A 19th Century Judgement

The 1883 case of Lim Guan Teet v Yew Boh Neo & anor was an action on a Promissory Note. The judgement states –

“By consent of both parties, if plaintiff goes to swear according to Chinese custom by cutting off head of a cock, and burning joss sticks before the temple in Pitt Street, he shall have verdict, if plaintiff refuses to do so, there will be verdict for defendants.”

This case came before the Penang court more than fifty years after the establishment of the Straits Settlements. While the parties were obviously sophisticated enough to bring their dispute to the courts, their preferred solution clearly evinces a preference to reach a result in line with their cultural preferences: it involved cutting off the head of a chicken.

Law in action is often not what it is perceived by its originators.

The Straits Settlements

The Straits Settlements was formed in 1826 when the three territories of Penang, Malacca and Singapore were combined to become the fourth Presidency of India under the administration of the East India Company. This state of affairs remained till 1867 when the Straits Settlements came under direct British rule as a crown colony.

The immigrant Chinese were largely left by the colonial authorities to organize themselves. In such a setting, private arrangements and norms emerged as a substitute for state control. Lawyers and economists refer to this as “private ordering”. Private ordering has many merits. In essence, where members of a group voluntarily submit to social norms, this can be welfare enhancing and can achieve efficient outcomes – a better functioning market, or better protection of rights. Modern examples include ICANN which controls the internet domain name system, the rules of a particular market, and professional and social groups.

In the 19th century, the early Chinese immigrants organized themselves along speech and kinship groups, as well as secret societies. The term secret society has certain negative connotations today but as originally conceived existed for a more noble reason. The secret societies in the Straits Settlements likely originated from the Heaven and Earth Society (also known as the Triad Society) that was active in Southern China. It is often said that societies such as the Heaven and Earth Society were established by Ming loyalists to carry on the struggle against the Manchus. In the Straits Settlements they soon lost their political purpose and became the means by which Chinese leaders exercised control over different parts of the Chinese community given the poor quality of the police force at the time.

In the 19th century, speech and kinship groups as well as the secret societies played many positive roles. Chief among them included the welfare of their members as well as resolving disputes. The secret societies unlike dialect and kinship groups knitted together a more heterogeneous membership through a ritual of brotherhood.

The secret societies did, however, degenerate over time to become increasingly lawless groups that engaged in gang warfare. Certain activities led to undesirable outcomes such as prostitution and the ‘sinkheh’ trade (which in its worst form resembled slavery), which were not regulated. Opium farms were established and are estimated to have contributed up to 50% of the annual revenue of the colonial government for most of the 19th century. As these were profitable activities, conflict arose between different groups for control of such businesses.

Lessons for the 21st Century

Some contemporary legal lessons can be drawn from this historical narrative.

First, the existence of close links within a particular Chinese community linked by speech or kinship was one reason for Chinese success in business. At a time when banking facilities were rudimentary, close links between Chinese businessmen from the same speech or kinship group engendered sufficient trust to allow informal credit arrangements to facilitate business transactions. The existence of the speech and kinship group also meant that there were informal mechanisms to punish members who abused the trust of another. In many developing countries with weak legal systems some measure of private ordering is necessary for business to be facilitated.

Unfortunately, one negative of such groups was that they tended to attempt to monopolize or improperly entrench their dominance in industries or trades they were involved in. Thus one could see clear concentrations of a particular group involved in certain businesses or trades. Secret societies were used to entrench such dominance. Therefore, a second contemporary lesson is that close-knit groups that order their affairs may have a tendency to exclude others from legitimate competition, or otherwise act in a manner that does not enhance the welfare of the wider community. This is one of the reasons for anti-monopoly laws and we see a modern resonance in cartel activities that in the past would have been legal in Singapore but are now illegal under the Competition Act.

A third lesson is that a certain degree of legal regulation is necessary for positive private ordering to take place and the key question is what the optimal degree of regulation is for a particular society. The absence of a properly functioning police force in the 19th century was undoubtedly a major reason why secret societies became a growing problem in the Straits Settlements that continued well into the 20th century. Well-designed laws that are enforced also limit the ability of groups to pursue their interests at the expense of the community as a whole such that overall welfare is diminished rather than maximised.

* This is part of a broader paper that the author is writing on Chinese immigrants in nineteenth century Straits Settlements.