57A.

Your telegram No. 935.

Facts are briefly as follows:

Agreement of February 8th 1939 (see Canton despatch to me No. 40, 1939) which provided for limited opening of outer river stipulated British ships should carry Japanese pilots for which service reasonable fee should be charged. On February 1st this year Japanese introduced a new scale of pilot fees which was roughly 7 times as high as that previously in force. Butterfield and Swire regarded this as entirely unreasonable and refused to pay, but their ships continued their sailings. In July Japanese Consul at Canton asked His Majesty's Consul-General there to make Butterfield and Swire pay full amount claimed to be due; in response to the second request His Majesty's Consul-General tendered a cheque for amount due under the old tariff. Japanese Navy then took hand and without regard for conversations which were going on between His Majesty's Consul-General and his Japanese colleague, peremptorily announced that unless full fees were paid by July 31st no pilot would be provided for Fatshan then at Canton, and which would therefore be unable to sail.

2. His Majesty's Consul-General was quite unable to get Japanese authorities to withdraw from this position and Fatshan remained at Canton. Hong Kong authorities accordingly treated agreement of July 1939 as being in suspense and withheld permission for Japanese transports to call at Hong Kong.

3. It looks as though local settlement may be reached shortly under which Butterfield and Swire would pay the money clained by Japanese as it were into court; its disposal being subject to agres- ment between His Majesty's Consul-General and his Japanese colleague who would also seek to reach agreement on the fees to be paid in future. Butterfield and Swire may also be required to send Japanese a vaguely worded letter of apology in reply to some trivial complaint made against them by Japanese Navy.

4. I have from the beginning impressed on His Majesty's Consul-General at Canton and Butterfield and Swire desirability of not allowing this question to become major issue and I think Company will now be prepared to agree, although rather reluctantly, to a solution on the above lines. (1835/16).

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