Papers Relating to the Foreign Relations of the United States, 1923, Volume II

891.6363 Standard Oil/327

The Minister in Persia (Kornfeld) to the Secretary of State

Teheran, January 5, 1924.
[Received February 16.]

No. 343

Sir: Referring to the Legation’s despatch No. 336 of December 29, 1923,¹¹ I have the honor to transmit herewith translation of the contract awarding the northern oil concession to the Sinclair Exploration Company.

I have [etc.]

Joseph S. Kornfeld

[Enclosure—Translation]

Contract Granting an Oil Concession to the Sinclair Exploration Company

The Persian Government, in accordance with the powers conferred on it by the Law of the 23 Djauza, 1302, authorizing it to grant a Concession for the Northern Petroleum to an American company, and whereas, the Sinclair Exploration Company fulfills the conditions stipulated by the Medjliss, has concluded and signs the present contract, subject to the ratification of the Medjliss, with the said Company, duly represented by its authorized attorney, Mr. Ralph H. Soper.

Contract of Concession for Petroleum, Natural Gas, Asphalt, Bitumen, Ozokerite, and All Other Similar Hydro-Carbons

The Undersigned,

His Highness, Reza Khan, Sardar Sepah, President of the Council of Ministers, for and on behalf of the Imperial Government of Persia, hereinafter referred to as the “Government”

of the first part,

and

Ralph H. Soper, for and on behalf of the Sinclair Exploration Company, a corporation duly incorporated under the laws of the State of Delaware, United States of America, whose principal business office is at 45, Nassau Street, New York City, hereinafter referred to as the “Concessionnaire”, which term shall include its successors and assigns, whether in whole or in part

of the second part,

hereby agree and covenant as follows:

Article I

The Government hereby grants to the Concessionnaire, by the present contract, the special and exclusive right to explore, prospect, drill for, extract, produce, obtain, exploit, and refine petroleum, natural gas, asphalt, bitumen, ozokerite and all other similar hydroearbonous substances throughout that portion of the Persian Empire comprised within the Provinces of Azerbaidjan (including the Vilayet of Ardebil), Khorassan, Astarabad, and Mazanderan (including Tonekaboun), hereinafter referred to as the “Four Provinces”. The Concessionnaire is also granted the nonmonopolistic right to refine, prepare for commerce, transport, buy, sell, export or import petroleum, natural gas, asphalt, bitumen, ozokerite and all other similar hydro-carbons and their sub-products or derivatives throughout the Empire of Persia, as well as outside its boundaries, under the terms and conditions of the present contract.

Article II

The term of this concession shall be fifty (50) years. The concession will be considered as formally and legally granted on the date when it shall have been approved by the Medjliss, and its term shall begin to count from that date.

Article III

The Concessionnaire agrees that within six (6) months from the date when this concession shall have been approved by the Medjliss he will send his experts to make the necessary geological researches and examinations of the surface of the land in the Four Provinces.

Article IV

Within three (3) years of the date when the concession shall have been approved by the Medjliss, the Concessionnaire shall have made the necessary reports and maps relative to his preliminary researches referred to in Article III and shall communicate them to the Government.

Article V

After the completion of the aforesaid maps and reports, and provided that the concession still remains in force, the Concessionnaire shall continue, through means of his experts, his exploration work in order to ascertain whether or not there exists within the “Four Provinces”, petroleum, natural gas, asphalt, bitumen, ozokerite or other similar hydro-carbonous substances, in commercial quantities.

The Government agrees on its side, except in case of force majeure, to give strong assistance to the Concessionnaire in the operations necessary to the execution of his concession. Furthermore, the Government agrees to protect the personnel and property of the Concessionnaire against any and all aggression and, in general, the Government agrees to guarantee to the Concessionnaire the full enjoyment of his rights and privileges, as well as to protect him against any and all third parties who may attempt to interfere in the exercise of the rights and privileges granted by the present contract.

Article VI

Within eight (8) years from the date when this concession shall have been approved by the Medjliss, the Concessionnaire agrees to spend or to cause to be spent upon or in providing equipment, labor, personnel, materials of all sorts, facilities for topographical and geological surveys, production, drilling, exploitation, refining, transport, marketing, etc., and in general on expenses of any kind made directly or indirectly in connection with the operation of the present concession, a sum total equivalent to at least $800,000 gold. The expenditure of this sum shall be made in such a manner that a minimum of $300,000 shall be expended within three years from the date when the concession is approved by the Medjliss, a minimum of $600,000 gold expended within six years from that date, and the remainder of the $800,000 within the period of eight years referred to above.

However, in order to avoid unnecessary expenditures, it is understood and agreed that in the event that the Concessionnaire fulfills his obligations under this contract within the times stipulated herein without having spent the full amounts specified above, the Government will not insist that the Concessionnaire spend larger sums than the amounts actually necessary to carry out his obligations.

Article VII

Within eight (8) years after the date of approval of this concession by the Medjliss the Concessionnaire shall remit to the Ministry of Public Works in Teheran the list of the lands that he will have selected for exploitation. These lands which will hereafter be designated “Selected Lands” may be selected by the Concessionnaire from time to time, or at any time during the entire eight year period mentioned above. Each time that such a selection is made the Concessionnaire shall present to the Ministry of Public Works in Teheran a map or maps upon which the lands in question shall be indicated in color, and upon such presentation the lands selected shall ipso facto become part and parcel of the “Selected Lands” placed by the Government at the disposition of the Concessionnaire on the condition that they shall be used exclusively for the purposes and under the conditions of this contract.

The “Selected Lands” may be chosen without limitation on the part of the Government as to the size and shape or the location of each parcel, and may be blocked out by such simple and practical processes as the Concessionnaire shall judge necessary for their complete identification, subject only to the condition that the total area of “Selected Lands” in each of the Four Provinces shall not exceed fifteen (15) per cent of the total area of that province. The remainder of the lands shall be returned to the Government, and the Concessionnaire shall have no right thereafter to make any claims relative to the production of petroleum or any of the other products provided in this contract on such returned lands, and the Government shall have the right to resume exploration work on such lands or to cede them to other persons or to other companies for the purposes of exploitation.

Article VIII

The Concessionnaire, within six (6) years of the date of the approval of this concession by the Medjliss, shall commence the drilling of at least two wells, and thereafter, until the expiration of the concession, shall continue his operations and shall commence the drilling of one well every two years. The drilling of the wells and the operations relating thereto shall be prosecuted with reasonable diligence, and the wells shall be drilled to a depth of at least 2000 feet unless oil is encountered in commercial quantities at a shallower depth. The Concessionnaire shall furnish the Government every six months with a report covering all the work relative to the drilling of wells, including their dimensions and their production, as well as the necessary maps showing the location of all wells whether projected or drilling.

Article IX

If, after the first three (3) years of exploration work, the experts of the Concessionnaire conclude that oil does not occur in sufficient commercial quantities in the Four Provinces to justify him in continuing his operations, the Concessionnaire may surrender this concession by notifying the Ministry of Public Works in Teheran in writing to this effect. In such case and counting from the date of such notification, the concession will be returned to the State, and the Concessionnaire shall have no right to any claims or indemnities whatever, and all terms, rights, privileges, and obligations which exist in virtue of the present contract shall become null and void.

Moreover, it is further agreed that in the case of surrender of this concession under the conditions mentioned above, the Concessionnaire will have no right to continue his operations for the production of petroleum within the boundaries of the Four Provinces.

Article X

This concession may never be assigned to any foreign Government or foreign company, nor to one or more subjects of any foreign Government and, furthermore, may not be assigned or transferred in any form or manner, except as follows:

The Government authorizes the Concessionnaire to organize one or more companies or subsidiaries thereof under the laws of Persia or of some state or territory of the United States of America, (it being understood that the Concessionnaire will notify the Ministry of Public Works in Teheran in advance as to the formation of any such company, and as to the country under whose laws it shall be formed), and to assign or transfer all or part of his rights under this concession to such company or companies or subsidiaries thereof, provided, however, that the Concessionnaire shall hold and exercise for the duration of this concession the management and control of such company or companies, and that all positions requiring managerial or executive functions in Persia shall be confided to American citizens or to Persian subjects under penalty of forfeiture of this concession for failure so to do; and provided further, that the Concessionnaire, under penalty of forfeiture of this concession for failure so to do, shall hold and own absolutely for the duration of this concession all the capital-stock of the company or companies mentioned above or subsidiaries thereof, except that the Persian Government and Persian subjects shall have the right to purchase up to thirty (30) per cent of the entire capital stock subscribed for the exploitation of the concession. Consequently, upon the issue of any capital shares in the above mentioned company or companies or subsidiaries thereof, the Government and Persian subjects shall have the right during one year counting from the date on which notice is given by the Concessionnaire to the Ministry of Public Works in Teheran in regard to this subject to purchase up to thirty (30) per cent of such shares at par value. However, any shares of stock in such company or companies which may be purchased by the Persian Government or Persian subjects shall contain a provision to the effect that they cannot be sold or transferred except to the Persian Government or to Persian subjects or to the Concessionnaire in the order of preference stated.

Any assignment made to any company or companies or subsidiaries thereof, under the terms of this article, shall be registered in the Ministry of Public Works in Teheran.

Any acts performed under this concession by any company or companies or subsidiaries thereof, to which the Concessionnaire shall have assigned this concession in whole or in part, shall be deemed pro tanto performance by the Concessionnaire.

Article XI

In order to furnish gasoline and kerosene to the inhabitants of Persia at a moderate price, the Concessionnaire agrees to refine in Persia from the oil he produces in Persia a sufficient supply of the above mentioned products to satisfy the requirements of their consumption as shown by contracts to purchase, provided that oil suitable for the manufacture of gasoline and kerosene is found within the Four Provinces. The Concessionnaire will fulfill the above obligation under the following conditions:

(1) The Government and residents of Persia will have the right to purchase from the Concessionnaire at the refinery or at the depots which the Concession may establish, kerosene, gasoline, fuel oil, crude petroleum and other crude petroleum products, provided such are obtained in the Four Provinces in commercial quantities, destined exclusively for the internal consumption of the country, but not for export or for re-sale. The purchase price of such products will be the actual cost price plus ten (10) per cent. The actual cost price of each barrel of petroleum will be calculated by the Concessionnaire and shall take into account the following factors:

A) The cost of crude petroleum, cost of refining, cost of transportation and marketing in Persia, etc., including such items as labor, fuel, manufacturing, insurance, repairs, maintenance, equipment, and the cost of all necessary supplies, etc

B) The management, office, accounting and superintendence expenses of the enterprise in Persia and all other charges of an administrative character.

C) Depreciation on the capital invested at any time in lands, materials, and all plants and facilities used in the production, refining, transportation, and marketing of the petroleum produced under the concession and the products thereof, and in general on all things subject to depreciation. The depreciation shall be calculated according to the accounts of the Concessionnaire at the rate of seven and one half (7½) per cent per year on the capital invested as indicated above, and shall continue until such depreciation aggregates 100% of such capital investment.

D) Interest on the total amount of capital invested at the rate of seven (7) per cent per annum until the capital invested has been completely amortized.

(2) The price fixed by the Concessionnaire in accordance with the terms of the present Article for the products destined for the internal consumption of Persia shall not exceed the price at which the Concessionnaire sells during the same period similar products produced under this concession in the world’s markets, less deductions for the cost of handling from the point of exportation in Persia to the point of sale.

Remarks:

(1) The expression “internal consumption” means the amount of gasoline, kerosene, fuel oil, petroleum and other crude petroleum products, that the Government, individuals, corporations, societies, companies and other organizations consume in Persia, and in general it means the amount of the above mentioned products necessary for satisfying the needs of the people of Persia, it being understood that the term shall not include petroleum products destined for export or re-sale by either the Persian Government or private individuals.

(2) The word “barrel” means 42 American gallons at a temperature of 60 degrees Fahrenheit.

Article XII

The royalty due to the Persian Government under this contract shall be at least twenty (20) per cent of the net profits of each of the companies, or of their subsidiaries, formed under the terms of Article X for the various operations of this concession, whether such companies are formed for the production, transportation, refining or sale of its products, and whether they are formed within or outside the boundaries of Persia.

The company or companies or subsidiaries thereof so organized shall within the first six months of each year pay to the Government a sum which shall be not less than twenty (20) per cent of the net profits of the previous year derived from the working of the present concession as shown by the balance sheet of the company or subsidiary in question.

In order that the Government may share in the excess profits which may be derived from the operation of this concession, the percentage of the net profits which the Government receives shall be progressive according to the following schedule:

When the Excess Profits are						The Government shall receive
Less than	60%	of the		Invested	Capital	20%	of	the	net	profits
Between	60%	and	75%	“	“	21%	“	“	“	“
“	75%	“	80%	“	“	22%	“	“	“	“
“	85%	“	95%	“	“	23%	“	“	“	“
“	95%	“	105%	“	“	24%	“	“	“	“
“	105%	“	115%	“	“	26%	“	“	“	“
Morethan	115%	of the		“	“	28%	“	“	“	“

Paragraph 1.

For the purposes of this contract, the Net Profits in any year is the gross revenue less deductions for all operating expenses among which, (it being provided that these expenditures shall be reasonable, and that they shall be made in good faith and not with the object of concealing the real profits, but with the object of successfully developing the enterprise, and that the Government shall have the right to examine the books and verify the accounts of the companies or subsidiaries thereof), are included labor, fuel, cost of materials, cost of administration, loans, supplies used, repaired or consumed in operations and all general expenses and other moneys expended or disbursed not properly chargeable to invested capital, with the following exceptions:

1. Payments to the Persian Government due under this contract.

2. Dividend payments.

3. Taxes paid to the federal Government, states, or municipalities of the United States of America if the company is organized in the United States.

There will also be deducted from the gross revenue before arriving at Net Profits:

1. All interest and/or dividends received by the company or companies or subsidiaries thereof, it being understood that before any payment of dividends by any company, the Persian Government will have received its part of the Net Profits as stipulated above.

2. All losses sustained during the year and not compensated for by insurance or otherwise and all debts ascertained to be worthless and charged off on the books of the company or companies or subsidiaries thereof within the year.

3. Depreciation at the rate of seven and one half (7½%) per cent per annum on sums charged to invested capital which have been invested in materials, equipment or properties of any kind subject to depreciation, such deduction to continue only until the aggregate of such deductions equals the total of such charges. If in any year before such deductions the Net Profits are insufficient to provide for depreciation, then the depreciation not covered shall be carried forward from year to year until completely provided for.

Paragraph 2.

For the purposes of this contract, Invested Capital means the total capital invested by the company or companies or subsidiaries thereof, as determined at the end of each year, whether derived from money paid in for capital stock, money borrowed or profits retained and invested in the enterprise; Invested Capital to be reduced by the amount of depreciation charged off each year in accordance with the provisions of Paragraph 1.

Paragraph 3.

For the purposes of this contract, the Excess Profits are defined as that portion of the net profits remaining after the Invested Capital has received twelve and one half (12½) per cent, per annum, cumulative.

Article XIII

The Concessionnaire agrees that upon the organization of the first company formed in accordance with the terms of Article X of this contract, he will deliver gratuitously to the Government a quantity or percentage of the shares of that company, whose value shall be equivalent to thirty thousand pounds sterling (£30,000). But it is understood and agreed that this obligation applies only to the first company to be organized. Nevertheless, if the Persian Government desires thereafter to exchange its part of the shares in the first company mentioned above for a number of shares in a company formed at some later date and likewise equivalent in value to £30,000, it shall have the right to do so without any other conditions whatever.

Article XIV

The Government, in the name of the State and the Persian shareholders, with respect to the Board of Directors of each of the companies or subsidiaries thereof, formed under the terms of Article X of the present contract, shall have one-fifth of the Directors and the Concessionnaire shall have four-fifths. It is understood that this right shall hold regardless of whether or not the Government and/or Persian subjects have effectively purchased the full quota of shares reserved to them; furthermore, in the General Stockholders meetings, the Government and the Persian stockholders shall have the right to be present and consequently to vote according to the number of shares which they actually possess.

Article XV

The State gratuitously puts at the disposition of the Concessionnaire all of the uncultivated lands which it possesses and which the engineers of the Concessionnaire may judge necessary for any and all of his operations of whatever nature they may be under this contract, provided, that the land in question has not up to that time been reserved for the installation of Governmental constructions.

In regard to the cultivated lands belonging to the State, the Concessionnaire shall have the right to acquire or rent such lands at the current price of the district.

The Concessionnaire shall also have the right to acquire or rent, for the duration of this concession, all other lands and buildings belonging to private individuals or otherwise, at a price which shall be mutually satisfactory to the owner and the Concessionnaire. In case of disagreement between the owner of the land and the Concessionnaire, the Government will not permit the land owner to require a price which exceeds the current price of the land in the district.

Mosques, cemeteries, holy shrines and other sacred places and their surrounding[s] to a distance of 250 meters, are excluded from the terms of this concession, provided that on these lands no other person shall ever have the right to produce or to exploit petroleum or any other of the substances mentioned in this contract.

In regard to lands belonging to pious foundations (vakfs) the State will use its good offices, provided circumstances permit, to the end that such lands shall be rented to the Concessionnaire.

On his side, the Concessionnaire agrees that those Persian subjects who are actually obtaining oil from small wells or seepages at the time of the approval of this concession by the Medjliss shall have the right in the future to extract from the same small wells and seepages a quantity of oil equal to that obtained at the date mentioned above, but the Government undertakes to protect the Concessionnaire, in case of dispute, against all claims on the part of the said Persian subjects to a larger quantity of oil than that obtained on the date of this concession.

Article XVI

All land granted by this concession to the Concessionnaire or which shall be acquired by the Concessionnaire, and all property of the Concessionnaire, such as his constructions, materials, equipment, machinery, pipe-lines, etc., and all other things used or held for use under this contract, as well as all products produced thereunder, crude or refined, and exported or held for export, or sold or held for sale in the country, shall throughout the duration of this concession be free of all customs duties, imposts, taxes and all other charges, including taxes on land and immovable property, mining and water taxes, capital and income taxes, taxes and duties on imports and exports, and all other taxes and imposts of whatever nature they may be, which are now in effect, or which may hereafter be established in Persia by the State or by any other authority whether Provincial, County, Municipal, Local or otherwise, and whether such taxes be of a temporary or permanent nature, with the sole exception provided in Remark “A” of Article XVII.

Furthermore, it is expressly provided that the Concessionnaire shall have the right to freely import in Persia, exempt from all customs duties, imposts, taxes, and all other charges, all materials necessary for initial construction, all supplies, equipment, machinery, foodstuffs, clothing, and all other materials destined for use in connection with the operation of this concession, or which the Concessionnaire elects to send to Persia for the production, transport, manufacture, distribution, and sale of the products or their derivatives covered by this Concession.

However, the personal effects, including articles of subsistence, acquired directly and for their private consumption, by the personnel of any of the companies or subsidiaries thereof, and not expressly mentioned above, shall not be included in this exemption.

The exemption from duties of importation and exportation in this article does not exempt the company or companies or subsidiaries thereof, or their personnel, from the legal formalities such as customs declaration, examination and verification, to which importation and exportation are subject in Persia.

Article XVII

The Concessionnaire shall have the right for the duration of the concession to construct, exploit, and maintain any pipe-line systems which his experts may judge to be necessary for the transportation of one or all of the products and their derivatives mentioned in Article I, and he shall have the further right to transport by means of his pipe-lines, free of all taxes and other charges, any and all of the products referred to above which have been obtained in Persia. Such pipe-lines may be constructed between any points within the boundaries of Persia, provided that their construction does not violate the rights already granted to other parties by the Petroleum Concession dated March 28, 1901.

Furthermore, the Concessionnaire has the right for the duration of the concession to construct, exploit and maintain any kind of wells, reservoirs, tanks, stations, pumps, and other facilities for the production, accumulation, and transport of petroleum, natural gas, asphalt, bitumen, ozokerite and all other similar hydro-carbonous substances and their derivatives, and to construct, exploit and maintain port works, wharves, buildings, houses, factories, workshops, laboratories, refineries, wagon-roads, special railroads and decauvilles for the exploitation of the concession, tramways, and other means of transport, telephone lines (provided the construction of such lines does not violate the terms of the concession granted to the Telephone Company of Persia in 1903), telegraph lines, wireless telegraph and telephone systems, electric power plants, transmission lines, and in general, to construct, exploit and maintain all other works and agencies relative to the exploitation of this concession, in the Four Provinces. Moreover, it is expressly provided that the Concessionnaire shall also have the right to make any and all of the installations and constructions mentioned above in the Province of Guilan as well as in that part of the Four Provinces not included in the “Selected Lands”.

The rights enumerated in this Article shall be exercised under the following conditions:

(1) All constructions provided for above shall be used exclusively for the operations in connection with the exploitation of this concession.

(2) If the Concessionnaire desires to make constructions running along or underneath or crossing any roads, railroads or tramways or water conduits, he shall have the right to do so, subject to replacement or repairs of any disturbances of the same created by his constructions.

(3) Copies of maps and plans of all projected constructions whether buildings, refineries, wagon roads, railroads, telephone and telegraph lines, main pipe-lines, or terminal points with their auxiliary constructions as well as copies of all maps and geological reports made in connection with the operation of this concession by the geologists and experts of the Concessionnaire shall be filed with the Government.

Remarks.

(A) The vehicles operating the transport of the Concessionaire’s petroleum products, in the case where such transport is effected over routes other than those under the control of the Concessionnaire, shall be subject to the regularly established road taxes.

(B) The telephone and telegraph lines mentioned in the present article cannot be connected with the public lines except with the consent of the Government.

(C) All port facilities which the Concessionnaire constructs under this contract shall be subject to such internal laws of the country as have been officially promulgated.

But it is understood and agreed that this condition shall not interfere with or hinder the right of the Concessionnaire to freely export by ship or otherwise, for the duration of this concession, any and all of the products and their derivatives mentioned in Article I, and likewise, shall not hinder or interfere with the right to import any and all of the things mentioned under Article XVI, and in general shall not prejudice or in any way hinder or interfere with any of the operations of the Concessionnaire under this contract, nor subject him to any payments except as provided herein.

Article XVIII

The Concessionnaire agrees that the Government shall have the temporary right in times of public emergency to use the Concessionnaire’s telephone and telegraph lines, wagon-roads, railroads and tramways, free of charge, provided, that the exercise of this right shall not hinder or interfere with the operations of the Concessionnaire nor injure his interests, and that all damage and expense arising from such official use shall be paid by the Government.

Article XIX

After the normal expiration of this concession, all the constructions, materials, machinery and all other property pertaining to the enterprise and in Persia at that time, including the lands of the Concessionnaire whether such lands be simply in his possession or whether they have been utilized in his operations, shall become the property of the Government, and the Concessionnaire shall have no right to claim any indemnity therefor. In case, however, that the Concessionnaire ceases to operate this concession within the first twelve years from the date of its approval by the Medjliss, (in which case the concession shall become null and void), the Concessionnaire shall surrender all his privileges and land rights but will have the right to remove, sell or export any and all of his constructions, materials, supplies, machinery and equipment, including steel tanks, derricks, tools, casings, etc., and all other movable property which he may have in Persia, whether or not installed or used in construction work or used on or under the surface of the ground, in buildings or otherwise, and the Concessionnaire shall have the right to sell or send the same abroad without hindrance from the Government or payment of any taxes or duties whatsoever.

Article XX

The Concessionnaire agrees to give to those Persian subjects who may be in his employ all reasonable facilities for acquiring a theoretical and practical knowledge of the oil industry, and to preferably employ unskilled Persian labor whenever possible, and also to give preference to Persian subjects whom he considers qualified for skilled labor.

Article XXI

The Government agrees in case of force majeure such as war, revolution, earthquakes, shipwrecks, storms, etc., which may in fact prevent, hinder, or delay the Concessionnaire from performing his obligations under this contract, to prolong the time of performance of the said obligations by the Concessionnaire, as well as the term of the concession, for a period of time equal to the period of prevention, hindrance or delay. The Concessionnaire shall give notice to the Ministry of Public Works in Teheran as to the occurrence of any case of force majeure within thirty days of the date when the occurrence can be considered of such nature as to prevent, hinder or delay his operations, and the Government shall, within sixty days after the receipt of such notification, advise the Concessionnaire in writing as to its view of the case. The silence of the Government, the sixty days having passed, will indicate its irrevocable acceptance of the Concessionaire’s excuse of force majeure. If the Concessionnaire, voluntarily or through negligence, fails to notify the Government of the occurrence of force majeure as indicated above, the latter will not consider the event as an effective case of force majeure. Finally, in case of disagreement between the Concessionnaire and the Government as to the nature of such occurrence, the matter will be referred to arbitration according to the terms of Article XXII.

Article XXII

If any dispute shall arise between the Concessionnaire and the Government relative to the interpretation of the present contract or as to the rights and responsibilities of either party hereunder, the question shall be submitted to arbitration in the following manner:

Each party shall immediately name one arbitrator, and these two shall, if possible, agree upon a third arbitrator; if agreement on some third person proves impossible, both parties shall request the President of the Permanent Court of International Justice at The Hague or some similar Tribunal on which both parties may agree to name the third arbitrator, whereupon the arbitration shall proceed without delay. The Arbitration Tribunal so designated shall meet at some convenient place which the Tribunal itself will designate with the consent of the two contracting parties, and the decision of the majority of the three arbitrators shall be binding and conclusive. The costs of the proceedings including the compensation of the arbitrators and the fees of the experts and lawyers shall be assessed as the arbitrators direct.

Article XXIII

The Government shall appoint a Commissioner to represent the Government in regard to work relative to the concession, and the representative or representatives of the Concessionnaire shall be in permanent contact with him. The Commissioner shall furnish to the Concessionnaire all the information which he may possess relative to the concession whenever called upon so to do, and will give his assistance to the Concessionnaire in all matters pertaining to the operation of the concession. The Concessionnaire shall give to the Commissioner, through the intermediary of his representative, all necessary information relative to the interests of the State under the concession, including reports as to the progress of the work. The Concessionnaire shall pay to the Government a sum equivalent to $5,000.00 gold per year to defray the expense of such Commissioner.

Article XXIV

This concession which forms the object of the present law may be cancelled by the Government in accordance with a decision to that effect by the Arbitration Tribunal provided for in Article XXII under the following conditions:

(1) If wilful violation of Article X of this contract is proved against the Concessionnaire.

(2) If failure to comply with any of his other obligations under this contract is proved against the Concessionnaire.

(3) If it is proved that the Concessionnaire or his accredited representative in Persia takes any action against the independence or integrity of Persia, or interferes in the political or religious affairs of the country.

In the cases provided for in paragraphs 2 and 3 above, the Government shall notify the Concessionnaire in writing as to his delinquency, and thereafter the Concessionnaire shall have four months in which to correct the same and if the Concessionnaire fails to make the necessary corrections, the matter will be submitted to arbitration according to the terms of Article XXII. If the verdict of the Arbitration Tribunal is against the Concessionnaire, the concession will be annulled and all the rights and properties of the Concessionnaire will be surrendered gratis to the Government as though the term of the concession had normally expired as provided in Article XIX of the present contract.

Article XXV

The Medjliss declares and the Government confirms that no other concession exists for the petroleum rights granted by the present instrument in the Four Provinces or in any part of them, and that, therefore, no one whosoever can raise any valid or legal pretensions in regard to these rights, and furthermore, the Medjliss declares and the Government confirms that the present concession, granted to the Concessionnaire for the development of the rights and privileges enumerated herein, is a sole and exclusive concession.

Article XXVI

All laws or parts of laws enacted prior to the date of approval of this contract by the Medjliss, and which are contrary to the terms of the present law, are hereby declared null and void.

Article XXVII

This contract of concession, consisting of twenty seven articles and made in duplicate, is written in French and translated into Persian, and in case of disaccord or divergence the French text only will be considered legal.

It is understood and agreed that the present contract will not be valid nor bind the contracting parties unless the Concessionnaire arranges through the intermediary of one or more American banks of good financial standing for a loan of at least ten million dollars for the account of the Persian Government. The terms and conditions of such loan will be negotiated directly between the representative of the said banks and the Persian Government. In order to proceed with these negotiations the said representative will come to Teheran as soon as it will be possible for him to do so. On its side, the Persian Government agrees to furnish for the loan security which is satisfactory and acceptable to the representative of the bank or banks.

And it is furthermore understood and agreed that until the terms of the present contract as well as the conditions of the above mentioned loan are ratified by the Medjliss, (as provided for in the Petroleum Law dated 23 Djauza, 1302) the Contractor will not be obliged to make any expenditures under this contract.

Teheran, twentieth of December, one thousand nine hundred and twenty three.

Read and approved:
For the Imperial Government of Persia.
The President of the Council of Ministers

Keza

Read and approved:
For the Sinclair Exploration Company.
Its authorized attorney

Ralph H. Soper

[Seal of the President of the Council of Ministers.]
Witnessed by the American Consul in Teheran,

Bernard Gotlieb

11. Not printed.