'File 82/34 II (F 94) APOC Concession' [‎79v] (151/362)

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indicated above, the conclusion that this might be possible in practice appears to
have been based upon false premises.
Again, by article 17 of the concession, any dispute or difference between the
parties is to be submitted to two arbitrators at Tehran, one of whom is to be named
by each party, and to an umpire who is to be appointed by the arbitrators; the
decision of the arbitrators (or, in the event of their disagreeing, that of the
umpire) being final. By article 2 of the alleged agreement, failing agreement with
regard to the matters referred to, the question is to be submitted to a single
arbitrator, whose decision shall be final, such arbitrator, in default of agreement,
being nominated by the president for the time being of the Chamber of Shipping
in London. Furthermore, by article 9 of the alleged agreement, in the event of
any dispute arising in connexion with the calculation of royalty, &c., the question
or questions in dispute are to be submitted to a chartered accountant to be
nominated by the president for the time being of the Institute of Chartered
Accountants in England, the decision of such arbitrator being final. This change
in the constitution of the tribunal and the venue of the proceedings might
conceivably militate very seriously against the interests of the Government, and,
in this connexion, reference may be made to the statement of Messrs. Kerly and
Goddard, that one consideration of far-reaching importance must necessarily
be : Who is to be the arbitrator whose opinion will ultimately decide between the
parties ?
With regard to articles 3, 4 and 5 of the alleged agreement, attention is called
to the paragraph numbered 5 of the opinion of Messrs. Kerly and Goddard, in
which they state that, if the subsidiary companies are formed for the purpose
of working the concession or any part thereof (that is, substantially to search for
and obtain or to prepare for sale or to sell oil within the Empire of Persia or to
carry oil away from the Empire), the royalty payable ought to include an amount
equal to 16 per cent, of their profits and that no deduction should be made in
respect of the 16 per cent, of the profits of the Anglo-Persian Oil Company itself
also included in the calculation of the royalty, on the ground that the first-
mentioned amount has been brought into calculation.
Our reading of this is that the Imperial Government are entitled to a royalty
of 16 per cent, of the net profits of all subsidiary companies formed to work the
concession, and also to a royalt}^ of 16 per cent, of the profit^ of the Anglo-Persian
Oil Company, notwithstanding that the latter may hold shares in such subsidiary
companies. Assuming this view to be correct, then, in so far as articles 3, 4 and 5
apply to such subsidiary companies, all deductions stipulated for in those articles
would certainly seem to be a curtailment of the Imperial Government's rights;
and there are other matters included in the alleged agreement which appear to
affect prejudicially the rights and interests of the Imperial Government under
the concession.
As we understand the matter, it is a question entirely for the Imperial
Government whether they adopt the alleged agreement or not, but we venture to
think that the various matters we have indicated above point to the conclusion
that the adoption of the agreement would mean the Imperial Government giving
up important rights and interests under the concession.
If, however, it is intended to repudiate the agreement, we are of opinion
that steps should be taken to do so as promptly and with as little delay as possible.
If there are any further points upon which your Excellency would like to
have our views, it will give us much pleasure to place ourselves at your
Excellency's disposal.
We have, &c.
LUMLEY and LUMLEY.