The British Envoy was in favour of granting this permissionand maintained that there was nothing in the Treaties exempting theChinese population of the Settlements from paying taxes to theirown government. The merchants in Shanghai saw more clearly thanthe Envoy the difficulties that might arise， as it would bring aboutdual and rival jurisdiction within the same area. They were obliged，however， to bow to the will of the Envoy and to admit the right of theChinese Government to tax her own subjects for national purposes. Asa compromise it was arranged that the tax should be collected by theMunicipality and handed over to the Chinese authorities. Accordinglyon June 12th， 1863 ， it was agreed that the Shanghai MunicipalCouncil should collect from Chinese residents 20 per cent. rental taxand that half the proceeds of this tax should be paid to the Taotai andH. B.Morse： International Relations of the Chinese Empire， Vol. II， p. 126.
half to the Council， and that no further tax should be imposed by theChinese Government.
Although theoretically it would appear that the Chineseauthorities had the right to impose taxes on the Chinese residing inthe Settlements， yet practically， if this right had not been restricted， itmight have resulted in a great hardship on the Chinese themselves andwould have subjected them to increasing exactions on their commerceand personal property. One of the chief reasons for their seeking ahome in the Settlements was to be free from government interferencewith their trade. As a matter of fact the Chinese Government haddone little or nothing for the protection of the Settlements and theexpense had fallen almost entirely on the foreign governments havingextraterritorial jurisdiction therein.
The Establishment of the Mixed CourtThe exercise of jurisdiction over the Chinese residents raised manyquestions. How were Chinese offenders to be dealt with? Should theChinese set up a court in the Settlements? The solution was found bythe establishment in 1864 of what is known as the “Mixed Court，”
presided over by a deputy of the Shanghai Magistrate. Police cases wereto be heard by the deputy alone. In criminal cases against Chinese，in which a foreigner was interested， a delegate from a consulate wasto sit as assessor with the deputy. In civil cases， where it was betweenChinese， the deputy was to sit alone; where it was a suit of foreignersagainst Chinese， a consular assessor was to sit with the deputy. Appealswere to be heard by the Taotai sitting with a Consul as assessor.
At first the court was held in one of the outbuildings of the BritishConsulate， and did not command much respect， partly because of thelow rank of the Chinese deputy appointed.
The procedure was amended in 186 9， when it was agreed thatthe court was to be presided over by a deputy who had the rank ofsub-Magistrate. All cases affecting the interests of foreigners were tobe heard with an assessor， but the deputy sat alone where both partieswere Chinese; servants of foreigners could be summoned only with theconsent of the Consul concerned; criminal charges punishable by deathwere to be tried by the Shanghai Magistrate.
In later years there was further modification. The consular assessorbecame a party to the judgment in every case—in police cases becauseof the interest of the foreign community， and in suits between Chinese，on the ground that “the Chinese official， with his traditional methodsof enforcing judgments， must not be admitted to an unfetteredjurisdiction within the area reserved for foreign trade and residence.“These changes， as we shall see later， came to be regarded by the Chineseas an infringement of their sovereign rights.
Land Regulations of 1869
In 1866 the Land Regulations of 1854 were revised by the landrenters in concert with the Consuls， without previous consultationwith the foreign Ministers in Peking.
The new rules recognized the establishment of the FrenchConcession. The Council was increased to nine members， vested withamplified powers， and personally exempt from any claim arising outof their administration. The Municipal Council， as a body， however，was liable to the jurisdiction of the Court of Consuls， established forthis special Purpose. Upon requisition of twenty-five land renters theConsuls might jointly or singly convene a public meeting and adoptmeasures which， if passed， should have the force of laws. The landrenters should have the right to vote by proxy. Chinese were to havethe right to participate in the Municipal Government.
These new rules and bye?laws were not sanctioned by theforeign Ministers at Peking until 186 9， and in sanctioning them，the Diplomatic Body eliminated the clause in regard to Chineseparticipation in the municipal Government.
The new Land Regulations were drawn up without Consultationwith the local Chinese authorities， but the latter made no objection totheir being put into operation as the changes did not affect Chineseinterests.
Shanghai is probably the only municipality in the world whereproxy voting is permissible， and naturally this has given rise to muchcriticism， inasmuch as it lodges a dangerous power of blockingprogressive legislation， in the hands of absentee landlords.
Detailed rules for the Court of Consuls were not promulgateduntil thirteen years later on July 10th， 1882.
Although attempts， as we shall see， we re made in later years toamend the Land Regulations still further， yet no change was endorsedby the Diplomatic Body until 1898， and the revision made at that timedid not materially alter the Regulations of 1869.
In 1860 Mr. Pickwood was employed as Secretary of the Council.
He was succeeded in 1862 by Mr. R. F. Gould and reforms were madein the internal working of the Municipality. A small staff of assistants，including a qualified engineer， a European interpreter， and an officer tosupervise the Municipal revenues from wharfage dues were appointed.