13. Ibid., Letter from Mr. Thomas W. Lamont to Mr. M. Odagiri, dated June 23, 1919.

14. Ibid., Memorandum of the Dept. of State to the Japanese Embassy, July 30, 1919.

15. Ibid., Memorandum of the British For. Office, Aug. 11, 1919.

16. Ibid., Imperial Japanese Embassy, Washington, Aug. 27,

1919.

17. Ibid., Dept.'s Reply, Oct, 28, 1919, to the Memorandum of the Japanese Embassy, dated August 27, 1919.

17A. Ibid., Earl Curzon's Memorandum to the Japanese Ambassador, Nov. 20, 1919.

18. Ibid., Memo. of Imperial Japanese Embassy, Wash., Mch. 2, 1920.

19. Ibid., Memo. left with Lord Curzon by the Japanese Ambassador, Mch. 16, 1920.

20. Thomas W. Lamont, Preliminary Report on the New Consortium for China, p. 8.

21. Documents, op. cit., Dept.'s Memo., Mch. 16, 1920, to the Japanese Embassy in reply to the Japanese Memo. of Mch. 2. 21A. Ibid., Earl Curzon to Viscount Chinda, Mch. 19, 1920. 22. Ibid., Imperial Japanese Embassy, Washington, Apr. 3, 1920.

22A. Ibid., Memo. left with Sir Eyre Crowe by the Japanese Ambassador, April 14, 1920.

23. Ibid., Earl Curzon to Viscount Chinda, Apr. 28, 1920. 24. Ibid., Dept.'s Reply, Apr. 29, 1920, to the Memorandum from the Japanese Embassy of Apr. 3, 1920.

25. Ibid., Imperial Japanese Embassy, Washington, May 8, 1920.

26. Ibid., Memorandum Communicated by Japanese Embassy to British Foreign Office, May 11, 1920.

27. Ibid., Dept.'s Reply to the Note of the Japanese Embassy, May 8, 1920.

28. Ibid.. Memorandum Communicated to Japanese Embassy by British For. Office, May 17, 1920.

29. Ibid., French Gov't to Japanese Emb., May 25, 1920.

30. Ibid., Letter to Mr. Thomas W. Lamont from Mr. N. Kajiwara, dated May 11, 1920; letter from Mr. Thomas W. Lamont to Mr. N. Kajiwara, May 11, 1920; also cf. Millard's Review, Oct. 23, 1920.

XXV

THE NEW INTERNATIONAL BANKING

CONSORTIUM (cont.)

THE Constitution of the New Consortium is found in the agreement of October 15, 1920.1 The purposes are to negotiate and carry out Chinese loan business and to supply the Chinese Government with the necessary capital for economic reconstruction and improved communications. They are embodied in the Preamble of the Agreement as follows:

"And whereas the British, French, Japanese and American Groups were formed with the object of negotiating and carrying out Chinese loan business.

"And whereas the said national groups are of the opinion that the interests of the Chinese people can in existing circumstances best be served by the coöperative action of the various banking groups representing the investment interests of their respective countries in procuring for the Chinese Government the capital necessary for a program of economic reconstruction and improved communications."

The requisites of the Consortium to operate in China are the diplomatic support given by each Government interested to their respective national banking groups, and in case of competition in contracts, to the Consortium as a whole, as set forth in the Preamble:

"And whereas their respective Governments have undertaken to give their complete support to their respective national groups the parties hereto in all operations

undertaken pursuant to the agreement hereinafter contained and have further undertaken that in the event of competition in the obtaining of any specific loan contract the collective support of the diplomatic representatives in Peking of the four Governments will be assured to the parties hereto for the purpose of obtaining such

contract.

The membership in the New Consortium is limited to the National Banking Groups. The admission of a new National Banking Group requires the unanimous consent of the parties, subject to the approval of their respective Governments. Each National Banking Group possesses the right to increase or decrease its own membership, but shall not admit, without the consent of the other Groups, any new member that does not belong to the nationality of the Banking Group and domiciled in its market, and shall bind the withdrawing member to the observance of the restrictive provisions of the Consortium and the incoming member to abide by the same (Article 1).

The scope of the New Consortium does not include the vested interests nor the existing agreements as to industrial undertakings in which substantial progress can be shown to have been made, nor does it aim to invade the domain of private enterprises in banking, industry or commerce. It covers, rather, the existing loans in which no substantial progress has been as yet made, and all future loans, administrative, political, industrial, and financial, to be made to the Chinese Government or any province. To be more specific, it aims "to include within its scope only those basic transportation systems, highways, reorganization of the currency, etc., which would serve to establish sounder economic conditions throughout China and thus form a firmer foundation for the encouragement of private initiative and trade." 2 Arti

cle 2 of the agreement sets forth the scope of the Consortium as follows:

"This agreement relates to existing and future loan agreements which involve the issue for subscription by the public of loans to the Chinese Government or to Chinese Government Departments or to Provinces of China or to companies or corporations owned or controlled by or on behalf of the Chinese Government or to any party if the transaction in question is guaranteed by the Chinese Government or Chinese Provincial Governments but does not relate to agreements for loans to be floated in China. Existing agreements relating to industrial undertakings upon which it can be shown that substantial progress has been made may be omitted from the scope of this agreement."

At the same time, however, it was mutually agreed that the existing agreements or future loan agreements within the scope of the Consortium should be subject to the provisions of the Consortium Agreement (Article 3).

The rights and the duties of the constituent groups are defined on the principle of complete equality. That is to say, every group enjoys the same rights and carries the same obligations as the other. To be more specific, equal rights are accorded to all in all operations, the signing of contracts, the equal sharing in existing agreements and future contracts, and in the liberty to decline participation. On the other hand, equal obligations are placed upon all groups for expenses connected with any business, for preliminary advances in any transaction, excepting stamp duties and the profits and losses of each group in their operations (Article 4).

Respecting liability, each group is to liquidate its own liabilities, disclaiming any responsibility for joint liability. Furthermore, each group is to realize its own profits within its own market, on the understanding,

however, that the issues in each market are to be made at substantial parity (Article 5).

Inasmuch as it is quite possible and probable that, in consequence of war, the groups will not be able to share the loans equally, in view of the needs for reconstruction in Great Britain and France, but must be compelled to allow the group or groups, meaning particularly the American group, to assume the greater share of the burden, it is therefore provided that the party or parties unable to take an equal share of the burden allotted or entitled can ask, in writing, the other party or parties who are competent and willing to make the additional issue for their account, which is known as "the Residuary Participation" (Article 6).

As the system of Residuary Participation is liable to be abused and thus to imperil the interests of the other parties, rigid conditions are stipulated to safeguard the proper operation of the system. Notice of such Residuary Participation must be given and received prior to the execution of the agreement. The party so requested is to be free to decide the apportionment of the additional issue among its own members, or else they shall share them equally among themselves. The issues in pursuance of Residuary Participation shall be placed on a parity with the regular issue. The party issuing the Residuary Participation shall be free to decide upon the expenses in connection with its flotation. It is entitled to a commission of not more than one and one-half per cent of the nominal amount of the Residuary Participation and to charge the party or parties making the request for expenses in connection with the issuance, these to be calculated in accordance with the proportion which the Residuary Participation bears to the entire issue. It is not required to subscribe thereto, nor to cause others to do likewise. It shall "apply all subscriptions received