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 law, with broad political administrative functions, including police, taxation and education. To have divested the company of these functions would have been to abandon the entire "special mission" of the South Manchuria Railway, as originally conceived and subsequently developed.

Numerous issues arose in regard to the administrative rights of the Japanese within the South Manchuria Railway area, especially as to the acquisition of land, the levying of taxes, and the maintenance of railway guards.

The railway area includes, in addition to a few yards on each side of the railway tracks, fifteen municipalities, termed Japanese "railway towns", situated along the entire system of the South Manchuria Railway from Dairen to Changchun and from Antung to Mukden. Some of these railway towns, such as those at Mukden, Changchun and Antung, comprise large sections of populous Chinese cities.

The right of the South Manchuria Railway to maintain practically complete municipal governments in the railway area rested legally upon a clause in the original Russo-Chinese Railway Agreement of 1896, which gave the railway company "absolute and exclusive administration of its lands". The Russian Government, until the Sino-Soviet Agreement of 1924, and later the Japanese Government, which acquired the original rights of the Chinese Eastern Railway so far as concerned the South Manchuria Railway, interpreted this provision as granting political control of the railway area. The Chinese always denied this interpretation, insisting that other pro·visions in the Treaty of 1896 made it clear that this clause was not intended to grant such broad administrative rights as control of police, taxation, education, and public utilities.

Disputes regarding the acquisition of land by the railway company were common. By virtue of one of the clauses of the original Agreement of 1896, the railway company had the right to acquire by purchase or lease private lands "actually necessary for the construction, operation and protection of the line". But the Chinese cont ended that the Japanese attempted to make improper use of this right, in order to obtain additional territory. The result was almost continuous controversy between the South Manchuria Railway Company and the Chinese local authorities.

Conflicting claims as to the right to levy taxes within the railway area led to frequent controversy. The Japanese based their claim upon the original grant to the railway company of the "absolute and exclusive administration of its lands"; the Chinese, upon the rights of the sovereign State. Speaking generally, the de facto situation was that the railway company levied and collected taxes from Japanese, Chinese and foreigners residing in the railway areas, and that the Chinese authorities did not exercise such authority, although they claimed the legal right to do so.

A type of controversy which was frequently arising was where the Chinese attempted to tax produce (such as soya-bean shipments) which was being carted to the South Manchuria Railway towns for transport by rail to Dairen over the Japanese line. This was described by the Chinese as a uniform tax, necessarily to be collected at the boundaries of the Japanese "railway towns", since to refrain from doing so would have been to discriminate in favour of produce carried by the South Manchuria Railway.

The issues as to Japanese railway guards led to almost continuous difficulty. They were also indicative of a fundamental conflict of State policies in Manchuria already referred to and were the cause of a series of incidents, resulting in considerable loss of life. The legal basis of Japan's alleged right to maintain these guards was the oft-quoted clause in the original Agreement of 1896 which granted to the Chinese Eastern Railway "the absolute and exclusive right of administration of its lands". Russia maintained, and China denied, that this gave the right to guard the railway line by Russian troops. In the Portsmouth Treaty, 1905, Russia and Japan,