CO129-588-24 China- British extra-territorial rights- negotiations with China 23-11-1942 - 1-1-1943 — Page 294

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article. You should therefore reply to Chinese Government on similar lines.

5. United States Government have since informed us that they will propose to Chinese Government expansion of preamble to include reference to principle of equality (but not reciprocity). If the Chinese agree we might do something similar but we can await developments.

References in following paragraphs are to articles in our draft treaty.

6.

We agree to proposed change in Article 1.

7. You should oppose the changes in clause 2 of Article 3 and clauses 3 and 4 of Article 4 for the reason that they would seem capable of vitiating some of the rights in question, and that the word "legitimate" in our draft appears to offer sufficient safeguard to the Chinese Government.

8. The proposal for the termination of the Convention for the Extension of Hong Kong Territory will be dealt with in a separate telegram.

9. We object to adding the words "or other illegal. practice" in Article 5 because certain Chinese regulations such as those requiring re-registration which we have not hitherto accepted might be used to vitiate titles. The United States Government will try to meet the Chinese on this point by amending the latter part of clause 1 after the words "such existing rights or titles" to read "shall be indefensible and shall not be questioned upon any ground excet upon proof established through the process of law of fraud or of fraudulent or other dishonest practices in the acquisition of such rights or titles, it being understood thất no right or title shall be rendered invalid by virtue of any subsequent change in the original procedure through which it was acquired". We are willing to adopt the same wording. We agree to omit final words in our draft relating to confiscatory action during Japanese occupation..

10. We agree that rights and titles mentioned in Article 5 shall be subject to the laws and regulations of the Republic of China concerning taxation, national defence and the right of eminent domain. We object, however, to the proposed restriction in the last clause of this article... because it might be used arbitrarily to limit the market for British landowners and prevent them from obtaining a fair price for their property. Moreover it would not be in accordance with the principles of equality and reciprocity so

You could add that far as the British treaty is concerned. the political purpose which the Chinese Government probably have in mind (the prevention of land purchases by Japanese) might be achieved by regulation and procedure without emphasising in the treaty the political aspect of the matter.

11. We object strongly to the proposed change in Article 6. We attach importance to obtaining national treatment in the matter of carrying on commerce which His Majesty's Government are entitled to claim on a basis of equality and reciprocity.

/Nevertheless,