'File 82/34 II (F 94) APOC Concession' [‎75r] (146/362)

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staff, which is limitatively defined as " such as the managers, engineers, borers
and foremen." The concessionnaire infringes this undertaking indirectly by
constructing refineries and other works outside Persia, and directly by employing
Indian workmen in Persia itself, despite the Government's repeated protests.
{d) Article 10 plays a vital part in the structure of the concession contract.
It is the only article that settles, from the pecuniary standpoint, the division of
the profits between the two contracting parties associated in the undertaking :
<C A sum equal to 16 per cent, of the annual net profits of any company or
companies that may be formed " is to be paid annually to the Government.
The execution of this article has always been seriously incomplete. The
concessionnaire not only flatly refuses to pay the 16 per cent, on the profits of
certain of its subsidiaries, but even in respect of those that it agrees to subject to
the dues it calculates them on bases which the British expert McLintock has shown
to be incorrect; even the accounts produced are of such a nature that
Mr. Armitage-Smith. notwithstanding all his friendliness towards the company,
does not hesitate to write : "In my opinion, these accounts are somewhat
ambiguous " (letter to the Persian Prime Minister).
These quotations are given merely to indicate the state of affairs. The full
gravity of the breaches of obligations in connexion with the dues can only be
established by a thorough examination by an accountant.
(e) In addition to all these fundamental breaches of obligations, the under
taking regarding the procedure provided for in article 17 of the concession has
not been observed. It reads :—
tc In the event of there arising between the parties to the present
concession any dispute or difference in respect of its interpretation or the
rights or responsibilities of one or the other of the parties resulting
therefrom, such dispute or difference shall be submitted to two arbitrators at
Tehran, one of whom shall be named by each of the parties, and to an umpire
who shall be appointed by the arbitrators before they proceed to arbitrate.
The decision of the arbitrators, or, in the event of the latter disagreeing, that
of the umpire, shall be final."
On several occasions the Persian Government has been in disagreement with
the company and has asked it to refer the dispute to arbitration; but the company
has always refused (see Appendices II and V).
28. According to the most undisputed principles, the failure of one party
to discharge his obligations entitles the other not to discharge his own; this rule
of justice and equity is known to all legislations, though they may differ as to the
manner of putting it into effect.
Roman law allows the party suffering by the non-fulfilment of the obligations
assumed towards him to notify the other party that he reciprocally regards
himself as released from his own obligations. French law requires the party to
apply to the courts in order to vindicate his rights.
As between these two types of legislation, Persian law shares with Roman
law the following rule : The party may himself, of his own motion, cancel the
contract in case of complete non-fulfilment or partial but serious non-fulfilment.
It is beyond question that that is the character of the non-fulfilment in numerous
grave forms of which Persia had to complain.
There can be no grievance against the Persian Government for having
followed the principle of Persian law.
It could not be asked to resort to the procedure laid down in article 17; for,
inasmuch as it was cancelling the contract, it would not, without contradicting
itself, regard itself as bound by any article of that contract—the more so because
the article in question was one that the other party had always refused to observe.
Moreover, the decision taken was not one against which the company had no
remedy. If it regarded the cancellation as infringing its rights, it had only to
apply to the courts.
Two lines of action were open to the company : either to negotiate with the
Persian Government, which announced that it was prepared to conclude a new
contract with the company on equitable bases, or to apply to the Persian courts.
29. Such being the situation, it can only have been through a misunder
standing that the British Government felt called upon to intervene.
30. To interpose between the parties amounted in effect to a claim to remove
from the jurisdiction of the municipal courts a dispute which naturally belonged
to them, and hence to infringe Persia's jurisdictional independence.
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