'F 80 File 82/34 I APOC Concession' [‎1ev] (21/436)

I need hardly say that my company has in no way accepted such a contention.
Indeed, had it been formally made, the company would have had no option but
to contest the matter before the competent legal authorities.
9. Such was the situation in 1928 when—there being other important but
less contentious questions needing settlement with the Persian authorities—a
series of discussions took place between his Highness the Minister of Court and
myself in London, Lausanne and—later—Tehran. These discussions eventually
led in the direction of negotiations for a new form of concession designed, on the
one hand, to admit of a shareholding participation of the Government in the
company's operations and profits, and, on the other, to secure to the company a
considerable extension of the concessionary period which, under the existing
concession, expires in 1961.
10. Considerable progress was made in drafting a new Concessionary
Agreement, which, in form and largely in substance, might have proved satis
factory An East India Company trading post. to both sides. In the final stage, however, when the actual extent of
participation came under review, it became quite impossible to reconcile the
demands of the Government with those which, though actuated with the strongest
desire to come to a generous and lasting settlement, I found it possible to concede
on the part of the company. The large royalties which were at that time accruing
to the Persian Government owing to the favourable market conditions, had
whetted its appetite for more, and—in substance—its new claims were based on
a series of formulae calculated, under conditions of commercial prosperity such
as were then existing, to give it a much larger maximum whilst securing to it an
excessively high minimum, however adverse future trading conditions
might become.
11. Finding it impossible to induce the Government authorities to take a
more practical view of the matters at issue, I left Tehran in April 1929, not
without hope that time and reflection would bring them to a more reasonable state
of mind, the more so as the Minister of Court gave me to understand that he would
again consider the matter and put forward new proposals.
12. No new proposals, however, were put forward, nor was any further
progress made until the autumn of 1931, when, at the instance of the Minister
of Court, prolonged discussions took place with him in London and Paris, with
the double object of coming to a new agreement which should take the place of
the Armitage-Smith Agreement, and of settling the accrued differences in respect
to royalty payments between 1920 and 1930. Since the views already expressed
by his Highness Teymourtache and the Imperial Commissioner had made the
actual question of the validity Of the Armitage-Smith Agreement a contentious
matter, it was agreed on both sides to conduct the negotiations with as little
reference to that agreement as possible—and, so far as it proved possible, this
was done.
13. These particular negotiations, which also covered the newly-raised
question of income tax, were successfully concluded, a draft agreement was drawn
up, which it was the intention to make operative from the 1st January, 1932,
and a further agreement was made with respect to settling the accrued differences
to which I have already referred. The agreement was subject to the principles
enunciated therein being put into proper legal and accounting form by the advisers
of the two parties, and, thereafter, to the approval of the Majlis.
14. Unfortunately, before these final stages had been attained, the annual
•general meeting of the company took place (June 1932), and the amount of royalty
for 1931 was thereupon notified to the Persian Government. Owing to depression
in the oil industry the amount was naturally far below that of earlier and more
prosperous years. Warning of this had been given to the Minister of Court
during the negotiations above referred to in London, and also both to him and
the Finance Minister by our resident director in Tehran. No actual figure was
mentioned, but it was stated that the royalty would certainly not exceed £500,000;
as a matter of fact, it ultimately worked out at approximately £307 000 as
compared with £1,288,312 of the previous year.
15. In spite of the warning given, this announcement evoked strong protest
by the Persian Government, and led to invidious and misleading comparisons
between the share of the Persian Government by way of royalty and that of the
British Government by way of income-tax and dividends. In violent press and
parliamentary propaganda, obviously inspired by the Persian Government, the
company has been publicly accused of falsifying its accounts and wilfully