1 The legal bases of the police in the French Concession

When the French Concession was established in Shanghai, there was no plan to create a police force. To understand why and how a foreign police force could develop on Chinese territory, it is necessary to examine the legal bases of French presence in Shanghai.

1.1 The legal bases of the French Concession

The legal bases of the French Concession were based upon the ‘unequal treaties’ signed between China and France, of which the Whampoa and Tianjin treaties were key.

1.1.1 The Whampoa and Tianjin treaties

Shanghai was opened to foreign trade after the First Opium War, when the Qing Empire was defeated by the British. On 29 August 1842, representatives of Great Britain and China (Sir Henry Pottinger, and Ki Ying and Ilipou respectively) signed the Treaty of Nanking; one article of which allowed the opening of commerce in five ports: Guangzhou (Canton), Xiamen (Amoy), Fuzhou, Ningbo and Shanghai, with the right to establish consulates in these ports.[1]

After the Treaty of Nanking, Sir Henry Pottinger decided to establish a settlement in Shanghai, along the banks of the Huangpu River, between the Soochow Creek (Suzhou he) and Yangjingbang Creek. A captain of artillery, George Balfour, was appointed British Consul in Shanghai, where he arrived on 5 November 1843. He signed the first regulations regarding the establishment of the British Settlement in Shanghai, with the Daotai, Gong Mujiu, on 29 November 1845.[2]

The French followed in the footsteps of the British. On 24 October 1844, Théodose de Lagrené signed at Whampoa, at the mouth of the Pearl River near Canton, on the gunboat Archimède, a treaty of 36 articles establishing commercial relations with China.[3]

1.1.1.1 The treaty of Whampoa

According to the Treaty of Whampoa, the French and their families were henceforth authorised to transport, settle down and engage in commerce without let or hindrance in five ports: Guangzhou, Fuzhou, Ningbo, Xiamen and Shanghai (Article II).[4] All the French who arrived in one of the five ports could rent houses and shops to deposit goods, or lease land to build houses and shops. They were also allowed to establish churches, hospitals, hospices, schools and cemeteries. To this end, the local authority, after consultation with the Consul, set aside the cities’ most convenient areas for the French to reside in—where, thereafter, they could carry out construction whenever they wished to do so. The number of houses and extent of land to be allocated to the French in the five ports was not limited and was determined according to the needs and convenience of the beneficiaries. If the Chinese violated or destroyed churches and cemeteries, the guilty would be punished according to the law of the land (Article XXII).[5]

French residents or visitors to one of the five ports were allowed to move without restraint in their immediate vicinity and could attend to their business as freely as Chinese nationals. However, they could not exceed certain limits, which were fixed between the Consul and the local authority, nor could they, under any circumstances, engage in business operations outside these limits (Article XXIII).[6]

1.1.1.2 The treaty of Tianjin

According to the Treaty of Nanjing, Article XXXV stipulated that if modification of some clauses became necessary, France could negotiate with the Chinese government 12 years after the treaty was signed. Most-favoured-nation treatment (最惠国待遇) was also offered to France (i.e. France would be entitled to the same privileges—grants, systematic benefits, tax exemption and protection—as those granted to other countries).[7]

In 1854, Britain, France and the United States demanded that the articles of the Treaty of Nanjing be modified. The demands included opening all of China to British merchants, legalising the opium trade, exempting foreign imports from internal transit duties, suppressing piracy, regulating the coolie trade, granting permission for a British ambassador to reside in Beijing and giving precedence to the English-language version of all treaties over the Chinese. The Qing Dynasty court rejected these demands. Britain and France thereupon jointly initiated the Second Opium War, using the pretext of the Arrow Incident and the execution of Father Chapdelaine. After the war, the Qing government was forced to sign treaties (of Tianjin) with Britain, France, Russia and the United States.[8]

The major points of the treaty were: Britain, France, Russia and the United States would have the right to establish diplomatic legations (small embassies) in Peking (a closed city at the time); ten more Chinese ports would be opened to foreign trade, including Niuzhuang, Danshui (Tamsui), Hankou, and Nanjing; all foreign vessels (including commercial ships) would have the right to navigate freely on the Yangzi River; foreigners would be able to travel in the internal regions of China (which formerly had been banned); and China would have to pay an indemnity to Britain of 4 million and France of 2 million taels of silver each.

The treaties of Tianjin stipulated the same rights as the treaties of Whampoa regarding residence of foreigners in the treaty ports. However, to better defend their rights with force, the treaties of Tianjin allowed the presence of French gunboats in the main ports of China, which would help facilitate the exercising of consular authority over the French merchant boats.[9]

The treaties of Whampoa and Tianjin just laid the foundations for a residential area, with shops and cemeteries, for foreigners in the treaty ports—but it never meant to establish an enclave which operated outside Chinese judicial and administrative controls. But, because the Chinese officials of Qing court had no idea of the ways in which modern diplomacy and sovereignty worked, those flawed articles could be interpreted in favour of the foreigners.

1.1.2 Special agreements between Shanghai Daotai and the French Consuls

After the treaties, the British (in 1845), the Americans (in 1848), and the French (in 1849) settled in the zones designated by the local authority in Shanghai. The Proclamation of Daotai Lin on 6 April 1849 designated the following limits with regard to French residence:

Moi, surintendant, etc., avec Minn (Montigny), avons déterminé que les quartiers pour la résidence des Français seront en dehors de la porte du nord de la ville de Shanghai et auront au midi le canal qui suit les remparts de la ville; au nord de la crique de Yang-king-pang; à l’ouest le rivulet du temple de Kouang-ti jusqu’au pont de la famille Tchou; à l’est les bords de la rivière (Houang-pou) entre le temple des Cantonniers et le bout oriental de la crique de Yang-king-pang; en foi de quoi on posera des marques.[10]

It was also agreed that if the designated lands were not enough, the Shanghai Daotai and the French Consul in Shanghai could determine other areas, according to need and convenience. Subjects of other foreign countries could settle in the French residential area if they obtained permission from the French Consul beforehand.[11]

Unlike the British settlement, this proclamation designating land for the French only detailed the limitation of their residence—it did not address issues of administration within the settlement. As in the Land Regulations of 1845, the proclamation tackled the problem of hiring watchmen, as well as other instructions to maintain order inside the settlement. However, it did not authorise either the British or the French to set up a municipal council and an independent administration outside of Chinese authority.

For the British Settlement, the Land Regulations stipulated in Article 12 that:

The foreign merchants who rent land or houses in the area north of Yang King Pang should negotiate between themselves to build bridges, to keep the roads clean, to set up street lamps, to establish fire extinguishers, to plant trees and maintain roads, to dig trenches and drainage, and to employ watchman (雇用更夫). The Consuls convoke conferences at the requests of renters to discuss and share the above mentioned costs. The watchmen are to be decided by the foreign merchants and Chinese citizens. The regulations about watchmen should be made and the chief of the watchmen is to be designated with the participation of Chinese authority. If gamblers, drunkards or beggars harass and harm the foreign merchants, the Consul should notify the local authorities to make punishments according to laws.[12]

The rule limiting the number of Chinese allowed to reside in the settlement was also stated in Articles 15 and 16:

The residents inside the limits of foreign residences should not lease from each other, nor are they allowed to construct houses to rent to Chinese merchants. The foreign merchants must not construct houses to rent to or serve for Chinese.[13]

However, as more and more Chinese rushed into the settlements to escape war and turbulence over the coming years, this law limiting the number of Chinese residents in the settlements was as robust as the piece of paper it was written on.

1.2 From the administration of French and foreign residents to the administration of Chinese

According to the Whampoa and Tianjin treaties, the French Consul had the right to arrest and pass judgement on his own national subjects, acting as police and judge to French nationals in China and Shanghai.

Article XXV of the Treaty of Whampoa stipulated the French Consular’s jurisdiction over their nationals:

When a French citizen has a grievance or a complaint to make against a Chinese, he should first present his grievance to the Consul, who, after reviewing the case, will try to arrange it amicably. Similarly, when a Chinese has reason to complain about a French individual, the French Consul will hear his claim with interest and will seek a friendly arrangement. But if, in either case, such a thing was impossible, the Consul will require the assistance of a competent Chinese official, and both, after considering the matter jointly, shall rule according to justice.[14]

The Chinese authority is responsible for the arrest of Chinese who are involved in affrays or quarrels between French and Chinese; the Chinese would then be judged and punished according to Chinese laws (Art. XXVI, Art. XXVII). The French involved would be arrested by the French Consul and punished according to French laws (Art. XXVII, Art. XXVIII). However, in the case of disputes between French and other foreigners, the Chinese authorities would not get involved in any way.[15]

On 12 April 1849, Charles de Montigny wrote to the Minister of France: ‘These concessions are on the other hand indispensable to giving the Consul of each nation the possibility of exercising jurisdiction over its nationals.’[16] And, in his letter dated 16 October 1850:

It is still only a matter of principle...but these principles will become much important when trade relations are linked with France and the port (Shanghai); these questions of principle will be linked to the rights of police and court that are favorable to security of our merchants and their interests...[17]

It is clear that the Consular jurisdiction and the rights of police were quite important for French interests in China.

The Consul’s right to act as judge and police was also confirmed by the law of 8 July 1852, which stipulated:

Les consuls sont partout revêtus du caractère de magistrats pour la solution amiables des différends qui naissent entre leurs nationaux, négociants, navigateurs ou autres. Dans les pays du Levant et en Barbarie, en Chine, ces pouvoirs sont plus étendus et entraînent l’exercice de la juridiction civile, commerciale ou criminelle...[18]

As greater numbers of Chinese and foreign residents began to settle down in the French Concession in Shanghai, the French Consul’s policing role, under the guise of keeping peace and order in the concession, was extended to cover all who lived in the concession. The Consul’s right to police the settlement was now a territorial jurisdiction and no longer confined to jurisdiction of nationality.

However, the French Consul’s right to arrest non-French residents had been disputed by the foreign consuls in Article 16 of the Règlement d’Organisation municipal of 1866:

No foreigner could be arrested inside the concession by virtue of a warrant emanated from a foreign judge or a foreign tribunal, without authorization of the French Consul or without the assistance of the agents placed under his orders.[19]

Article 16 was revised in 1868 as follows:

...the arrest warrants, judgments, seizure order etc. that emanated from a foreign judge or a foreign tribunal and intended to be executed in the limits of the French Concession, must firstly, except in case of extreme urgency, be presented to the French Consul or at least to the Chief of the Municipal Police. The police chief could send one or several agents placed under his orders to accompany the carrier of judgement or mandate, and if necessary, to give him assistance.[20]

The Chinese authority still held on to certain administrative prerogatives, such as the right to arrest Chinese suspects or collect taxes in the settlements. The treaties also stipulated that the foreign consuls and local Chinese officials had to share the right to judge cases between Chinese and foreigners (this later became the Mixed Courts in the International Settlement and French Concession in Shanghai).[21]

1.2.1 The immigration of Chinese residents in the concession

On the 19 March 1853, the Taiping Rebels occupied Nanking and the whole Jiangnan area. Shanghai was threatened by the approaching Taiping armies;[22] on 8 September 1853 a group of rebels claiming to be associated with the Taiping Rebellion [Small Sword Sect (Xiaodao Hui)] occupied the Chinese quarter.[23] The Shanghai magistrate (上海知县) was killed and the Daotai was forced to seek refuge in the American consulate and find shelter in the foreign settlements. For 17 months, the Chinese local authority was temporarily paralysed.[24]

As a result of the unrest and violence, a large number of Chinese fled to the settlements. This sudden influx brought significant changes: the limit set on the number of Chinese residents allowed inside the settlements was broken; Chinese residents had to be regulated to safeguard foreign interests in the concession; and, when it came to deciding on the modes of law and administration, foreign modes prevailed over local ones.[25] Moreover, as the local Chinese authority was unable to maintain law and order over its Chinese subjects during this time of war and disorder, the foreign powers seized the opportunity to gain administration of Chinese residents inside the settlements.

Between 1853-64, the city suffered ten years of turbulence as a result of the Taiping Rebellion. However, when order and peace was regained in Shanghai, the foreign settlements refused to give back the administration of Chinese inside the settlements. Whereas in judicial cases the Mixed Court maintained the control of the Chinese government over its subjects,[26] policing, tax collection and other basic municipal rights remained in the hands of foreigners. They had obtained these rights on the pretext that the Chinese police were corrupt, and that the Chinese courts and runners were notoriously prone to irregularities which would inevitably lead to injustice.[27]

1.2.2 The Second Land Regulations of 1854 and the establishment of administration in the settlements of Shanghai

As stipulated by the Land Regulations of 1845, Chinese were not allowed to reside in the foreign concessions. However, in 1854, the French, British and Americans signed a second Land Regulation with Shanghai Daotai, which legalised the Chinese presence in the settlements. From then on, Chinese were allowed to buy or rent houses and/or land inside the French, British and American settlements, but only once permission had been obtained from foreign consuls and the Chinese local authority.[28]

Etant donné qu’aucun sujet chinois ne peut acquérir de terrain ou louer ou construire des maisons sur les concessions étrangères, sans d’abord obtenir une autorisation sous le sceau officiel des autorités locales, autorisation sanctionnée par les consuls des trois puissances-il y a été décidé que la procédure suivante doit être observée par n’importe quel Chinois désirant louer un terrain ou des maisons dans lesdites limites. Il doit faire établir une demande écrite par son propriétaire, et si ce dernier est un étranger, à son consul, et directement aux autorités locales, s’il est un indigène, en déclarant son domicile, son âge, son lieu de naissance, sa profession, la description et le plan de la maison qu’il va construire, les usages de la maison, les noms et le nombre de locataires. Et s’il n’existe pas d’objection de la part des autorités locales et des consuls, la permission lui sera donc accordée de résider dans les concessions étrangères.[29]

The Regulations also helped define the jurisdiction over Chinese subjects residing in the settlements, in the form of a type of ‘co-jurisdiction’ between the foreign consuls and the local Chinese authority. Those who broke public health and safety regulations were fined by the consuls and the Chinese authority. For example:

... in order to prevent the risk of fire, it is forbidden for the Chinese to build houses or straw sheds in the vicinity of houses of foreigners, under pain of prosecution by the Daotai...it is forbidden to accumulate filth or let filthy water run everywhere, fire guns, let horses run on the roads etc., all such noisy and filthy nuisances shall be subject to a fine of ten taels. All fines will be collected by their consuls, and by the Chinese authority for those without consuls.[30]...Anyone wishing to sell liquor or open shops to sell liquor must obtain permission from the consuls; and if the applicant is Chinese, he must also get permission from the Daotai.[31]

As can be seen above, it is clear that in the 1854 Land Regulations, the Daotai still had some power over Chinese affairs inside the settlements. On paper, it seemed that a mode of co-administration still worked, but, in practice, the right of administration by the Shanghai Daotai was always pushed outside the limits of the settlements. Co-administration was monopolised by the foreign consuls and the Municipal Council inside the settlements. According to Feetham, the police powers in the settlements were transformed from non-exclusive powers to exclusive powers that ruled out any exercise of authority on the part of the Chinese police or yamen runners over the Chinese residents in the Settlement, unless authorised by the consuls and with assistance of the Municipal police.[32]

According to the 1854 Land Regulations, the British and American settlements and French Concession were to be governed together. However, from the outset, the French Consul showed great reluctance for this amalgamation; finally, in 1862, he set up his own municipal organisation (Conseil Municipal d’Administration (Municipal Administration Council or MAC)) which marked the separation of the French Concession from the foreign settlements in Shanghai.

1.3 Separation of the French Concession and the establishment of French administration in the concession

In a letter from Edan to Alcock, dated 4 October 1854, Edan expressed doubts over the validity of the Land Regulation in the French Concession:

Le règlement territorial qu’il s’agit aujourd’hui d’appliquer, quoique ayant reçu l’approbation et la signature des ministres des trois puissances, est resté jusqu’à présent sans date; de plus, en ce qui a rapport à son exécution, vous n’ignorez pas, monsieur, que dans des circonstances récentes une distinction fort grave a été établie dans des actes publics à noter préjudice entre les deux rives du Yang-king-pang, relativement à la protection qui devait être accordée à l’établissement étranger. La validité et la force obligatoire de ce règlement, en ce qui concerne la France, pourraient donc être légitimement mises en question.[33]

‘La distinction fort grave’ refers to the fact that the French Concession was excluded from the joint defence scheme for the foreign settlements when the rebels attacked Shanghai.[34] In fact, this was one of the reasons the French Concession declared independence and set up its own defence and municipal organisations.[35] In 1862, the first French municipal council was created in Shanghai, and it functioned from 1 June of that year. It consisted of five members appointed by the French Consul and approved by the Assembly of Landowners. The first general meeting of landowners in the concession, to hear the report and approve the municipal accounts, took place on 30 April 1863.[36]

As the French Concession was not part of the foreign settlements, it was deemed that it should have its own regulations separate from the Land Regulations of 1854. So, in 1866, the ‘Projet de règlement général pour les concessions françaises’ was issued by the Special Commission of Foreign Affairs in Paris.

At the beginning of the draft regulations, it was stipulated that:

Les règlements municipaux qui suivent seront observés scrupuleusement par tous les habitants des concessions françaises, quelle que soit leur nationalité, et tous devront contribuer proportionnellement, aux charges publiques, puisqu’ils profitent de la protection et de la sécurité dont ils jouissent sous la direction de l’autorité consulaire française qui y réside.[37]

It meant that all those who resided in the French Concession, regardless of nationality and even if they were Chinese, had to obey the Regulations. Article 2 confirmed the extended powers that the French Consul would now enjoy:

Les territoires concédés à la France conserveront toujours leur nationalité, et, bien qu’ils ne puissent être considérés comme territoire français, les autorités chinoises ne pourront y faire arrêter aucun de leur nationaux, y procéder à aucune enquête ou y imposer des taxes sans en avoir préalablement obtenu l’autorisation du Consul, et les agents de ce dernier seront seuls chargés de mettre à exécution les mesures convenues.[38]

In this article, the territorial jurisdiction of the French Consul, and the exclusivity of Chinese police and other administrations inside the French Concession were quite clearly expressed.

In the following ‘Règlement d’Organisation de la Concession Française’ of 1866 and 1868, some articles were revised; even though the two regulations mentioned above were no longer included, the principles were still being practiced. The French claimed that their rights of administration in the concession were delegated by the Chinese authority.

Quoique revêtu, par délégation du Gouvernement chinois, de la plénitude des pouvoirs administratifs en matière municipale, le Consul général n’exercera directement, à l’avenir, que ceux de ces pouvoirs qui se rattachent au maintien du bon ordre et de la sécurité publique. Pour ce qui concerne les autres branches d’administration, il sera seulement investi d’une sorte de contrôle supérieur et tutélaire; le conseil votera le budget, délibérera sur toutes les mesures d’intérêt général, dirigera les services municipaux, percevra les taxes et ordonnancera les dépenses.[39]

However there are no official Chinese documents which establish such a delegation of administrative powers to the French municipality. After closer examination, the French legal scholar, Jean Escarra, found some written evidence—as in the case of Tianjin—of the relinquishing of rights of administration and policing in the concessions by the Chinese authorities. With regard to Shanghai however, as there is nothing in writing on any surrender of such rights by the Chinese, it may be assumed that because the Chinese government did not safeguard these rights when the concessions were opened, the foreign powers were able to seize them. As for the French Consul’s right to promulgate the Règlement d’administration Municipale in the concession in the absence of express legal arrangements, custom was the sole basis of regulatory power.[40] In fact, it is thanks to a protocol between China and Japan on 19 October 1896, and the clause granting most-favoured-nation status to France, that the consulate’s rights to police inside the concession were legalised.[41]

Even the French court in 1928 was puzzled by the legal statutes of the French Concession in Shanghai during the case of the Shanghai Tramways vs. the French Municipal Administration Council in Shanghai, and ruled that the French Concession of Shanghai was not a French administrative entity:

Si les renseignements donnés par la Banque de l’Indochine dans la lettre qu’elle m’a adressée sont exacts, le caractère d’unité administrative française aurait été refusé à la concession parce que les traités de Whampoa et de Tianjin, qui ont autorisé la concession, ont réservé la souveraineté de la Chine sur tout le territoire et s’opposent ainsi à l’établissement, sur ce territoire, d’une collectivité du droit public français. Mais cette réserve de la souveraineté de la Chine ne paraît pas être complète, puisqu’elle ne s’étend pas à la juridiction, et qu’en outre, l’autorité municipale de Shanghai semble avoir qualité pour lever des impôts sur ses administrés.[42]

1.4 Origin of the police in the French Concession of Shanghai

The first police force in the French Concession was established in June 1856, during the period of the Taiping rebellions in Shanghai, when a large number of refugees and deserters flocked into the French Concession, threatening safety and order therein.[43] According to Maybon and Fredet, Chinese authorities were responsible for public safety in Shanghai, but their lack of concern and incompetence meant the foreign settlements were able to seize the power to manage law and order within the concession[44]—it proved an excellent opportunity to steal municipal power from the Chinese authorities.

In the beginning, this police force was financed by the Shanghai Daotai (who paid the French Consul $300 from July 1856 to March 1857).[45] When the Daotai was no longer able to pay, tenants in the French Concession refused to meet the cost themselves, believing that the police were inefficient and that it would cost less to hire Chinese watchmen.[46] Thus, following the meeting on 11 March 1857, the police force was disbanded. However, when the unstable political situation worsened and famine struck the southern provinces (causing serious security problems in Shanghai), the question of the lack of a police force was placed on the agenda once again. In December 1857, a meeting of land renters was held to discuss the creation of a 12-man police force. Finally, after much debate, the first police force (as agreed by the proprietors) came into being.[47] This tiny police force was simply not strong or large enough to cope with the turbulent city of Shanghai during its troubled years, so they often had to work with foreign marine soldiers to keep order in the concession. In 1862, there were only 18 men in the French police force,[48] so, to complement its numbers, a volunteer army was organised in 1861.[49]

When the French Municipal Administration Council was established in 1862, symbolising the independence of the French Concession from the foreign settlements, it seized control of the police force from 1 June 1862.[50] There were 23 men, including one superintendent and two sergeants. It was composed exclusively of French or foreigners, who made their submission to the French Consulate and were therefore answerable to the French court.[51]

To organise the police, new regulations were created—any who did not obey were dismissed. A note of instructions determined the responsibilities of the police superintendant:

1. Command the police.

2. Control the work of the inspector of roads.

3. Control the work of tax collector.

4. Provide overall supervision of roads and docks, lighting, and everything related to public roads.

5. Judicial prosecution of the agents of both services when needed.[52]

As the police force and other municipal services were set up, the problem of revenue had to be addressed. In order to maximise tax revenue, the Chinese authorities were barred from taxing Chinese living in the French Concession. In April 1863, the French Consul negotiated with the Daotai who readily accepted the Consul’s demand. He published a proclamation which declared that the Chinese authorities would no longer levy any tax on Chinese residing in the French Concession. In addition, the French Consul demanded the Daotai pay an annual fee of 4,000-5,000 taels for the maintenance of the police in the French Concession.[53] Thus, it could be argued that, by paying this fee, the Shanghai Daotai did not actually give up his jurisdiction over the police in the French Concession.

However, the Daotai was soon to be embarrassed by the French police that he had so willingly paid for. In January 1864, a group of police agents sent by the county magistrate (知县), under authorisation of the French Consul, arrested a number of criminals in a gambling house in the French Concession. They arrested 17 Chinese and ‘looted’ the gambling house, confiscating over $800 and some jewellery. According to French opinion, this operation was a type of ‘squeeze’ and the individuals arrested were, in fact, not criminals at all.[54] From then on, Chinese police were forbidden to exercise arrests in the French Concession. The only authorised police in the French Concession were the French police.[55] They also served not only to expel the Chinese police but also other Chinese forces that operated in the French Concession.

Despite the proclamation of April 1863 (when the Daotai agreed to cease taxation of Chinese residents in the French Concession), the Chinese authorities continued to collect those taxes, largely because the Chinese government needed money to quash the Taiping rebellion: ‘c’est l’unique moyen de faire face aux dépenses pour délivrer le pays de l’insurrection...les taxes que nous levons sont entièrement employées à y rétablir la paix et la tranquillité’.[56] Given that most Chinese took refuge in the foreign concessions, and that the Chinese authorities had to pay for the foreign army that protected Shanghai and the foreign concessions[57], it could be argued that the right of taxation in an emergency should not be refused. The French Municipal Council, however, disagreed and were determined the Chinese authorities should not have the right to levy tax in the French Concession. To resolve this problem once and for all, an agreement was signed between the French Consul (Mauboussin) and the Shanghai Daotai on the 30 June 1863:

...as the right to levy taxes on the property is ceded exclusively to the French Municipal Council, under condition that the revenue produced by rental taxes that I agreed to rise to double, so as not to affect your revenue, will be divided equally between the council and the Daotai.[58]

However, the French Municipal Council did not want to accept this agreement, so, on 23 November 1863, another agreement was signed between the French Consul and the Daotai, which stipulated that assessment of rents and the amount of tax would be determined by delegates of Daotai and members of the French Municipal Council, but only the latter were in charge of collection. The quarterly tax was levied on the basis of 16 percent, which meant that each side received 8 percent for the tax (Art.2). The expenses of the Council would not be subject to the control of Chinese authority (Art.3). Collection accounts would be kept in duplicate and a copy delivered to the Daotai (Art.4). The tax could not be increased in the future (Art.5). The Council had to deposit the amount due to the Daotai in the Bank of Customs every month.

Articles 7 and 8 determined that due to the establishment of the rental tax, the Daotai will not establish new taxes or any other taxes over the Chinese living on the French Concession (Art.7). The collection of rental tax will cease as soon as peace is restored in the province of Jiangsu (Art. 8).[59]

The Municipal Council reluctantly ratified this agreement on 10 December 1863. However, the Chinese government did not stop taxation in the French Concession, and the French Police were called on to act on behalf of the council. On 23 January 1864, the French police intercepted three Chinese agents who were collecting a new tax of 500 taels from a Chinese wine dealer in the French Concession. They arrested the Chinese agents and immediately confiscated the funds received.[60]

With this evidence in hand, the French Municipal Council organised a meeting which declared that ‘the Chinese, beset on all sides, could no longer cope with the municipal taxes and even less with what the municipality had to collect on behalf of the Daotai’. As the Chinese authority had deliberately broken the promises made, the French Municipal Council informed the French Consul that, for these reasons, he would terminate the agreement, and that all Chinese agents making new attempts to collect tax in the French Concession would be arrested.[61] At a meeting on 10 February, the Council, noting that because Chinese authorities had not yet provided any explanation for the actions of their agents, considered itself to be ‘as released from any obligation by the Convention of 30 June’. Most importantly, it declared that the Chinese rental tax would be collected, for its sole benefit, on the basis of 8 percent.[62]

It was a severe blow to the Chinese authorities in Shanghai, as, from that point on, the income from taxes on Chinese residing in the French Concession belonged entirely to the French Concession. As well as completely losing its rights to taxation in the French Concession, the Chinese government faced added pressure from the French police with regard to the presence of any Chinese authority in the concession. Policing an area was an effective way to monitor the expanding borders of the concession, and the police were a primary force in maintaining the municipal services in the concession. In the following years, whenever the French Concession built new roads outside the concession’s limits, police officers were sent to affix a number to Chinese houses and collect taxes under the pretext of providing police protection and municipal utilities like water and electricity. The French Concession police began to guard an area without limits, thus building and consolidating the powers of the concession.