Treaty of Versailles, Articles 120 and 257, [[section]] 2. The following represents the Japanese government's view on the ownership and use of government land: "(a) Government Land. (State Domain). With regard to the legal nature of the State domain in the territory the Japanese Government fully explained its attittude in its Annual Report for 1924. In its opinion, the State Domain in the mandated territory may be divided into two classes. The first class consists of those parcels of land which were transferred to Japan under article 257, paragraph 2 of the Treaty of Versailles, and the second of those which have been purchased by the Japanese Goverment or are exploited by it at is own expense. The former class is to be regarded as property belonging to the Government in its capacity of Mandatory. The same right may be said of the latter class. When, however, this second class of land is examined, it is found that it includes properties which have been purchased or exploited by the Government on its own account, and which may, therefore, be regarded as the actual domain of the Goverment. An instance of this is the land purchased from the German South Sea Phosphate Company. The mandated territory is administered by the Japanese Government as an integral part of its own territory, in accordance with the Covenant of the League of Nations. For this reason all State domains in the mandated territory are treated just like other State domains of the Japanese Empire, no discrimination whatever being set up between them.
"And land in the territory except such as is the property of private persons is considered part of the State domain, and no party other than the Government can exercise the right of occupation by priority. With regard to the management of the State domain, a South Seas Bureau Rule, promulgated in July,1922, declares that the Law on State Property of the Japanese Empire shal apply mutatis mutandis to the territory. According to this law, State domain is classified into the following four classes and for each class an appropriate procedure for its disposition and management is provided.