"F 80 ملف 82/34 I امتياز أ.ب.و.ك" [ظ‎و‎‎١] (٤٣٦/٢٣)

in the calculation of the net profits of the company arising from this ^reat
extension of its activities, differences of opinion as to the correct interpretation
of the term " 16 per cent, of the annual net profits " began to arise between the
Persian Government and the company. By 1919 these differences had reached an
acute stage, and formed the subject of discussions in London between the then
Persian Minister for Foreign Affairs (Firuz Mirza) and Mr. (now Sir) William
McLintock, on the one hand, and the company's representatives on the other.
These discussions continued into the summer of 1920, but no final agreement could
be reached. The Persian Government thereupon decided to entrust the
negotiations to Mr. (now Sir) S. A. Armitage-Smith, who was at that time actins:
as its financial adviser.
The instructions to Mr. Armitage-Smith, which were issued by the Persian
Ministry of Finance, on the 29th August, 1920, ran as follows :—
" Monsieur,
" J'ai I'honneur de vous notifier que par la presente vous etes nomm^
comme representant du Gouvernement imperial pour regler definitivement
toutes les questions en litige entre the Anglo-Persian Oil Company et le
Gouvernement imperial de Perse.
" Dans le cas ou vous jugerez qu'un accord amical sur toutes les
questions pendantes, de nature a satisfaire entierement aux droits et aux
interets de la Perse, ne soit possible, vous avez I'autorisation d'avoir recours
a 1'arbitrage an sujet des revendications du Gouvernement imperial contre la
compagnie et d'admettre egalement ce meme procede, si ladite compagnie en
exprime le desir, concernant ses propres revendications.
" Pour le Ministre des Finances,
" Le Sous-Secretaire d'Etat,
"E issay."
Mr. Armitage-Smith's understanding of the powers delegated to him is
evidenced by the following extract from his report to the Persian Government: —
" It " {i.e., the agreement) " does not require or admit of formal approval
or ratification, for, under the powers which the Government did me the
honour to entrust to me, it is binding. At the same time, it is a source of
satisfaction for me to know that the brief resume which I cabled to Tehran
met with your Highness's approval, and I venture to suggest that it might
conceivably be in the public interest and a copy of this report might be
submitted for the information of a specially appointed financial committee of
the Majlis, in order that the situation may be generally appreciated."
The discussions between Mr. Armitage-Smith (who was assisted by
Mr. McLintock), and the company's representatives in London, eventually led to
the conclusion of two agreements. The first of these agreements settled the
differences then existing as to the amount of money which was to be handed over
by the company to the Persian Government in complete satisfaction of the latter's
claims for adjustments in its favour of the royalty payments up to the
31st March, 1919. The agreed sum was accordingly paid by the company, one
consideration for the payment being the acceptance by the Persian Government of
the second or ' c Armitage-Smith " Agreement.
The main features of the Armitage-Smith Agreement, which was signed on
the 22nd December, 1920, were as follows ;—
(a) Subject to certain conditions, limitations and exceptions thereinafter
mentioned, the Persian Government were to be entitled to receive
from the Anglo-Persian Oil Company a royalty of 16 per cent, on all
the annual net profits arising from the winning, refining and
marketing of Persian oil, whether all the stages of the above processes
be handled by the company itself, or through subsidiary companies, &c.,
and whether refining and marketing takes place within the Persian
Empire or not.