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Syllabus would not have become liable to compensate the victim of that error.

The plaintiffs' petition will be dismissed.
It is so ordered.


(Cong. No. 5–54. Decided June 3, 1959. Plaintiffs' motion for re

consideration overruled November 4, 1959)


Congressional reference; civilian pay; Shanghai Municipal Council

employees. The court is asked by Congress to determine whether plaintiffs have a legal or equitable claim against the United States and the amounts, if any, due from the United States, the claim being for wages, pensions and other benefits due the plaintiffs as a result of their employment with the Shanghai Municipal Council, on the ground that such amounts were lost because of the action of the United States in relinquishing its extraterritorial rights in China without first providing the necessary safeguards to ensure that the Chinese Government would assume and pay the plaintiffs the amounts due them by the Council. It is reported to Congress that adequate arrangements had been made with the Chinese Government for the payment of plaintiffs but that the Japanese occupation of Shanghai made this impossible, and the losses of the plaintiffs did not result from any action or failure to act on the part of the United States so that there is neither a moral nor an equitable obligation on the United States to compensate these plaintiffs, although Congress may if it wishes grant a gratuity to the plaintiffs in accordance with formula set

forth in the findings of fact. United States em 69(1) Congressional reference; equitable or moral obligation of Govern

ment-what constitutes; civilian pay-Shanghai Municipal Council.—Where there has been no failure on the part of the United States to fulfill its moral obligation to plaintiffs and the loss of civilian pay for work at the Shanghai Municipal Council was occasioned by the actions of others not within the control of the United States, there is no obligation, equitable or moral, on the United States to reimburse plaintiffs for their losses. Burkhardt United States, 113 C. Cls. 658,

distinguished. United States 69(1)


146 C. Cls.

Opinion of the Court

Mr. Myron Wiener for the plaintiffs.

Mr. David Orlikoff with whom was Mr. Assistant Attorney General George Cochran Doub for the defendant. Mr. M. Morton Weinstein was on the brief.

Maris, Circuit Judge, sitting by designation, delivered the opinion of the court:

By Senate Resolution 257, adopted June 1, 1954, the United States Senate referred to this court Senate Bill No. 2429, 83d Congress, entitled “A bill for the relief of certain American employees of the former Shanghai Municipal Council.” The reference was made under sections 1492 and 2509 of title 28, United States Code, with the request to "proceed expeditiously with the same, in accordance with the provisions of said sections, and report to the Senate, at the earliest practicable date, giving such findings of fact and conclusions thereon as shall be sufficient to inform the Congress of the nature and character of the demand, as a claim legal or equitable, against the United States, and the amount, if any, legally or equitably due from the United States to the claimants.” Following the reference seven of the claimants named in the Senate bill and the personal representatives of three others, all of whom we shall call plaintiffs, filed petitions in this court under Rule 18. The petitions claim wages, pensions and other benefits due the plaintiffs, or their decedents, under their terms of employment with the Shanghai Municipal Council. The plaintiffs assert that they have been deprived of the amounts claimed by reason of the action of the United States in relinquishing its extraterritorial rights in China and joining with Great Britain in rendering back to China the Shanghai International Settlement and thus terminating the Shanghai Municipal Council without providing the necessary safeguards to ensure that the Chinese Government would assume and pay the amounts due the plaintiffs by the Council.

The International Settlement at Shanghai, China, had its origin in a set of Land Regulations which were promulgated pursuant to separate treaties entered into by China with foreign nations, including the United States, by which the


Opinion of the Court Treaty Powers acquired extraterritorial rights in China. The Shanghai Municipal Council, the governing body of the Settlement, was endowed with general powers of municipal administration. It levied and collected taxes, exercised normal local governmental powers, entered into contracts, and operated the ordinary municipal facilities. It consisted of 14 members elected by qualified taxpayers residing in the Settlement. The Council owned the assets of the Settlement, holding land, public buildings, facilities, securities and cash. It could sue and be sued in specially constituted consular courts.

The plaintiffs were employed in various positions by the Council in the administration of its municipal functions. The United States was not responsible or in any way concerned with the recruitment of the plaintiffs or any other persons employed by the Council. Their salaries were paid in local Chinese currency. Under the terms of employment the plaintiffs were entitled to increases in pay, holidays, leave, medical benefits, retirement on pension at ages 50 or 55 after 20 years continuous service, and to withdrawals from the Superannuation Fund to which contributions were made both by deductions from plaintiff's salaries and by the Council. In March 1937, when the terms of employment were revised, Chinese currency and the rates of its exchange into pounds, dollars and yen were relatively stable. An employee on retirement would be paid in local currency the amount to his credit in the Superannuation Fund (his own and the Council's contributions). It was assumed that he would be able to derive a return from this amount of 5

percent per annum. Deducting the amount of this assumed return from one-half the employee's salary at the date of his retirement, the Council would pay him the difference quarterly as a pension. Although the difference was determined in local currency it was payable, in the case of a foreign employee, either in local currency or in foreign cur146 C. Cls. Opinion of the Court rency at fixed rates of exchange, at the option of the employee. In 1941 the terms of employment were revised to provide, inter alia, that in the case of a foreign employee payment would be made in the "Council's discretion either in the alternative currency applicable or in local currency.”

1 For brief reylews of the events leading to the signing of these treaties and of the rights held by the United States thereunder see The Chinese Esclusion case, 1889, 130 U.S. 581, 590_593 ; Reid v. Oovert, 1957, 354 U.S. 1, 60–61; 2 Hyde, International Law, 2d Rev. Ed., pp. 868-871, and the findings of fact set out below.


During 1931 the Japanese had invaded Manchuria and by July 1937, the hostilities had been extended into China proper. The Chinese economy was from that time forward subjected to the strain of a life and death struggle. By 1939 inflation had so affected the Chinese currency that the Shanghai Municipal Council found it necessary to supplement salaries with extra allowances for the cost of living. By 1940 these allowances exceeded 100 percent of the base pay.

On December 8, 1941, following the attack on Pearl Harbor and the declaration of war between Japan and the United States and Great Britain, the Japanese took control of the Settlement and the Council. Three of the plaintiffs had left China and were residing in the United States before this event. Seven of the plaintiffs continued to work for the Council until they were interned by the Japanese. In 1943 the Council was replaced by a Japanese puppet regime. Between 1943 and 1945 the seven plaintiffs were repatriated to the United States.

On January 11, 1943, Great Britain and the United States signed separate treaties with the Republic of China relinquishing their extraterritorial rights in China. Subsequently, other treaty powers entered into similar treaties with China. The pertinent provisions of the United States treaty are as follows:

“The United States of America and the Republic of China, desirous of emphasizing the friendly relations which have long prevailed between their two peoples and of manifesting their common desire as equal and sovereign States that the high principles in the regulation of human affairs to which they are committed shall be made broadly effective, have resolved to conclude a treaty for the purpose of adjusting certain matters in the relations of the two countries

"ARTICLE III “The Government of the United States of America considers that the International Settlements at Shanghai


Opinion of the Court and Amoy should revert to the administration and control of the Government of the Republic of China and agrees that the rights accorded to the Government of the United States of America in relation to those Settlements shall cease.

"The Government of the United States of America will cooperate with the Government of the Republic of China for the reaching of any necessary agreements with other governments concerned for the transfer to the Government of the Republic of China of the administration and control of the International Settlements at Shanghai and Amoy, including the official assets and the official obligations of those Settlements, it being mutually understood that the Government of the Republic of China in taking over administration and control of those Settlements will make provisions for the assumption and discharge of the official obligations and liabilities of those Settlements and for the recognition and protection of all legitimate rights

therein." 57 Stat, 767, 769. In September 1945 Japan surrendered. China was liberated and control of the Settlement at Shanghai passed to the Government of China pursuant to the treaties. The old Shanghai Municipal Council was not reestablished by the Government of China. In 1946 a Liquidation Commission was appointed, consisting of eight Chinese officials, to consider the problems connected with the administration and control of the former Shanghai Municipal Council, including specifically its obligations to its former employees. Attached to the Liquidation Commission were four Foreign Advisers representing the Governments of the United States, Great Britain, Switzerland, and The Netherlands. The Liquidation Commission appointed a subcommittee consisting of the four Foreign Advisers and four Chinese members to determine the rights of the former employees of the Council and to make recommendations thereon to the Commission. The subcommittee began its deliberations in November 1946. Differences arose as to whether the cutoff date for determining the Council's obligations to its employees was December 8, 1941, when Shanghai fell into the control of the Japanese, or September 30, 1945, the date on which China took control of the Settlement. It was agreed that provisional payment of superannuation and pension benefits be ascertained to December 8, 1941, without prejudice to the ultimate determination of

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