Reorganization of the mixed court system in Shanghai, 1906-1913

From the 1860s, British mercantile firms and banks in China suffered from certain activities carried out by their Chinese compradors, co-proprietors or other employees. These Chinese frequently used the names or assets of their British employers or commercial partners as the guarantee for their private sales on credit to other Chinese merchants. Only later, when unknown Chinese creditors suddenly appeared demanding that these British employers or commercial partners guarantee the debt, were these British mercantile firms and banks aware of how their names and assets had been used behind their back. So British mercantile firms and banks made every effort to avoid guaranteeing the private debt of their Chinese employees or commercial partners through the civil case proceedings at the Mixed Court and the Shanghai British Supreme Court. Unfortunately for the British, none of their attempts succeeded, and they could at most only reform the procedure of sales on credit to minimize commercial risk in the future. Even then, British firms and banks in China were not safe from being involuntarily made a surety for private transactions entered into by their compradors or other Chinese merchants. This was confirmed in a judgment of the High Court in London in a civil case (an appeal) brought by Chinese creditors in 1907. The court sentenced the defendant, the Hankou branch of the Chartered Bank of India, China and Australia, to guarantee any kind of commercial debt even if it had arisen from transactions not directly connected with them. So, until 1907 British mercantile firms and banks had no choice but to take responsibility for guaranteeing commercial debts caused by sales on credit.