PROMOTION OF TRADE IN CHINA.

TUESDAY, MAY 10, 1921.

UNITED STATES SENATE, SUBCOMMITTEE ON THE JUDICIARY, Washington, D. C.

The subcommittee met pursuant to call at 3 o'clock p. m. in the room of the Committee on Interstate Commerce, Capitol, Senator Cummins (chairman of the subcommittee) presiding.

Present: Senators Cummins, Brandegee, and Walsh of Montana, members of

the subcommittee.

Present also: Senators Chamberlain and Jones of Washington, and Representative Dyer of Missouri.

Present also: The Secretary of Commerce, Hon. Herbert Hoover, and Mr. John Van A. MacMurray, Chief of Division of Far Eastern Affairs, Department of State.

The subcommittee then proceeded to the consideration of H. R. 4810, title of which is as follows: "An act to authorize the incorporation of companies to promote trade in China."

Senator CUMMINS. The subcommittee will be in order. The subcommittee has met to hear further upon the bill introduced by the Senator from Washington, Mr. Jones, and the House bill introduced by Mr. Dyer, which has passed the House and is now before our Committee on the Judiciary. The hearing will so far as possible be in continuation of a hearing held upon a similar bill on the 25th of February, 1921, and while we can not expect that there will not be some duplication I hope it will be reduced to its minimum.

Senator Jones, we look upon you as having this matter in charge. will you have called before us?

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STATEMENT OF HON. WESLEY L. JONES, UNITED STATES SENATOR FROM THE STATE OF WASHINGTON.

Senator JONES. Mr. Chairman, I want to ask first that you really consider H. R. 4810, as that bill covers the same subject as the one I introduced, and that bill having passed the House I will ask the committee to consider it.

The CHAIRMAN. Yes; the committee will act upon the House bill rather than upon the Senate bill, because that will bring the matter to an end.

Senator JONES. Mr. Chairman, I shall have to leave in just a moment, and I am not going to discuss the bill, because there are others here who will take up the different phases of it. Mr. MacMurray, of the State Department, is here, and I suggest that he be heard first. Mr. Powell and Senator Chamberlain will arrange about the order in which the other witnesses will appear, unless the committee has some special desire. I suggest that you hear Mr. MacMurray. Senator CUMMINS. I hope all the witnesses will remember that our time is somewhat limited, and while we want to hear everything that is material we hope it will be compressed as much as possible. Senator JONES. I think that will be done.

STATEMENT OF MR. JOHN VAN A. MacMURRAY, CHIEF OF DIVISION OF FAR EASTERN AFFAIRS, DEPARTMENT OF STATE.

The CHAIRMAN. We will assume, Mr. MacMurray, that you have something to say upon this subject, and if you will just discuss it in your own way we will be glad to hear you.

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Mr. MACMURRAY. Mr. Chairman, I confess to not having followed this matter before, and I do not know upon just what points you wish to touch, but may I present it as it appears to one who was connected with the legation in China for some time and who felt very constantly and pressingly the need of some sort of legislation which would be uniform and easily ascertainable and would enable American firms to do business there in the same way that a good many competing national firms do.

Of course, the fundamental fact about it all is that in China we enjoy extraterritorial rights by treaty. That means that our citizens and our corporations are wholly and completely subject to American jurisdiction and amenable only to American law. In order to carry on in China at all a juristic person must incorporate itself under some kind of American law, unless it is to forego that protection that we have by treaty and put itself under a foreign flag-Chinese, British, Japanese, or whatever it may be.

The only American laws under which they could incorporate have been those of the respective States. More recently the United States Court for China has held that an Alaska statute in regard to incorporation would serve the purpose. · The decision of the court in Shanghai has never been brought judicially into question; it is the fact, however, that in the minds of a good many Americans who are interested in business there there is, frankly, a doubt whether that ruling of the court would be sustained on appeal.

Senator WALSH. What is the ruling you refer to?

Mr. MACMURRAY. That a certain Alaska statute is applicable to the China jurisdiction. There has therefore been considerable hesitation on the part of Americans wishing to incorporate for China purposes about putting themselves under that Alaska statute, for fear that it might be declared not applicable. Senator CUMMINS. Why Alaska, rather than one of the States?

Mr. MACMURRAY. Because the Alaska law was a Federal law. The laws which the Revised Statutes make applicable to the Chinese jurisdiction are, first of all, the statutes of the United States. For that reason, the court held that a territorial law enacted by the Federal Government would apply.

Senator CUMMINS. Do you mean that a corporation organized under one of the States to do business in China would not be entitled to the jurisdiction of the United States Court for China?

Mr. MACMURRAY. Pardon me, Senator; I am afraid I misunderstand your question. It would, of course. But the effect of the court's decision was to create the Alaska law as the nearest thing to a Federal law that we have.

Senator CUMMINS. That is a psychological matter rather than a legal matter. Mr. MACMURRAY. It is really psychological, of course. It is really open to anyone to incorporate under the laws of Delaware or New York or any other State.

Senator WALSH. Was some disposition shown to incorporate under the Alaska statutes?

Mr. MACMURRAY. NO. As I say, Senator, the feeling was one of doubt as to whether that decision of the court might not be overruled.

Senator WALSH. What I mean is, is there a feeling there that if the Alaska statute would authorize the organization of a corporation to do business therethat is to say, if it would be convenient--would there be a disposition to incorporate under the Alaska statute?

Mr. MACMURRAY. I think probably there would be.

Senator WALSH. Because the foundation is the Federal statute rather than Some State statute?

Mr. MACMURRAY. Yes; and the court in applying that statute held that registration might actually be accomplished in China. That is the great point of convenience about the Alaska statute.

Senator WALSH. I do not understand what you mean by registration.

Mr. MACMURRAY. The registration of the corporation-the formalities attending it. The Alaska law required certain formailties, the registration of the articles of incorporation, and provided that it should be done I have forgotten the exact terms of the statute, but I think with the secretary of state of the Territory, for which purpose the United States Court for China held that the legation would be the equivalent in applying that statute to the China jurisdiction. You see, it was carrying that over by analogy into the China jurisdiction.

Senator WALSH. I do not understand that at all. I understand there is a statute of the United States providing for the organization of corporations in Alaska?