'F 80 File 82/34 I APOC Concession' [‎1gr] (24/436)

III
V*
(b) The Government was not to receive royalty on the profits arising from
transporting oil by the company's tankers, but a procedure designed to
protect Persian Government interests was agreed for calculating
freight rates.
{c) The net profits on which royalty was to be calculated were to be the
adjusted profits for income tax in the United Kingdom, subject to
the various adjustments embodied in the agreement.
(d) In arriving at the net profits of subsidiary companies (as defined in the
agreement), on which the royalty had to be calculated, the company
was to be entitled to make certain deductions in the cases of refining
and distributing companies (the principle being that the company was
entitled to receive a fair return on its capital invested in the said
companies).
(e) Special provision was made for the calculation of the net profits on
Persian oil in cases where a refining or distributing subsidiary
company handled oils other than Persian oil.
(/) Further, the company undertook in the agreement " that it will not enter
into any fictitious or artificial transactions which would have the effect
of reducing the amount of royalty payable."
As mentioned in the covering letter, the Imperial Commissioner (his
Excellency Eissa Khan Fayz) first contended in 1928 that the Armitage-Smith
Agreement was invalid inasmuch as (so he claimed)—
(a) Sir S. Armitage-Smith had exceeded the powers entrusted to him.
(b) The agreement had not received the sanction of the Majlis.
The company has always claimed, and still claims, that the Armitage-Smith
Agreement is valid unless and until replaced by another form of agreement.
In respect to the views of the Imperial Commissioner as expressed in 1928,
it is of interest to note the following extracts from letters written by him to this
company in 1925 :—>
June 5.
" Pains have been taken to draw up an agreement as a guide alike to us
as to you, and only by adhering to it can we work in the best mutual interest."
June 22'.
" I am most anxious to reach an amicable settlement of all the questions
at issue, whilst at the same time firmly maintaining the rights of my
Government on every question of principle as laid down in the agreement of
the 22nd December, 1920."
July 15.
" My whole desire is to make the agreement the sure foundation of our
actions, and so enable us to work in an amicable and businesslike relationship
calculated to further our mutual interests to the best advantage."
Enclosure 2 in No. 1.
Translation of an Extract from the " Berliner B'drsen-Zeitung " of
September 22, 1932.
THE Persian Legation in Berlin writes to us as follows in regard to the
incorrect statements which have appeared in various papers on the question of
the share in profits of the Persian Government in the Oil Company in Persia :—
" The oil concession was granted to D'Arcy in the year 1901. Oil was
produced already in the year 1905. The first royalties were paid by the oil
company in the year 1914, namely, an amount of almost £9,000. Since that
time, and although oil was produced right through the war, not a pfennig